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Posted at 2:50 PM ET, 12/ 2/2010

'Chicken crap' by the numbers

By Ezra Klein

chickenbohener.JPG

Soon-to-be-House Speaker John Boehner is not happy to see the House Democrats pushing a bill that includes only the tax cuts for income under $250,000. “I’m trying to catch my breath so I don’t refer to this maneuver going on today as chicken crap, all right?”

There are 238,781 households in John Boehner's district. There are 2,824 of them with an income above $200,000. That's 1.1 percent. And that 1.1 percent is too large, as many of those people make between $200,000 and $250,000, and so every dollar of their income will be eligible for the tax cuts the Democrats are pushing.

So in all likelihood, what separates a tax cut bill that's "chicken crap" from a tax cut bill that's great is its treatment of the richest 1 percent of households in Boehner's district. And $700 billion slapped right onto the deficit. If Republicans win this debate despite the unpopularity of their position and its violent contradiction to their stated concern for the deficit, it'll be one of the most impressive coups in recent political memory.

Photo credit: Harry Hamburg/AP.

By Ezra Klein  | December 2, 2010; 2:50 PM ET
Categories:  Taxes  
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Comments

>>one of the most impressive coups in recent political memory>>

It's easier to win if your opponents decide that shooting themselves is the key to victory.

Posted by: fuse | December 2, 2010 2:57 PM | Report abuse

I believe you meant to say "when" Republicans win this debate.

Posted by: amiller5 | December 2, 2010 3:20 PM | Report abuse

does he look "less" tan than normal to anyone else?

Posted by: visionbrkr | December 2, 2010 3:29 PM | Report abuse

Mmm. "Chicken crap". Stay classy, John Boehner.

Posted by: csdiego | December 2, 2010 3:39 PM | Report abuse

This is natural typical liberal lies.

Why do liberals measure the cost of a tax cut over a 10 year duration, and the cost of extending unemployment benefits over a couple month duration? You know the same liberals are going to holler 2 months later over the same thing.

Posted by: krazen1211 | December 2, 2010 3:39 PM | Report abuse


It would be interesting to know how many of the 1.1% are business owners that "need" this tax cut so they can continue to provide jobs.

Posted by: kharihunt | December 2, 2010 3:44 PM | Report abuse

I have a nice question for the liberals, though:

Who exactly is going to invest in IPOs like GM if not the rich?

Posted by: krazen1211 | December 2, 2010 3:45 PM | Report abuse

Considering that the Republicans are opposed by President Obama and the Democratic Party, the question is whether the Republicans win but rather: "How long will it take until the Democrats fold and the Republicans win?"

Posted by: MitchGuthman | December 2, 2010 3:50 PM | Report abuse

You should have tried to put the words chicken crap and coup closer together. Maybe, Boehner tries turn chicken crap into coup

Posted by: RichardHSerlin | December 2, 2010 3:52 PM | Report abuse

The owner of the company I work for is probably the only one who is making more than $250,000. He is also the only one who makes decisions on how many employees to hire or fire. I'd imagine that he is already paying a lot in taxes since the top 1% pay 30% of all income taxes collected.

Thank God that the grown ups will be back in charge of Congress in January and protect my boss from transferring his hard earned wealth, that he uses to keep our company running, from the whimsical earmarks of the Democratic Party.

The national debt is a spending problem not a revenue generating problem.

Posted by: cummije5 | December 2, 2010 3:53 PM | Report abuse

Yeah, there you go. You should have headlined this one, "Boenher tries to turn chicken crap into coup".

Posted by: RichardHSerlin | December 2, 2010 3:55 PM | Report abuse

But Ezra spent the last month telling Democrats to trade the tax cuts for a rise in the debt ceiling (which has to happen anyway.) It seems absurd that he's now saying Democrats should not have negotiated.

Posted by: Hopeful9 | December 2, 2010 3:57 PM | Report abuse

Right on, Ezra. It will show exactly what we all already knew, the deficit was never anything but a convenient mask to put on a party whose positions are taken largely out spite and a desire to win an election at any cost.

Posted by: KBfromNC | December 2, 2010 4:00 PM | Report abuse

cummije5,

Your boss decides on how much to employ based on whether it's profitable, which is based on sales. If the government spends more money, then there's greater sales and that requires more workers.

If the sales are there, you hire more workers no matter if your tax rate is 39% or 33%. You still sell as much as you can because 61% of the additional profit you get is still way better than nothing, even if it's not the old 67% of profit.

And believe me, as a small businessman, it's well worth it to make a little less in good times when your income is over a quarter million per year, in exchange for having a better safety net and health insurance for your family when your business is not doing so well.

Posted by: RichardHSerlin | December 2, 2010 4:05 PM | Report abuse

READ MY LIPS

We have no liberals in Congress or the White House.

The Dems are wolves in sheep's clothing, and this recent failure, as well as last two years of "incompetence and inaction", proves it.

Posted by: lauren2010 | December 2, 2010 4:05 PM | Report abuse

Hopeful

Um, where did Ezra say not to negotiate?

Posted by: lauren2010 | December 2, 2010 4:09 PM | Report abuse

Pity they didn't do this before the election when it might have counted or at least shown that the Democrats were willing to stand for something.

Posted by: jnc4p | December 2, 2010 4:17 PM | Report abuse

Dear krazen1211 | December 2, 2010 3:45 PM:

Who is going to make those who invest in GM's IPO's except the middle class workers who produce their cars?

No workers, no cars, no profit.

Come back from the dark side.

Posted by: kindness1 | December 2, 2010 4:18 PM | Report abuse

"The national debt is a spending problem not a revenue generating problem."

That's the most naive comment I've ever read here.

Posted by: lauren2010 | December 2, 2010 4:19 PM | Report abuse

"Who is going to make those who invest in GM's IPO's except the middle class workers who produce their cars?

No workers, no cars, no profit.

Come back from the dark side. "


What the hell is this babbling nonsense?

Moron liberals decide that its ok for the government to take money from the private sector and give it to GM.

For some reason, they have a massive problem with the private sector retaining more of their own money and giving it to GM.


Textbook definition of class warfare.

Posted by: krazen1211 | December 2, 2010 4:22 PM | Report abuse

Business owners don't "need" income tax cuts to save jobs.

Income tax is on profits! It is not possible for the income tax to put a company out of business or to kill a job because the tax is only calculated AFTER expenses are accounted for.

Why is it that no one can seem to remember this?!

Posted by: will12 | December 2, 2010 4:22 PM | Report abuse

"I have a nice question for the liberals, though:

Who exactly is going to invest in IPOs like GM if not the rich?"

What a stupid statement. How about the millions of individual small investors, the pension funds, and other funds? I have a nice question for conservatives - when are you guys going to get a freaking clue? As kindness 1 says, "no workers, nobody to buy your goods and services."

Posted by: lcrider1 | December 2, 2010 4:27 PM | Report abuse

Now Democrats want to Include extending tax cuts that were in the stimulus package!
On one hand, they're claiming we can't afford to extend tax cuts over $250,000;
But, on the other hand, they want to include temporary tax cuts that were in the stimulus bill.
Don't Democrats know how to add?
Yes, we really do have an education problem....Democrats don't understand math!

Posted by: ohioan | December 2, 2010 4:27 PM | Report abuse

cummije

If your boss is making over $250,000 per year in profit, then that is AFTER business costs and expenses. DO YOU UNDERSTAND THE WORDS YOU ARE READING? DO YOU NOW UNDERSTAND WHY it is stupid to allow wealthy people like him to pay less in taxes as a percentage of his total income than ordinary Americans like you?

Warren Buffet has begged the gvmt to raise his taxes because he pays less taxes than his secretary (as a percentage of income).

Your boss is your boss because he is smarter than you. Think about that before reacting.

Don't try to pretend you understand how much he actually makes or pays in taxes, and especially don't try to pretend you understand how complex societies work and how much taxation is needed to either stave off debt or fund essential services.

Posted by: lauren2010 | December 2, 2010 4:28 PM | Report abuse

Moron liberals decide that its ok for the government to take money from the private sector and give it to GM.

For some reason, they have a massive problem with the private sector retaining more of their own money and giving it to GM.

Umm, speaking of nonsense. The government invested in GM in order to save the industry and made money on the deal. But obviously you'd have preferred for the entire auto industry to fail. At which point there'd have been no GM cars to be bought, and of course no employed workers in those industries which would have caused all kinds of other businesses in those states to fail as well. But hey! that's capitalism!!

Posted by: lcrider1 | December 2, 2010 4:32 PM | Report abuse

krazen

Only a fool would claim the wealthy are victims of class warfare in a society where they control the gvmt and the media, and where their share of the wealth is at record highs, and where their taxes are at record lows, and where the middle class is literally struggling to survive.

Posted by: lauren2010 | December 2, 2010 4:34 PM | Report abuse

lauren,

you need to understand better the words profit and salary (that is taxed). You're talking apples and oranges and making little sense in reference to the post to cummenj5

And i've got to tell you Warren Buffett can afford it as a billionaire to ASK for a tax raise. its like Walmart asking to raise costs of grocery stores so it can beat its competition at the margins.

I'll make you a deal. I'll agree not to act like I know about crazy conspiracy theories if you stop acting like you know anything about how small businesses operate, OK?


As a small business owner i make nowhere close to a 6 figure salary and pay a lot relatively for payroll taxes. I pay the employer side on everyone and the employee side as well on me. Plus I live in NJ with ridiculous property tax rates etc. Trust me paying MORE taxes is not what I need. More effective use of taxed money, now that I could use.

Posted by: visionbrkr | December 2, 2010 4:35 PM | Report abuse

lauren2010: Buffett CAN pay more taxes if he chooses to, the Bureau of Public Debt,
Gift to Reduce Debt.
He doesn't need to beg the gov't.
That's fine if millionaires and billionaires choose to pay more, but its downright Self-Righteous if they expect others to follow them.
I guarantee Buffett and Gates did not want to pay more taxes back when they were "building their business".
But now that they're retired they "forgot"
how hard they struggled.
Hypocritical, self-righteous.
While admire them for their charitable contributions, I don't agree with this self-righteous behavior.

Posted by: ohioan | December 2, 2010 4:36 PM | Report abuse

"What a stupid statement. How about the millions of individual small investors, the pension funds, and other funds? I have a nice question for conservatives - when are you guys going to get a freaking clue? As kindness 1 says, "no workers, nobody to buy your goods and services." "

What moronic talk. The only person suggesting the no worker route is Barack Obama and his worst job growth in the history of the United States.


If you weren't so ignorant, you would realize that 'small investors' were pretty much shut out of GM's IPO, and that 'other funds' are of course, money the rich are saving with the Bush tax cuts.

Posted by: krazen1211 | December 2, 2010 4:37 PM | Report abuse

lauren,

you need to understand better the words profit and salary (that is taxed). You're talking apples and oranges and making little sense in reference to the post to cummenj5

And i've got to tell you Warren Buffett can afford it as a billionaire to ASK for a tax raise. its like Walmart asking to raise costs of grocery stores so it can beat its competition at the margins.

I'll make you a deal. I'll agree not to act like I know about crazy conspiracy theories if you stop acting like you know anything about how small businesses operate, OK?


As a small business owner i make nowhere close to a 6 figure salary and pay a lot relatively for payroll taxes. I pay the employer side on everyone and the employee side as well on me. Plus I live in NJ with ridiculous property tax rates etc. Trust me paying MORE taxes is not what I need. More effective use of taxed money, now that I could use.

Posted by: visionbrkr | December 2, 2010 4:38 PM | Report abuse

lcrider

Is George W Bush a liberal in your book?

You may have heard of him. He was the former president and the man who started giving money to GM.

Posted by: lauren2010 | December 2, 2010 4:39 PM | Report abuse

"Only a fool would claim the wealthy are victims of class warfare in a society where they control the gvmt and the media, and where their share of the wealth is at record highs, and where their taxes are at record lows, and where the middle class is literally struggling to survive."


Nothing of the sort. I am just not jealous, and I want our doctors, lawyers, engineers, and investors prudently rewarded.

Posted by: krazen1211 | December 2, 2010 4:40 PM | Report abuse

vision

I don't make deals with morons, which is what you are if you have failed to grasp my message to cummie.

And why would I care about your knowledge of conspiracy theories?

Posted by: lauren2010 | December 2, 2010 4:44 PM | Report abuse

"Nothing of the sort. I am just not jealous, and I want our doctors, lawyers, engineers, and investors prudently rewarded."

SO do I. That's why I favor a return to 2000 tax levels for the wealthy.

Posted by: lauren2010 | December 2, 2010 4:46 PM | Report abuse

lauren2010,

so you call me a moron and you don't grasp the difference between a salary and profit?

Have you ever run a small business? Any business at all? Ever known anyone that did? If you haven't then you can't understand the concepts involved in the discussion here.

Posted by: visionbrkr | December 2, 2010 4:51 PM | Report abuse

Ezra, this is a question for you to address in another post related to this -- if the House has passed tax cuts for the middle class, and the bill now goes to the Senate, WHY doesn't the Democratic leadership just let the Republicans filibuster it? It will make them look heartless and stupid, and make it clear who they are really supporting -- the rich. Why is everyone so afraid of a filibuster?

Posted by: LindaB1 | December 2, 2010 5:08 PM | Report abuse

"Is George W Bush a liberal in your book?

You may have heard of him. He was the former president and the man who started giving money to GM."

The problem isn't giving money to GM.

The problem is the delusional fantasy that the so called rich merely 'put money in their portfolio'. Of course, that money funds companies like GM and failing municipal governments in California.

It's the government who engages in wasteful spending like pensions for public sector employees and healthcare for the poor.

Posted by: krazen1211 | December 2, 2010 5:08 PM | Report abuse

Ezra -- please address this in another post related to this topic -- why are the Democrats afraid to let the Republicans filibuster the bill passed by the House today? Wouldn't a filibuster make it a lot clearer that Republicans support the rich not the middle class?

Posted by: LindaB1 | December 2, 2010 5:10 PM | Report abuse

Glad some people here are on the right track.

For those who don't get it, please explain how a small business owner's personal income tax rate affects the npv of business decisions.

The answer: it doesn't.

If small business owners with incomes (i.e. profits from the business) of greater than $250 are making business decisions based on their personal income tax rates, by all means they should be taxed for their stupidity as well as audacity. Why? Because they'd still make more money if it made sense to hire in the first place!!!

Posted by: CrimsonBlue | December 2, 2010 5:11 PM | Report abuse

My apologies, he did not say not negotiate, he simply said that Republicans winning this debate would be a "impressive coup" and he advocated for exactly that outcome.

Posted by: Hopeful9 | December 2, 2010 5:17 PM | Report abuse

Hopeful

Your admission is more than I've ever got vision to do when he was inaccurate. Kudos Indeed, I've seen vision confronted by others and still no admission.

When confronted with such, vision will instead ask inane questions or claim you are a conspiracy theorist. Typical tactics of someone who is wrong.

Debating shapeshifters like him is a futile effort and is why I no longer waste much effort on him. Krazen is another example. Just look how he wiggled from my grasp in this thread.

Posted by: lauren2010 | December 2, 2010 5:30 PM | Report abuse

It's even less than 1%. You're not taxed on your gross income. That's $250,000 of TAXABLE income. Check how many people had a gross of more than a half-million, then you'll have a closer number.

Keep repeating ... more than $250,000 of TAXABLE income. Plus, your taxes will stay the same on the first $250,000. It's just anything you make over that in TAXABLE income.

Posted by: bjalexa | December 2, 2010 5:30 PM | Report abuse

I am puzzled by the overwhelming concern for tax cuts for the rich by those who will not directly benefit from them, i.e. middle and low income Americans.

And, the old canard that tax cuts for the rich generate extraordinary benefits for the economy has been disproven many times over. The Republicans rarely take steps to aid ordinary Americans.

These tax cuts will primarily accommodate rich Americans and corporations. Believe it!

Posted by: aramis10 | December 2, 2010 5:42 PM | Report abuse

"And, the old canard that tax cuts for the rich generate extraordinary benefits for the economy has been disproven many times over. The Republicans rarely take steps to aid ordinary Americans.

These tax cuts will primarily accommodate rich Americans and corporations. Believe it!"

And heres another liberal who does not understand simple math.

3 trillion > .7 trillion.

Posted by: krazen1211 | December 2, 2010 5:46 PM | Report abuse

The problem here is that lots of people consider small business makers to be little widget factories.

For starters, not every business owner is a widget maker or a robot. They consider the expected returns of an investment, along with the risk and their own required return. Not every profitable investment is taken.

Consider an investment with an expected after tax IRR of 15%. That sounds good, but if I'm financing it with an 8% bank loan, I'm only netting 7%, and the project has uncertain cash flows. However, 7% might be good enough for me. If taxes knock that IRR down to 13%, my total return is 5%, and it's risky. Is it really worth the time and risk? In some cases yes, and in others no.

In addition, there is a psychological effect in play too. People really, really hate losses. Having your income cut by a politician you despise from $450,000 to $430,000 is far more demotivating than simply having an income of $430,000 or even significantly less. If you're already doing fairly well, and you're pushed by anger, you might decide not to work harder (or as hard), take more vacations, etc.

While I admit the effect of taxes on business decision making is marginal (that is, it changes the do/not do decision for a small number of businesses on the margin), the margin is very important.

There were 4,190,000 jobs created in September 2010 alone. If 98% of those hires would be unaffected by taxes, but only 2% fail to take place, that would reduce the total number of jobs by 1,005,000 in a year.

http://www.bls.gov/news.release/jolts.nr0.htm

In the long run, prices will likely adjust (i.e. wages would fall), but the short run would be characterized by somewhat fewer jobs.

Not every job is simply meeting demand. In 2010, jobs that meet demand are increasingly outmoded with jobs that expand capability - jobs become more like capital investment than labor.

Examples would be include your IT team, refreshing your website, moving your accounting system to a new platform, and designing/launching a new product.

None of these things NEED to be done to meet demand. However, a business may or may not decide to do them, and it is more likely to do them with more cash sitting around. Moreover, these are actions that larger small businesses tend to take, not smaller ones.

And again, it's all on the margin.

Trends which impact the whole sample are far more important than the margin.

If a boom would otherwise create 4,000,000 jobs a year in the United States, losing 1,000,000 or 500,000 at the margin isn't going to be a big deal. Also, if the tax hikes have other salutory effects (e.g. lower interest rates in the 1990s), the impact could be muted or even completely offset. Finally, if you're going to have a credit bubble burst cutting taxes in half isn't going to give you 1990s-style job growth.

Also consider that a large tax change temporarily changes the pattern of spending to the negative.

Posted by: justin84 | December 2, 2010 5:56 PM | Report abuse

Why don't the democrats in the senate pass the tax cut with reconciliation? Why is no one (especially Harry Reid or Obama) threatening to do so as leverage?

Grr.

-Frustrated Democrat

Posted by: dbs8 | December 2, 2010 6:01 PM | Report abuse

"Check how many people had a gross of more than a half-million, then you'll have a closer number."

What's your estimate for the average number of persons hired by a business (other than the owner) with profits exceeding $500,000/yr, and a business with profits below $500,000/yr?

My estimates:

> $500,000: 30
< $500,000: 1 (lots of zeroes)

Some data would be nice, but the point is the guy who has a $2,000,000/yr business is going to hire a lot more people than the guy with the $80,000/yr business.

Posted by: justin84 | December 2, 2010 6:05 PM | Report abuse

The top 5% of income earners (over $160k/yr in ADJUSTED Gross Income... otherwise known as taxable income) make 34.73% of total AGI (yes, the whole country's total) and pay on avg. 20.7% to Federal Taxes.

The bottom 50% of income earners (less than $33k.yr in AGI), make only 12.75% of all the income.

If that doesn't explain why the top pays half the taxes, you fail at math... Hint: it's not because they're overtaxed... it's because they make a heck of a lot of income.

Posted by: sofla954 | December 2, 2010 6:29 PM | Report abuse

justin,

don't bother. lauren doesn't understand the difference between profits and salary or income. He/she or it just drones on. The only thing I found funnier today was one Chris Matthews pronouncing the country that won the World Cup in 2022 as "GUTTER". That's right not "QATAR" but "GUTTER". The only saving grace for him is that its MSNBC and not many people will catch his mistake.

Posted by: visionbrkr | December 2, 2010 6:33 PM | Report abuse

Vision

Your claims about me prove to me you are a liar and willingly resort to such to defend your inaccuracies.

Justin is too verbose for me to even consider reading.

Posted by: lauren2010 | December 2, 2010 6:39 PM | Report abuse

sofla954,

so finish the story. How much does the bottom 50% pay in taxes?

Posted by: visionbrkr | December 2, 2010 6:39 PM | Report abuse

cummije

If your boss is making over $250,000 per year in profit, then that is AFTER business costs and expenses. DO YOU UNDERSTAND THE WORDS YOU ARE READING?

Posted by: lauren2010 | December 2, 2010 4:28 PM | Report abuse

lauren you call me a liar now and again don't answer my question. This is verbatim what you said. I then said you didn't understand the difference between profit and income and they're two entirely different things. Get it? If a small business owner makes a salary of $80k per year and breaks even its entirely different than if he or she makes that same salary and then pays taxes on a profit of $250k. Get it now?

Posted by: visionbrkr | December 2, 2010 7:41 PM | Report abuse

krazen1211


I have a nice question for Republicans.

Taxes for the rich are at an all time low.
Profits are at an all time high.

Where are the jobs the rich are supposed to be creating.


Posted by: langs13 | December 2, 2010 7:46 PM | Report abuse

Why can't we link tax cuts to job creation. Anyone who creates a job, gets a tax cut. The more jobs you create, the more of your tax cut you can keep. Same rule for all income levels. Someone please tell me why not.

Posted by: aafan | December 2, 2010 9:23 PM | Report abuse

Breaking News, Democrats have called the Republicans bluff...Harry Reid just said they will hold 2 votes!! One for the middle class and one for the wealthy.

http://www.doubledutchpolitics.com/

Posted by: RyanC1384 | December 2, 2010 9:59 PM | Report abuse

Ezra, you do understand that the vast number of these people are small business owners. You know, the ones who employ most Americans. But don't let that detail get in the way.

Posted by: NelsonMuntz | December 2, 2010 10:13 PM | Report abuse

Vision

You are a liar and an idiot

My posts are clear, and if you can't get what im saying then just ignore me and leave me alone. I don't have to answer your obfuscating and distracting questions or allow myself to be dragged into tangential issues I did not comment on nor care to discuss.

I'll save my energies for people who understand the language I communicate with.

So again, leave me alone and quit stalking me. I've made it clear I want nothing to do with you, and neither did I initiate comments to you.

Posted by: lauren2010 | December 2, 2010 10:20 PM | Report abuse

Nelson

The vast number of small business owners do not make anywhere near $250,000.

Your "factoid" is meaningless as stated. Indeed, the people you cry over are a tiny minority of small business owners (probably less than a percent or two).

The vast majority of people who have annual taxable incomes of over $250,000 are multi-millionaires. The Clinton era tax rates did not hurt small business in the past and there is no proof that they will hurt them in the future.

The damage to the country in extending tax cuts for these people (in terms of added debt and lost services such as unemployment funds) is more significant than the lost purchases of Armani suits or Tiffany jewelery (if any such purchases are lost at all).

Posted by: lauren2010 | December 2, 2010 10:38 PM | Report abuse

"Justin is too verbose for me to even consider reading."

Lauren,

This is exactly why your opinion is uninformed and irrelevant. You can't be bothered to read half a page worth of text.

Here is a gem Lauren posted back in July, in which she blames the housing collapse on the Iraq War driving up wood and concrete prices. That's right - contrary to popular belief, apparently it was "shortages of wood and concrete" that tanked the housing market.

"The Iraq War in the long-term contributed to the Great Recession because of debt and money shortages and increased energy prices and increased home construction prices due to shortages of wood and concrete and other materials, as well as other factors."

http://voices.washingtonpost.com/ezra-klein/2010/07/the_gridlock-and-debt_index.html

Of course, to any informed person the price of materials was, well, immaterial to the housing bust.

All that matters for Lauren is that there are rich people out there and that she is somehow entitled to their wealth. No need to read any further.

My comments may be long, but unfortunately I have to spend a whole lot of time showing why your comments at best miss important details and at worst are completely ridiculous.

I don't find short comments describing an opponent as a "liar and an idiot" or "too verbose to read" convincing. In any case, you aren't my audience. My comments are for the open minded.

Posted by: justin84 | December 3, 2010 12:50 AM | Report abuse

"I have a nice question for Republicans.

Taxes for the rich are at an all time low.
Profits are at an all time high.

Where are the jobs the rich are supposed to be creating."


The jobs are waiting for Pelosi to leave office.

Posted by: krazen1211 | December 3, 2010 1:32 AM | Report abuse

@ aafan "Why can't we link tax cuts to job creation." -- There are tax credits, one taken on the 941 and another 5884-B new for this year (for fiscal filers or 2011 filers who file on a calendar year).

@ crimsonblue - "If small business owners with incomes (i.e. profits from the business) of greater than $250 are making business decisions based on their personal income tax rates, by all means they should be taxed for their stupidity as well as audacity. Why? Because they'd still make more money if it made sense to hire in the first place!!!" Please stop... There are lots of Schedule C's and SMLLCs (look it up) who can easily make 250K. In previous posts it notes about owners drawing an 80K salary and having to make 250K profit... that's incorrect in most situations as they would in that case need to make 170K profit. Now also consider that you are or will be in the 35% tax bracket, than add in state taxes (I live in NH, no personal tax but there are state) of a low 5%. Now that's 40% which isn't really considered when calculating your profits. So, 40% of 250,000 profit is 100K - now with an 80K salary that's 70K profit before you're affected (don't forget that you pay FICA on that 80K as well), does this start to sound like more small businesses you know? If you have a spouse who works for the company or draws other income, they also are adding their salaries. Lets not forget AMT purposes, which could bring the tax rate of anyone with an AGI over 45,000 to a 28% tax rate -- something not addressed by congress before the election because it would make the budget look much more HORRIBLE than it is. Also, why is congress doing this now... because they are a "Lame duck" congress - they can fall on their swords and make a dramatic play of it, why didn't they address this before - much like last year... Politics... The democrats are playing politics with our tax decisions and waited till the last second to try to force decisions and make the Republicans look bad, Republicans are not the only ones who deserve a bad rep here.

Justin84 makes another good point about businesses and risk assessment and value - not all (potential) profit is good profit. Plus, there are many circumstances where earning an extra $100 (or $1 if the case were that close) could cause you to lose out of over 600 in tax breaks and other concessions -- think of that tax rate (yes, it's over 100% increase in taxes) that should be thought of.

@ langs -- profits are not at an all time high, the potential is that they may be, but in general (in a recession) they are not. Don't forget, many states are raising rates and looking for additional ways to increase taxes on businesses and people, therefore reducing "Realized" profits.

@ Lauren - if verbose posters (and articles?) are a problem for you (which I am one of) how can we expect you to be well read on the issues instead of just talking with your "common sense" opinions.

@all - Let's try to keep this nice with no name calling.

Posted by: NHTaxEric | December 3, 2010 1:38 AM | Report abuse

NHTaxEric doesn't understand square one of running a small business and having to project costs and other budgetary variables. Having never met a payroll and perhaps even being an adjunct perfesser at a community college really impresses the readers with the ability to get high sniffing one's own farts.

Posted by: djman1141 | December 3, 2010 2:22 AM | Report abuse

If Agent Orange had an education, a PR person, and marketing skills, he'd be way out in front of a book: Chicken Crap Soup for the Soul. To be followed with CCS for the Unemployed.

Posted by: kickoradell | December 3, 2010 5:01 AM | Report abuse

I keep hearing tax cuts for the upper class adds to the deficit. Would someone please explain how? Serious question. Thanks

Posted by: dlco | December 3, 2010 7:08 AM | Report abuse

@Lauren or Lomillalor,

You've NEVER attacked me? See below for you of forgetful minds.

http://voices.washingtonpost.com/ezra-klein/2010/10/how_the_roberts_court_works.html

an excerpt from lauren,

i was honestly wondering why liberal media hadn't attacked Justice Roberts yet (especially after the incident at the State of the Union address).

Posted by: visionbrkr | October 4, 2010 2:46 PM | Report abuse

There is no liberal media.

Anyone who thinks that is an idiot.

There is a corporate media however. That's why the Roberts court and tea partiers and climate skeptics are media darlings, and why Obama is painted as an anti-business Muslim Kenyan who hates white cops.

Posted by: lauren2010 | October 4, 2010 2:52 PM | Report abuse


onto other topics of your love of conspiracy theories:

http://voices.washingtonpost.com/ezra-klein/2010/05/more_on_the_crash_of_254pm.html

I also remember another tirade by you regarding something about not buying Japanese products for some reason although I can't find it right now and don't have the time/patience/interest to really spend that much time on it although it is funny to read in a sad sort of "I wish you had taken your meds" kind of way.

My only concern is that some people may take you seriously although most don't. Its the same fear that I have with many of the nutjobs at firedoglake.com as well as the right wing blogosphere for that matter although i don't spend time there at all. Unobstructed information is fine but when people start taking it all as fact and act upon it then it becomes scary.

Posted by: visionbrkr | December 3, 2010 7:43 AM | Report abuse

Justin and NHTaxeric:

Thanks for posting guys.

NHTAXeric:
You seem to know some stuff about accounting. That's good. Thanks for sharing. But accounting is not finance. And business investment (e.g. capital budgeting and employment) decisions are based on finance. If it's npv positive to hire, the owner should do it. His personal income tax rate will not affect this decision.

justin:
You're just making excuses for owners who are making bad decisions. Thinking in terms of irr is your first mistake. NPV is the better decision rule. Regardless of the rate paid on the personal income,

You guys can't lump personal finance and business finance together, especially not for a business that's netting $250k plus. At a healthy 10% net margin, that's over $2.5million in revenue. Whether it's a widget factory or not, they should be savvy enough to know how to make these decisions.

Posted by: CrimsonBlue | December 3, 2010 2:35 PM | Report abuse

Regardless of a the personal income tax rate paid, if a project is npv positive, it should be undertaken.

Changing personal income tax rates cannot change the NPV of projects.

This is very basic corporate finance stuff, guys. I still don't think you get it.

Posted by: CrimsonBlue | December 3, 2010 2:47 PM | Report abuse

"You're just making excuses for owners who are making bad decisions. Thinking in terms of irr is your first mistake. NPV is the better decision rule. Regardless of the rate paid on the personal income"

Crimson,

How does NPV change things?

Simple case, $500,000 investment, $150,000 cash flows over five years ($230,769.20 less taxes at 35%), 13% required return on equity. NPV of $27,584.69.

Tax rate of 39.4%, cash flows down to $139,846.20. NPV is now -$8,128.57.

Obviously this is stylized, and you can use debt finance to offset some of the tax implications, but higher taxes can push some projects below the required rate of return. Also, I would guess that many smaller businesses don't go through detailed capital budgeting exercises (though I would also guess this same group would overestimate the impact of taxes on their decision making).

Raising the tax rate might also bump up the required rate of return (via the psychological effect I discuss). Again, I emphasize not all projects will affected. Not even most. Just a few. But when we're only creating a net 39,000 jobs out of 4,000,000+ total new jobs, moving the dial by 1% on the total can make a difference.

In all fairness, I think it would also be appropriate to consider the impact of higher interest rates on the cost of capital. If you are going to leave taxes low but also leave spending high, higher capital costs might well offset lower taxes.

"You guys can't lump personal finance and business finance together"

If a small business is a propreitorship, business finance is personal finance.

"Changing personal income tax rates cannot change the NPV of projects."

It cannot? How many projects do you think would be undertaken at 100% marginal tax rates?

Posted by: justin84 | December 3, 2010 5:12 PM | Report abuse

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