Signs of the Times - and a question

[ebacon]

Originally Posted by piece-itpete

Taxes

Pete

What taxes?

You clearly haven't thought this through. You are just repeating what you have heard on the teevee and radidio.

[piece-itpete]

Of course

If it costs me $1.00 to make something, and I need to make 20% to justify being in business, I charge $1.25.

If the government changes me 20% on it, I need to charge $1.50. I sure as heck don't pay it, the customer (who already pays income and sales tax!) does.

Pete

[finnbow]

Originally Posted by piece-itpete

Of course

If it costs me $1.00 to make something, and I need to make 20% to justify being in business, I charge $1.25.

If the government changes me 20% on it, I need to charge $1.50. I sure as heck don't pay it, the customer (who already pays income and sales tax!) does.

Pete

Government only taxes the clear profit, not the total revenue. Accordingly, there would be only $.05 of tax per unit in your example ((1.25-1.00)x0.20)

[piece-itpete]

Whoops. OK, so I charge $1.31 or 1.32. Again on top of everything else.

Pete

[whell]

Originally Posted by finnbow

Government only taxes the clear profit, not the total revenue. Accordingly, there would be only $.05 of tax per unit in your example ((1.25-1.00)x0.20)

You also had to pay tax on the capital when you acquired it, whether than capital is money or machine. A business also pays taxes on its human capital.

[bobabode]

Originally Posted by piece-itpete

Whoops. OK, so I charge $1.31 or 1.32. Again on top of everything else.

Pete

Well if that is the case, I'll take a gross. You sell yourself too cheap Pete. Now do I pay taxes in Ohio or Cali or both?

[bobabode]

Originally Posted by whell

You also had to pay tax on the capital when you acquired it, whether than capital is money or machine. A business also pays taxes on its human capital.

Only below the Mason Dixon line.

[ebacon]

Originally Posted by piece-itpete

Of course

If it costs me $1.00 to make something, and I need to make 20% to justify being in business, I charge $1.25.

If the government changes me 20% on it, I need to charge $1.50. I sure as heck don't pay it, the customer (who already pays income and sales tax!) does.

Pete

You still haven't thought it through. Your thoughts are a train wreck. Writing is nature's way of letting you know how sloppy your thoughts are.

First off you need to define what a "business" is when you are talking about "business taxes". Based on your discussion it seems that you are talking about federal income tax on corporate profit.

Second, it seems that your goal is to get money into employees hands so that it flows through the economy. It also seems that your goal is to reduce the tax burden on the corporation.

Given those assumptions, let's go through two extreme examples and see how they pan out.

First, let's assume that the business tax rate is 1%. That means that after the company pays its expenses and employees it pays 1% on the profit. A CEO will likely think that 1% is pretty low and therefore keep the profit in the corporate coffers.

Second, let's assume that the business tax rate is 99%. That means that after the company pays its expenses and employees it pays 99% on the profit. A CEO will likely think that 99% is too much and therefore increase its expenses to keep profits down. How can a corporation increase its expenses? It can pay its employees more.

The corporation's motivation on how to split the extra money between its executives and its laborers depends on the personal income tax rate. The heavier the executives are taxed the more sense it makes to pay the money to laborers.

The entire political system would work a lot better if laborers focused their political energy on their rational self interest. Upper management has shitpots of money to buy votes and does not need workers political help.

[finnbow]

Originally Posted by whell

You also had to pay tax on the capital when you acquired it, whether than capital is money or machine. A business also pays taxes on its human capital.

Presumably that was included in Pete's $1 cost to manufacture the item. Explain how a firm is required to pay tax acquired capital in the form of money (in the form of a business loan). Actually, the interest on that loan becomes a deductible item, as does the cost of Pete's home office, computer, Internet service, car lease, and annual junket to Miami to visit suppliers. In the end, he can actually show a loss, despite earning $.25 on each item, and write that loss off against his profits from his his or his wife's other income.

Pretty soon he's down to less than 13% effective tax rate.

[whell]

Originally Posted by bobabode

Only below the Mason Dixon line.

FUTA Tax - typically 0.8% on all wages up to $7000 per year
SUI tax - Typically for a new business its about 2.7%, but the wage base varies by state. In New Jersey, for example, a new business might pay 3.3% on all wages up to $30300 per year.
FICA Tax - 6.2% on all wages up to the annual limit. Wage base typically rises each year. 2012: $110,100
Medicare Tax - 1.45% on all wages