[asivisepo]

Washington Independent:
http://washingtonindependent.com/973...increases-hurt

This week, Sen. Joe Lieberman (I-Conn.), who caucuses with the Democrats, addressed a local chapter of the Chamber of Commerce in Middlesex, Conn. “I know that many people, including the president, have argued that the tax cuts should not be continued for people making more than $200,000 a year, but to me these are the people we need to be using their income to spend and invest to spur growth and job creation. The fact is that the top three percent of American income-earners account for 25 percent of the consumption in our economy.” He also argued that the tax increases would hurt small businesses — which, as the traditional engine of job growth in the United States, have created about two-thirds of the country’s new jobs over the past 15 years.

...

It’s not clear, however, that the rich spend the money they keep under lower income tax rates. There is economic evidence that the rich tend to spend tax rebates — checks that come in the mail, rather than incremental changes on a pay stub. Federal Reserve economists Julia Lynn Coronado, Joseph Lupton and Louise Sheiner, for instance, found that the rich spent more of their child-care tax credits in 2003 than poorer Americans did. But the same is generally not true for income taxes.

In this particular case, economists say that the wealthy probably would not spend the money, were the Bush cuts extended. “Policies that temporarily increased the after-tax income of people who are relatively well off would probably have little effect on their spending because they generally would be able finance their consumption out of their income or assets without such a change,” Douglas Elmendorf, the head of the Congressional Budget Office, said this year, finding tax cuts the least stimulative of 11 policy options. He argued that tax cuts would increase spending for lower-income workers, who have less in savings and tend to spend more of their paychecks anyway.

Economists from Moody’s Analytics, in an analysis of Federal Reserve data going back to 1989, came to the same conclusion. In a report released this week, Moody’s economists found that spending is far more impacted by the business cycle, such as the fluctuation of stock prices, than tax cuts.

...

Dean Baker of the Center for Economic and Policy Research, estimates that the tax hit would not be too high for most small businesses. For one, the marginal tax increase impacts earnings, not revenue. A business would need to be clearing more than $250,000 a year after salaries and other costs in order to see a tax hit. And then, it would likely be small. “For the $250,000 to $500,000 a year bracket,” Baker notes, “the estimated tax hit is $700. That isn’t enough to hire anyone.”

Other groups have also estimated that the impact would not be great. Citizens for Tax Justice, for instance, examined (PDF) “data on individuals who get more than half of their income from a business that they actively operate.” Only five percent would lose any portion of earnings — many of whom would be partners in law firms, hedge fund managers and accountants.

[carletoxtrs]

Dean Baker of the Center for Economic and Policy Research, estimates that the tax hit would not be too high for most small businesses. For one, the marginal tax increase impacts earnings, not revenue. A business would need to be clearing more than $250,000 a year after salaries and other costs in order to see a tax hit. And then, it would likely be small. “For the $250,000 to $500,000 a year bracket,” Baker notes, “the estimated tax hit is $700. That isn’t enough to hire anyone.” How do you figure that Richard? Where does you & he pull this $700 number from? Any income over $273,333 would pay more than $700 and at $500K would pay $9489 more in tax.

No it is likely he is saying the average income for all taxpayers in the 250K-500K tax bracket (a bracket which BTW doesn't exist) is $273,333. A bracket especially chosen to provide a low number, but this is not surprising coming from an uber-leftie economist.

[jadabaad]

I'm not a tax expert, that's for sure, but Paul, how do the wealthy avoid paying taxes generally? Tax deductions and loopholes? Sheltered funds? Charitable donations? I don't know, but with a good tax attorney, don't you think it's possible?

[VladFal]

I'm not a tax expert, that's for sure, but Paul, how do the wealthy avoid paying taxes generally? Tax deductions and loopholes? Sheltered funds? Charitable donations? I don't know, but with a good tax attorney, don't you think it's possible?

A small buisines treats taxes like any expense and will try to minimize it. Not sure what your question is here though?

Less than wealthy people also avoid paying taxes all the time. In my State, Wisconsin, two adjacent counties have differing sales tax rates. Milwaukee 5.6% and Waukesha 5.1% the border between the two is pretty well populated. People in Milwaukee County will all the time shop at a buisiness just across the border in Waukesha to save several bucks in taxes on big ticket items. $5 here and $10 there does add up.

I made sure that I bought my car right before I moved back into Milwaukee County from Waukesha County so I could save $80 or $90 on my $17000 purchase. Yeah, I'm not wealthy, but why pay the extra tax.

[AdobeCreativeSuite]

Are you a tax expert, Paul? An economist? I ask because the guy who made the statement is. I've already stated I'm not, so I'm asking. You see, I have to give that guy the benefit of the doubt unless you have a Ph.D. or some years of experience. Saving some money on a car purchase doesn't quite do it for me. No offense.

[yxn2dC07]

Oh your expert thing again, so we find 3 experts all saying dissimilar things and we take all of what they say unchallenged, right? So we just let the experts run our lives, that is the Liberal way, I suppose? So where does the $700 figure come from, then? You don't know and you don't care, because some expert told you, right?

I'm just a person who knows and understands percentages. Right off the top of my head I could see that a 3% increase would be a $1500 for a person at the $300,000 ($300K - $250K = $50K * .03 = $1500). level, so I wondered what game he could be playing.

[PetrZimin]

The distinction that the economist is making is as follows: Revenue and earnings are two different things. Many folks arguing against the tax increase on wealthy Americans say it will hinder job creation because there will be less business revenue after taxes, because many small businesses are structured as an S-Corp. This business entity flows earnings (profits) into the owner's personal taxable income.

The argument that some on the right are making is that business revenue gets swept into the calculation, so that if, say, a pizza shop collects $400,00 a year at the register, they'd be taxed on that amount. That's not the case. After paying all their costs, the business would net a fraction of that amount. Maybe, if things go well, $40k/yr before looking at capital expenditures (replacing old/broken equipment).

If the owner is paying himself a salary from the shop and using a S-Corp as his entity, his taxable income at the end of the year ends up being his salary plus the profits from the business, unless his accountant can take advantage of credits, carry-overs or other deductions to bring that reportable profit down.

So some on the right will wave that $400k number around saying this business would be impacted by an expiration of the Bush tax cuts for wealthiest Americans. That's nowhere close to being accurate. This particular business owner, if this is a single-earner household, would probably end up with annual taxable income of well under $100k. Very likely under $60k if he's channeling any pre-tax money into an FSA or retirement plan.

[ARKLqAZ6]

The other point of confusion is that there seems to be an assumption in some quarters that if you earn $275,000/yr, that your entire income is suddenly taxed differently than someone who earned $250,000. That's not true. All of the tax cuts in place for earners up to 250,000 apply to everyone's first $250,000 in taxable earnings. Any increase in tax rates only applies to your taxable income in excess of $250,000. So that person at $275,000 will only see a tax rate rise applied to $25,000 of their income.

[qikolax]

The Washington Post has put together a chart comparing the tax savings offered to earners in several wage brackets in the Democratic plan compared to the Republican plan.
http://www.washingtonpost.com/wp-dyn...081106717.html

[in4wikiu]

...The argument that some on the right are making is that business revenue gets swept into the calculation, so that if, say, a pizza shop collects $400,00 a year at the register, they'd be taxed on that amount. That's not the case. After paying all their costs, the business would net a fraction of that amount. Maybe, if things go well, $40k/yr before looking at capital expenditures (replacing old/broken equipment)....

Who on the right is saying that?

[sat23neus2]

The Washington Post has put together a chart comparing the tax savings offered to earners in several wage brackets in the Democratic plan compared to the Republican plan.
http://www.washingtonpost.com/wp-dyn...081106717.html

Please explain how the makers of this chart can claim that someone earning 500K is getting a $6701 tax cut from the DEM plan when their tax rate is increasing from 35% to 39.6%? A tax cut compared to what?

[PWRichard]

Please explain how the makers of this chart can claim that someone earning 500K is getting a $6701 tax cut from the DEM plan when their tax rate is increasing from 35% to 39.6%? A tax cut compared to what?

Serious, really can someone explain this to me?

[Stivenslivakovishhhs]

The baseline for comparison is the tax rates before Bush's temporary tax cuts were enacted in 2001. The expire at the end of 2010, and both parties calculate their respective plans' economic impact against the 2001 baseline that the expiration returns everyone to.