Can you balance the budget?
 

We have heard a lot about balancing the budget. However, we haven't heard a lot about reducing social security and/or Medicare, or raising taxes. Here is an interactive budget calculator.

Budget Puzzle: You Fix the Budget - Interactive Feature - NYTimes.com

Play around with this a bit and see how you can balance the budget. It will be pretty hard to balance the budget without some major changes. So what changes would you make?

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Here is an interesting configuration. If you remove all of Bush's tax cuts you completely balance the 2015 but only reduce the 2030 deficit by half. I know the right would howl about loosing jobs but it appears that Bush's tax cuts didn't help jobs at all. In fact, during Bush's two terms the economy shed an unprecedented number of jobs.

Cut military spending by 40%.

Done.

Here's how I did only spent about 10 mins on it. Came up with 70% in saving/spending cuts and 30% increases in taxes.

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Might lead to another situation like the 1920's where a bunch of men returning from war couldn't find work. If you cut the military spending by 40% there's going to be much higher un-employment, how do you deal with that?

I came up with this, with the only tax increase being the bank tax
Budget Puzzle: You Fix the Budget - Interactive Feature - NYTimes.com

Military budget is under 700 billion. The deficit is around 400 billion in 2015. At 40% you are still over 150 billion short.

I tried to do it. Actually, I did do it, but I didn't like what I came up with for a variety of reasons. The options given are either simplistic, vague, or both. The option to "cap the Medicare growth at GDP growth plus 1 percentage point, starting in 2013" was quite tempting, but I found myself wondering... what exactly would that entail? The NYT tool gave no clues. So, I set out to research the issue and came across this analysis of the NYT deficit tool:

The NYT’s attempt to fix the budget | Analysis & Opinion |

I just hope the government can balance the budget.

there's no benefit for the politicians in balancing the budget. It means they lose some ability to dole out goodies.

True, very true.

I looked at this again this morning giving it more thought and time. I'm not sure it can be done without serious problems. You cut here and people lose jobs, you tax more there and more jobs are likely sent over seas. Every action has a reaction.

In down times no one ever thinks it's going to get better and in booming times no one sees the bust coming. But I wonder what it's going to look like on the other side of this.

while it's a fun little play tool, it's useless unless it actually lets you eliminate entire agencies.

Are you more concerned about eliminating a particular agency than you are about balancing the budget?

i'm more concerned with reducing both the size and the spending of government. The best way to do that is to literally disband certain agencies and gut the crap out of others. Like I said in another thread, it's amazing that all of these 'bipartisan' politicians are really looking forward to cutting spending on entitlements, but are adamantly refusing to look at cutting spending where it's needed and wanted most....their own budget.

And what do you do with the thousands of people you just sent to the umemployment line?

i'll be as responsible for them as they were for me during my times of unemployment.......meaning they can enter the job market and compete with me. at least this way they can start producing in an economy instead of sucking away millions of our dollars.

Well that certainly sounds like a good thing to do in some of the toughest economic times times ever.

I think the desirable thing is a balanced budget and a stable society.

No, no- come on let's just tell millions of unemployed people "fuck you, when I was out of work I had to go find a job now it's your turn." Never mind reports show currently there are jobs available for about 1 out of every 5 unemployed.

Maybe we could come up with "A Modest Proposal" part II.

Oh, here I thought they were just being lazy.

and why are we in some of the toughest economic times ever? partially, a big part, is outrageous government spending.

seriously, did you know in the last 4 to 6 years, the number of people at the pentagon making over 150k a year jumped from 9 to just over 900? 150k a year. that's 133.5 million a year + some.

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desperate times require desperate measures. we're all making huge sacrifices in our own homes, why should we leave an entire class of people untouched, simply because they work for uncle sam?

Like others have pointed out the problem with balancing the budget is that anything you do is going to have a major backlash somewhere, be they lost jobs, lost benefits, higher taxes or reduced role as a world superpower it really feels like a no win situation. With a society that thrives on instant gratification nobody wants to sacrifice anything for the sake of an overall better society down the road couple that with politicians having little other recourse but kissing ass to get votes they have almost no incentive to sacrifice their political career for the sake of the future.

We as a nation need to accept that we can't have our cake and eat it too, something has to give somewhere and unless people are willing to accept making some sacrifices the the budget is probably never going to be balanced.

People need to be okay with higher taxes, a reduced govt and a smaller military amongst many other things or we're going to eventually just collapse.

First I don't know anything about the increase in salaries at the DOD. Do you have a source? I mean if a bunch of folks went from making 147K to 151K then I wouldn't be surprised. From my experience working for the government, something I did for roughly 25 yrs., isn't the cake walk cushy job people think. I know when I retired, at a very reduced rate of pay, they were begging folks topped out on the pay scale to retire so they could hire lower paid new people. I was lucky that I had a side business that augmented my ability to retire.

As for the job itself I worked parole and probation for the last 18 or so years. Our dept. worked 4 10 hr shifts per week... on paper. I rarely worked less then 50hrs a week in reality. Anything over 40hrs a week was counted as comp. time and after you acquired 80hrs of comp time you began to lose it. Every year I lost comp time because there was no way to take it. It's stressful work and you're on call pretty much 24/7. No one calls you in that job with good news. Every time the phone rings you can be pretty sure it's some crisis.

Second as for having an unaffected class from speaking to former co-workers I really doubt government workers are unaffected. In my former dept. they are not hiring new people to replace those retiring, work load is simply increasing.

If there is an unaffected class in the US I'd bet it's the wealthy and upper middle class.

Federal bureaucrats earning $150K up tenfold in past five years Hot Air

having worked with federal employees before, i'm aware of the comp issues, but did you have any union representation?

I don't think that article gives enough info to actually understand the entire situation. The example given regarding Dr's seems like they might have been under paid in the past. I just don't know. I know when I looked at balancing the budget I choose cut federal pay across the board. So I guess to some degree I agree it's a problem or at least should be part of the solution. Is it fair to blame it all on Obama and the Dems, I don't know. Is it possible these pay increases where already bargained for, you know like the tax cuts were set to expire before Obama was ever elected and now he's getting blamed for wanting to increase taxes?

Yes, I was in two unions Afscme and Opeu. I worked in a very rural area and my position was partially funded by the state of Oregon and partially funded by a federal grant. Most of the time when I had an issue, such as constantly losing comp time the unions fought over who was responsible for me. They both had no problem taking mandatory dues out of my check. After working there less then 2-3 years I gave up on trying to gain back any lost time. Myself, like most of my co-workers just stopped keeping track when called at in the middle of the night.

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Here's an article I found on Obama and federal/military pay raises-


Source

Sounds more like reality then the other article to me.

really? so the USA article link inside the article I posted is one big pile of shit and lies?

There's a difference between stating "soared tenfold" and "increased to 3.9%." (Yes, ten times a fraction of a percent.)

Going from 9 to 900 or so out of over 25,000 employees (or whatever the number is) isn't quite "soaring," especially when you consider that the federal government has increased the amount of lower-cost labour they outsource to the private sector.

Come on did I call it a pile of shit? I just read it and it seems to play with some numbers. Saying "the biggest pay hikes have gone to employees who have been with the government for 15 to 24 years. Since 2005, average salaries for this group climbed 25% compared with a 9% inflation rate." Probably doesn't paint the entire picture in my opinion. People getting close to the top a pay scale, private or public tend to get larger increases.

Look at the portion you highlighted-

By reading that it seems like "Wow! Obama has doubled the number in 22 months!" But read it more carefully and the picture becomes more clear. Kind of skips, certainly doesn't mention by name, that it tripled under the previous 50 months with Bush. Just that it increased fivefold over the past five years and you can thank "Barack Obama and Democrats." Seems like we should be, even with this writers numbers, thanking Bush and the GOP even more so.

Plus it doesn't really say what these newly well to do folks were making prior to passing the 150K mark. If, again, they were making 147k I would think this wouldn't be big news.

Articles written like this make me question their honesty.

Edit-

Ok now my math is messed up too. That should be 36 months of Bush not 50. Sorry.

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Anytime you take an arbitrary number like 150K and use it as your baseline it's pretty easy to paint a less then realistic picture. What if you used dollars per hour? You could say after "X" date the number of people making more then 7.50 an hour increased 20,000%. You don't have to mention that minimum wage went from $7.35 to $7.55 on that day. You'd still be telling the truth, just omitting a major factor.

It didn't take me 10 mins to figure out. The bottom line is this - if I was charge of this "economy", I wouldn't have a problem. It's not rocket science, and I'm glad about that.

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But here's the thing - how do we make it matter?

Ok, but that doesn't explain your seemingly simple solution(s.)

OK, done. Eliminate all non-humanitarian foreign aid, even if that doesn't get us the full 17 billion in savings we should be able to pick up the difference by taxing all capital gains as income.
Budget Puzzle: You Fix the Budget - Interactive Feature - NYTimes.com

The whole problem with this is that any of us could go balance the budget with plans both radical and reasonable, but no matter what, you have to do something, or some combination of things, that will be unpopular. The people in control of the purse strings simply aren't going to do that.

I keep wondering when we'll wind up like post WWI Germany; or modern day Zimbabwe... rampant inflation, massive unemployment, because we didn't tackle the problem when we could have.

Or will we do as Argentina did and repudiate the debt? It was disastrous at the time, but they are sure doing fine now.

There's the published military budget and the real military budget.

For example (and correct me if I'm wrong) the following are not included in the Pentagon's budget

1. Cost of operating all ICBM silos (That's the Department of the Interior - yep, really)

2. Cost of the War in Iraq and Afghanistan.

3. Cost of all the "free money" that is given to the Military Industrial complex in the name of Research and Development. (Corporate Welfare)

4. Cost of Vetran's Hospitals.

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It's very simple how to balance the US Federal Budget.

1. Cut spending

2. Increase taxes

Or better yet, a bit of both.

The one thing I've noticed about Americans is that they truly believe in the concept of the Free Lunch. You want to have all the government goodies - but you don't want to pay for them and you figure that someone else should pay for them. I laugh when I hear all sort of people talking about reforming income tax, or flat tax - everyone seems to have an agenda. It would seem that everyone believes that they pay too much and the other guy pays too little tax and if they just rejigged it this way or that way, I could pay less - you could pay more, and all would be right in the world.

I watch CNN and people keep talking about keeping the "Bush Tax Cuts". Fuck, you couldn't afford them under W for crying out loud, in supposed good times. He just went out and borrowed 500 billion a year in order to finance a tax cut and look like a hero to the population who must be fucking on glue or something. I mean, really, if I was you I'd be saying, "Don't borrow money to finance a tax cut - keep the fucking taxes where they are and balance the budget"

But you NEVER EVER hear ANY American say that. Instead, they just keep crossing their fingers and praying for another tax cut so they can go out and buy more shit that they don't need. Of all the Industrialized Countries, America already pays the least in taxes.

I contrast that to Canada where people were UPSET when they cut the national sales tax (G.S. T. from 7% to 5%) because it would mean that the gov't would have less money for social programs, or that the gov't would have to go into debt and people (myself included) were saying, keep the fucking GST at 7% thanks very much and balance the damn budget.

Americans would sooner eat glass and die than ever think that way.

Its not always that black and white though Kirk, a lot of people that want lower taxes also believe that social programs (for example) should be slashed to the bone or eliminated all together. You wont find many people in the "my taxes are too high" crowd that also support getting as many government goodies as possible...unless it benefits them directly and then they usually don't mind paying (roads, military or police for example). Most of those folks want a smaller govt, less social programs ect ect and believe they are either wasteful or unnecessary and therefore the taxes they pay to support them are wasteful and unnecessary leading to all sorts of ideas and theories about who should have to pay for what.

Its not always as simple as Americans just wanting something for nothing.

Now it looks like congress is going to take a big step towards not balancing the budget. If they simultaneously extend unemployment insurance and extend the tax cuts for everyone in the same bill my head my just explode...

Rekna: Haven't you learned? Deficits are totally OK when Republicans have power. And when they don't, they just make sure that anything the Democrats want to do can't be paid for and then complain about it.

Here's the thing:

Those "Tax cuts for the rich?" The ones that supposedly just benefited people making $250,000+ per year?

Those cuts also affected something close to 50% of the small businesses in the country: "S" Corporations I believe they're called. If those tax cuts expire, the taxes paid by those types of small corporations will more than double. I know: I work for a small family business, and my Boss is running around like a chicken with its' head shot off trying to figure out how we can possibly afford to stay in business paying 35%-plus taxes (US Corporate taxes are the 2nd highest in the world, behind only Japan, who is only 1/2 of one percentage point higher), PLUS paying for Obamacare. Since almost any small business capable of keeping the doors open "makes" more than $250,000 per year, guess what? The only sector of this economy which can expert any meaningful growth over the next five years is getting ready to get with a -huge- increase in the cost of just doing business. Do you think this makes it easy to hire new employees, invest in new technologies, open expansions/franchises or take the risks needed to actually grow the economy and generate income for working people and entrepreneurs?

His math says, and I believe him, that it can't be done. If those tax increases occur, and Obamacare is implemented as written, we will close. Period. The End. No discussion. I will lose my job, my family's business will close, and that will be the end of it. And trust me: there are a -LOT- of small business and family shops who are doing the same math and coming to the same conclusions.

Mr. Obama says that small businesses are the engine of our economy, and crucial for recovery? Horseshit. Bunkum. LIES. He and his backers have it in for us every bit as much as they do for BP or Berkshire Hathaway or any other "big evil" business. If they didn't, they wouldn't be trying to tax us out of business or drive us into penury with insane paperwork requirements (like filing a Form 1099 for every purchase we make over $600.00, or the insane passage of SB 510).

Obviously, businesses couldn't possibly have succeeded during the Clinton administration.

Under the Clinton Regime, they weren't being simultaneously hit with a mandate for cartelized, overpriced, Nanny-stated healthcare payments and taxes. They weren't faced with paying to support both their employees -and- the jackoffs down my street who can, but won't, get a job.

Matt Tiabbi's book "Griftocracy" had an insight which I liked. He said, quite rightly, that one reason the Tea Party enjoys such support from small business owners is that for us, -any- interaction with the government is bad. It always ends up costing you money, frequently money you can't really afford to lose even in a -good- economy, and draws the attention of other bureaucrats who then figure out -new- ways to cost you money. It brings an army of inspectors with checksheets for obscure retarded things: in my little University town there was a law -requiring- open drains in restaurant kitchens. The sinks had to empty down into a funnel which led into the main drainage pipe: the pipes from the sinks had to be X size and Y far away from the funnel, which had to be Z wide by A tall, with a main drain-pipe that was B wide...

...the end result was a system, near-universal in my town, which caused the drains to back up and flood kitchens and make an horrendous, unsafe, unsanitary mess. Did any of the morons down at City Hall think about this when they wrote this insane law? No. Of course not. And it cost my bosses (and therefore me), to say nothing of every other resteraunteur, waitress, and busboy in town, a lot of aggravation and productivity and money.

People wonder why there aren't any jobs? This is why. When employers have to spend all their money paying for everything imaginable, from wars to subsidies to every benefit their employees or some legislators demand to keeping up with insane and expensive and contradictory laws, they don't have enough money to stay open. Then they go out of business, and all the people who used to work there are fucked. When they anticipate a huge financial skullfucking in the near future (as a result of the aforesaid costs), they sit on their cash so they can try to weather it, and all the people they might have hired are fucked. Both are happening or beginning to happen as we speak. This is why there's no liquidity anywhere, why credit is -still- tied up (this and the approaching Commercial Mortgage time-bomb) after two years of useless "stimulus:" nobody wants to turn loose of their ready cash reserves before they have a handle on just how much this is going to hurt financially.

And business-owners who trust the establishment Republicans who still make up most of Red Washington to relieve them anytime soon are utter, damned fools. That crowd of shills will keep the most onerous regulations (like the 1099 requirement) around until at least after 2012's Elections. Those things are just -too- handy a stick to beat the Dems with, especially once the results start to become manifest. And in the meantime, a lot of people and businesses will go clean under as a result.

And you think the Tea party would be any better? It might be better for the business people, but not for the consumers, workers, and society as a whole. And the local people and state people write the codes for whatever reason. Some of it's to make sure 'professionals' do the work, a lot of it is really dirty bribes and favors.

PolitiFact Virginia | Eric Cantor says expiration of Bush tax cuts will raise small business taxes

This story looks at the reality of the 'small business owner' in America. The people who hire accountants to find all the loopholes and schemes to try and find a .5% lower rate because it will make them more money. And now they are upset that the debt is $14 trillion, but don't want to be the ones who have to pay anything to bring it down.

Fix the system, if it is even possible (including pay rates, oversight, and punishment for breaking laws). But, it is a shame that the 'debt commission' barely touched some big ticket items (0.15 cent gas tax...and everyone on the McLaughlin Group said it would never pass... try 0.75 cents to $1.50), while going after others that are too small and provide a necessary service.


Anyway, yes I could balance the budget. People might not like it, but not paying 14% of your taxes in interest would be a better system. (And I would like to see unemployment changed in a big way. Yet, society is changing too since we don't need all of the workers we have. Computers, the Internet, and robots are taking over.

More money so they can hire new employees, or invest in new technologies, or maybe (here's a thought) stay in business in the fucking first place! Ever heard of inflation, or Rates Of Exchange? In order to keep up with these two things (inflation keeps getting worse, and the Dollar keeps taking a shit) any business (especially one which deals in imports) -must- continue to expand and -must- be able to maintain cashflow. "Making more money" isn't just about putting it into the Owner's pockets, it's about keeping the damned doors open. When a product costs $130/unit -more- than it did 3 months prior, that cost has to be covered somehow. How? You guessed it; by making more money!

They're upset because the $14T debt (and $70T worth of liabilities) is for shit they didn't do. That $14T debt is from things like asinine wars, bloated "welfare" schema, a Federal workforce almost entirely beholden to Unions who always demand moreMOREMORE! nevermind the cost, and a "public service" sector that has never yet learned to live within its' means because the Gov't will just steal, print or borrow whatever money they decide they need. They're upset because they didn't do this shit, but now they're on the hook for it and being blamed for it by a bunch of professional gabblers who have never held a productive, private-sector job in their entire lives and have no idea what reality is for people who actually work for their livings or how the most basic ground-level economics work. They're upset because they're being tapped for the cash to pay for every manner of giveaway imaginable, cash which they can ill spare and giveaways which primarily go to the grifters, welfare cheats (Personal and Corporate), and "gamers" whose primary contribution to the economic life of this or any country is to buy cheap liquor and scratch-off tickets. They're sick of being told they have to pay for bridges to nowhere, wars in countries that haven't hurt us (and "aid" to countries which have), ever-faster-rising wages for semi-sentient and essentially untouchable Gov't workers (who then raise an unGodly shitstorm when Mr. Obama talks about freezing their raises; when's the last time you got any kind of raise?), and perks for useless worthless helpless hopeless morons like my neighbors. They're sick of being demonized for their resistance to having their savings and investments raped by a pack of clueless clowns who think being a Community Organizer and a one-term no-show kinda-sorta-Senator makes a person qualified to not only control the Big Red Button but also the largest and most complex economy on Earth.

No, they don't know if the Tea Party Republicans will be any better. But most small-business owners are having a very hard time figuring out how they could be any -worse-.

Deflation is a bigger risk factor in the U.S. right now than inflation.

In 2009, the U.S. had a net deflationary period. In 2010, there were a few months of inflation below 3%, while most of the year it was below 2% (mostly at nearly 1%, which is low). Maintaining inflation at around 2% is desirable.

You want to know what isn't desirable? A deflationary spiral during an economic downturn/trough. It shoots recovery in the head. If the U.S. returns to a deflationary period again (which is a real risk), then corporate profits will tank and it will force them into holding onto their money instead of spending it for future growth.

How long do you want to stay in the trough?

And here's a newsflash: small businesses are suffering globally, not just in the U.S. It's a shitty time to be doing business and small businesses are more susceptible than larger ones. Until we see an economic recovery worldwide, you can't expect the business environment in the U.S. to magically go to booming.

Economies are globalized; that means economics is globalized. Look at the big picture, not just within U.S. borders. The tax environment is just one factor. If returning to previous tax levels is going to be ruinous, then there is clearly something else wrong with the environment.

Correct. Which is why small-business people would very much like for Mr. Obama and his cohorts to stop using them as a cash-cow, punching bag, and class-warfare scapegoat.

The changes required primarily involve stopping Congress from additional spending while we grow the economy.

Assuming taxes revenue is about 28% of GDP, for every trillion in GDP growth the government revenue increases by $280 billion. If the 2030 deficit is projected to be $1.3 trillion we would need about $4.8 trillion in GDP growth or 32% growth in 20 years from our current $14.8 trillion GDP.

The above is manageable and would allow room to pay down existing debt without too much pain. The key is to control spending while creating an environment for strong economic growth. People who are in a panic in my view either have a political agenda or they underestimate the fundamental strength of our economy and the impact of economic growth.

To be honest, I don't know the American small-business environment well enough to really gauge how things are unfolding of late.

What specific comments do you have about the small business bill?
What about the $30-billion fund for small-business loans?
And don't a vast majority of small businesses earn under $250,000/year gross?

The quote below specifically references conditions in California but it is reflective across the country. Credit abruptly dried up in 2008/2009, it was virtually impossible to get new credit unless you were a perfect risk (basically you don't need the money), lines-of credit were frozen, and rates/fees went up drastically. Even after the bailouts, banks did not and are not lending. Conditions were created where banks had to "fix" their balance sheets often just based on the rhetoric and threats from Washington. On top of that banks could get "loans" from the Fed at virtually no cost and then buy treasuries at no risk...it was and still is craziness...we need focused leadership.

http://www.centralvalleybusinesstime.../001/?ID=17038

If small business are feeling too much of a squeeze to continue operating then we do have a problem that needs to be addressed weather we like it or not. Taxes are important and we all need to do our part but, assuming this is a major problem for small businesses, we need to be more pragmatic about the role they play in the tax structure and allow them to thrive and succeed as well.

I'd be pretty upset if I sunk my time, energy, life and money into a business only to watch it go under because the govt kept asking for more without thought or concern to my or my businesses financial well being.

For the past two years small business owners have been shouting and screaming that there is a major problem. Too bad we are not GM, AIG, Wall Street, or State and local governments - if the needs of small business had been addressed early on, there is no doubt unemployment would be much closer to normal levels and economic growth would be stronger.

I'm not disagreeing I just honestly don't know how widespread it is. I do know a few people that run small business who are echoing the same thing but its hard to grasp if its just happening in a vacuum or perhaps just one piece of a much larger puzzle thats causing them to fail.

Anyway the more I hear about the more I'm starting to see that its become a major problem that needs to be addressed.

Problems for Small Businesses:

1: Lack of credit. Banks and lending Corps. are sitting on their reserves in anticipation of a skullfucking.

2: Lack of Inventory: The ForEx situation keeps getting worse for the Dollar, making it harder and more expensive to import product from overseas. Since the US has essentially no manufacturing left, this means the prices for a -lot- of things are being fucked with.

3: Tax Increase: 35%. That's what they're looking at: losing 35% straight off the top -just- in Income Taxes. That's not counting all the other payments they already make (Social Security, State/local taxes, Medicare, Workman's Comp, etc), -or- Obamacare. So most small business-owners are figuring on losing a minimum of 50% of each day's take immediately. That's 50% gone before they've paid the electric bill, paid their employees, paid themselves, or paid the rent. That's gone before they can buy inventory or service their debts. And it's totally unsustainable. NO business smaller than the Pentagon can stay in open when 50% or more of their income is getting snatched before they've even paid the Goddamned light bill. Guess what: paying the Officers (CEO, CFO, President, etc) comes -last- in almost any small business. All that other stuff comes first. And if somebody spends a few months not drawing a paycheck because there's nothing left after taxes, bills, and payroll...guess what? Nobody's dumb enough to do that forever, and nobody can support it. That shop will close, and all those jobs will evaporate.

4: Regs and Bullshit: See the above anecdote in regards to drains. Now extrapolate that into every possible aspect of a business. Now imagine that the rules are constantly changing, and that every change requires modifications or alterations which cost money and time. Imagine trying to run a restaurant, bar, or club when every time some pencil-pushing Inspector with a chip on a shoulder shows up it ends up costing you time and money.

A friend of mine runs a small gas station/convenience store nearby, its been there for about 20 odd years and always seems busy but he's saying roughly the same thing. I've never prodded him on specifics but he's more or less telling me that taxes/regs are making it so difficult to turn any kind of meaningful profit that he's starting to question weather its worth staying in business. Its just too much of a hassle for the small profit he's making, if he's now facing an additional 35% tax increase I can see him closing down for good and just washing his hands of it. I would probably do the same, its just not worth it.

We can't just keep ignoring these problems.

To be clear: the tax increase will be -to- 35%, not -by- 35%. Allegedly this Devil's Deal from yesterday should stop the tax increase, but that's only if it's all approved and no other skullfucks come down the pipe.

Oh I see I thought that sounded wrong when I went back and read it, not that it really makes much of a difference when you're looking at your bottom line and your profit is getting smaller and smaller.

I thought the Democrats tax plan was only to increase taxes on the amount of income above $250K and the taxes on the amount below $250K would stay reduced as is. If income taxes must be raised there must be some income number above which we are willing to tax.

The problem is, as I said, that those raises (for $250,000+) affect a very large percentage of small businesses. It won't just increase the taxes paid by Bob G. Millionaire, it will increase those paid by Mom & Pop's Grocery and Joe's Plumbing besides. Almost any small business takes in more than $250,00/yr: most of it goes right back out the door again as inventory or payroll or taxes. However, just as you're taxed on your income (and the IRS cares not one whit how much of that income goes for rent/food/bills/etc), so are these companies.

IRS: "You made $300,000 last year, so you owe us $105,000.00 in Income Taxes. Pay up."

Business Owner: "We took in $300,000, but $200,000 of that went to inventory, payroll, benefits and infrastructure. The Corporation only got to keep $100,000."

IRS: "Like we said, you made $300,000.00 last year. What you spent it on doesn't matter. You owe us $105,000.00. Now pay up, or we're seizing your business, all your inventory and infrastructure, and your bank accounts. Then we're sending you to jail."

Business Owner: "But that's more money than we have left over after all those expenses! We'll be bankrupt, have to close down!"

IRS: "Do we look like we give a shit? Pay up or go to jail, your choice."

I only know a few small business owners and they only paid taxes on income after deductions and business expenses. One Contract Engineer I worked with would write off all living expense while he was away from home (rent, car, meals, etc..) and he was away from home most of the time. As I recall he had to jump through some hoops to maintain a home address for tax purposes such as voting record etc.. The bottom line is he was only liable for income after deductions.

I don't see your comments as a disagreement. The issue to me is that the folks in Washington should stop and think about the impact small business has on this country and stop with the attacks. Here is a link to the Census Bureau with some stats on small business.

Statistics about Business Size from the Census Bureau

For example in the category of business employing 1 to 99 people - there are about 4.8 million of these firms, employing about 58 million people. There are 3,534 businesses with 2,500 employees or more, they employ 42.8 million. Big business has big influence in Washington, people who run business with fewer than 100 employees get ignored and get the shaft.

Think about it this way, there are 4.8 million small businesses based on the above on the margin of hiring one additional employee, staying with what they have or laying off one employee. In November there were about 15 million considered unemployed. Unemployment could be cut by 1/3 overnight with policy that encouraged each business in this category alone to hire one person!

This is not complicated stuff and I don't have any special knowledge or insight - so what is the deal with the folks in Washington???? Sorry, I am just blowing off steam as I end another year in the hole - two years ago I employed 4 people, 6 including me and my wife, now it is just me and my wife.

What you can "expense," how much of it, and what it's deductible is worth, however, are questions the IRS decides based upon, among other things, what type of Corporation (or LLC, or Partnership, etc) a business is. The rules which apply to one business may not apply to an identical business up the road if the two are Incorporated (or otherwise organized) in different ways.

Additionally, even if you are correct across-the-board, and all expenses for payroll, inventory, etc can be deducted, there's still the double-whammy of Obamacare and the increased tax rate to deal with. All the deductions in the world won't help when Income remains the same, Payout remains the same (in terms of rent, payroll, inventory, etc), while the amount of taxes you -do- pay more than doubles as well as having new expenses added on top of it. It's simply unsustainable.

If a business makes $100,000.00 per year, and spends $50,000.00 of that on deductable expenses, it's taxed on $50,000.00. But if the tax -paid on- that $50,000.00 suddenly doubles while income remains $50,000.00 per year and expenses hold steady, you can see how this could get to be a problem. Now, throw in on top of that a very expensive, highly intrusive, time-consuming mandate like Obamacare, and you have a very serious problem. Literally every small business owner I know is worried sick about these laws, and for good reason.

I've always wondered if part of the problem is the folks in Washington are simply out of touch. You can only garner so much information with just numbers and raw data, which I'm sure (along with pandering for votes) is what usually goes into making a tax policy. It can work to an extent but if you don't take into account the real people and issues behind those numbers then its never going to work properly.

Sorry to hear about your business, hopefully you and your wife are able to keep it afloat. I can certainly understand needing to blow off a little steam about it.

Calling this a "tax increase" is playing a symantics game. The Bush tax cuts were temporary. Bush inherited a tax surplus and rather than paying down the debt came up with a temporary cut. The fact that it goes back in 2011 is a result of legislation that Bush signed and represents the end of "temporary".

Not according to the Joint Committee on Taxation (and other sources).

Restoring the temporary tax cuts on those with income over $250,000 would impact about 3 percent of small businesses....or less than 1 million taxpayers who pay their business taxes at the individual level.

And there is no evidence anywhere that restoring that tax to the marginal rate of 39% from the current (and temporary) rate of 36% would impact their businesses.

But it would continue to drain significant revenue from the federal treasury....to the tune of nearly another $1 trillion over ten years.

Are taxes going up, or not?

Which was part of the problem.

No, he inherited a projected surplus, which projections were made with the assumption that there were no systemic or structural faults in the economy, and that the growth of the late 90's would continue unabated and unslowed into eternity. That projected surplus was predicted based upon the assumption that there would be no more recessions, bubbles, corrections, or even simple down-swings in the market and economy: they were based upon the assumption that nothing would ever go wrong. That was idiotic. That projected surplus never fucking existed.

Edited to add: if this sounds similar to the CBO's projections regarding Obamacare, there's a reason. The projections that Obamacare will save XYZ Dollars are based upon the same core assumption: that nothing will ever go wrong/. That nothing will be late, or over-budget, or require modification, or require more staff; that there will be no economic downturns/spikes, that inflation/deflation will remain status quo, that the ForEx markets won't go bonkers thanks to the Chinese dumping inflated Dollars, that the Commercial Mortgage bubble won't burst, etc. etc. etc. When's the last time a FedGov project came in on time and on budget? I can't remember.

Again, one of the problems with the original cuts: they had an expiration date.

What are these "other sources?" I frankly don't trust anything the Joint Committee on Taxation says: they are Gov't employees, bureaucrats, Statists and tax-parasites every one. It is in their interest to distort this information in order to continue and aggrandize their grotesque power and affluence. They -want- these expansions, and will do a great deal to get them: if WikiLeaks has taught us anything (which we/you should have learnt long before now) it should be this: Politicians LIE.

Even assuming these figures are true: how many people do those businesses employ? How much economic activity and liquidity do they generate? And how much will -both- of these figures fall? My experience in the small-business world says a lot and a SHIT-TONNE.

Then maybe the Feds should quit draining the Treasury with ridiculous unproductive wars, bailouts for businesses which deserve to fail, and every welfare benefit imaginable. Maybe if they kept to their Constitutionally-mandated bailiwick, and kept out of other Country's and States' business, they wouldn't -need- to take 35-39% of a persons' or businesses' income, depriving people of jobs and the opportunity to advance and depriving how many unknown millions of people of the benefits of technological advancement.

According to the link I provided previously there were 4.8 million businesses that employed less than 100 people. So are we talking about 20% of these businesses - and then what percent of potential start-ups - those that are in the precarious stage of less than 5 years in business. Start-ups are often devastated due to poor tax planning and the inability or unwillingness to get professional help, these issues that may appear trivial can be the difference between further growth or closing the doors. People who risk their life savings and have it culminate to a big year literally may be forced out of business over a few thousand dollars - especially if credit is not available.

Also think about the 1 million on the margin of hiring one person, staying put, or laying one person off - that marginal tax rate difference will play a role in their decision - wouldn't we prefer 1 million businesses hiring one additional person - wouldn't the net to the treasury in that scenario more than off-set the "tax cut"?

Many businesses run on very thin profit margins, taxes make a difference. More importantly it makes a difference in the calculations used to determine future investment. If I had money to invest in the growth of my business or in some other vehicle, my internal rate of return calculation factors in taxes. If I can get a risk free return(like triple AAA municipal bonds), that is greater than my risk adjusted return on investing in business growth - the decision is an easy one. Wouldn't we rather people invest in business activity rather than in non-productive financial vehicles? Many people are buying and holding gold rather than in something productive - we need to encourage business investment. Not raising taxes more important than the actual rate, sets a tone that will encourage such investment. This administration desperately needs to send a message to all those who have investable capital on the sidelines or in non-productive assets. Perhaps Obama is starting to get it, too bad others don't if he is.

Look at it this way, the government can increase taxes, even confiscate property any time they want. The national net worth will not decrease just because people write smaller checks to the IRS.

Fact check:

If you have hard data that restoring the marginal rate on the top bracket to 39% (from the current temporary 36%) would adversely impact those taxpayers, post it.

---------- Post added at 08:58 PM ---------- Previous post was at 07:59 PM ----------

ace...for the record, nearly 1/3 of the nearly $800 billion in the stimulus was tax cuts and tax relief- for individuals AND businesses (primarily small businesses), including extension of Enhanced Small Business Expensing (a temporary increase in limitations on expensing some depreciable business assets), 5-Year Carryback of Net Operating Losses for Small Businesses, Exclusion of 75% of Small Business Capital Gains from Taxes and others.

Increasing anyone's tax by 3% is going to have an adverse effect on that person because that is 3% of their money that they don't have any more. It's amazing that the inside the beltway crowd, namely Congress and Obama doesn't understand that.

An increase in the marginal rate on middle income taxpayers -- those with little or no disposable income - probably does have an adverse effect.

There is no hard data to support the notion that the top 2 percent of taxpayers would alter their spending and/or investing patterns with a 3% increase in their marginal rate.

As I asked ace, if you have data to suggest otherwise, please post it.

And, dont forget that those top taxpayers would still benefit from the current tax rate on their first $250,000.

---------- Post added at 09:55 PM ---------- Previous post was at 09:52 PM ----------

There is also no hard data that if the rate were to remain the same for top bracket that it would be stimulative in any way...as opposed to extending unemployment insurance, which numerous studies have found results in significant stimulus - nearly $2 for every $1 in UI.

What difference does it make whether it alters their spending, savings and investment patterns or not? It's that person's money and their right to do what they want with it. If they want to spend it, save it, give it away or just light it on fire, it's none of Washington's business. It's not Washington's money.

It's also none of Washington's business whether someone's income stimulates the economy or not. Once again, it's that person's money to do what he chooses to do with it. If he wants to emulate Scrooge McDuck, that's his right.

So you have abandoned your initial argument that an increase of 3% on the marginal rate would adversely impact the top 2% of taxpayers to the libertarian argument that it is their money to do with as they please.

I would point you to the libertarian icon, Adam Smith in the Wealth of Nations:

No. Raising taxes on anyone adversely affects them since they now have less of their money.

I disagree with Adam Smith's concept of punishing people for being successful as well.

Even a Keynesian, assuming those who most loudly professes to be have actually read some of what he wrote, should understand the importance of the physiology of confidence in the market. The President countinues to fail in this regard. From Keynes:

Economist's View: Keynes on Credit and Confidence

This, from a guy who continues to insist (in other discussions) that trickle down, supply side (or voodoo economics) works.