Economics

The Tax Man Cometh

Obama's tax plan will hurt small businesses and damage the economy.

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Congress may be home campaigning for the upcoming election, but the tax policy debate has not cooled down. Whether in a lame duck session or as a first order of business come January, something will be done to address the coming tax hike triggered by the expiration of the Bush tax cuts.

The debate is focused largely on whether or not to raise taxes on the rich in order to chip away at the deficit. But there is a lot of confusion as to how exactly increased taxes on the top 2 percent of wage earners would impact small businesses and economic growth.

President Barack Obama is chief among those confused. He appears to be concerned with the health of small businesses in America, but at the same time is proposing policies that will hurt businesses large and small.

In a Labor Day speech in Milwaukee, the president suggested that helping small businesses is vital to economic recovery and proposed a permanent extension of the research and development credit established by the Bush administration. He also argued for letting businesses write down 100 percent of their capital investments over a one-year time frame, instead of the current three to 20-year process.

However, at the same time Obama also proposed allowing income tax rates on those making more than $250,000 to go up, which will hit small business profits, since those profits are often filed as individual income. Obama also defended letting rates go up for wealthy taxpayers on investment profits, including capital gains and dividends.

This policy stems from the administration's attempt to manipulate capital towards what it sees as productive ends. On the one hand, the administration would like more federal revenue spent on the stimulus without adding to the deficit. On the other hand, White House economists want more investments in the economy to boost productivity and with it employment and exports.

These contradictory policy goals will only blend if stimulus spending actually helps the private sector grow. However, they both face an uphill battle.

Politically speaking, increasing taxes for the wealthier segments of society is popular, even though the wealthiest 10 percent already pay 70 percent of federal taxes. But what is often misunderstood is that small business owners will take a substantial hit from these taxes. Many small businesses make more than $250,000 a year—though they don't earn enough for it to make financial sense to file their taxes in the corporate bracket.

Your local dry cleaner or grocer likely brings in more than $250,000, but then has to pay their few employees from those earnings, leaving the owners with take home pay far below the rich man's threshold. It is these employers and entrepreneurs that would be hit hard by a rate increase on the top two tax brackets.

The Tax Foundation has recently estimated that—assuming business income is the last dollar of income a taxpayer earns—39 percent of the proposed $629 billion tax increase on high-income taxpayers would be extracted from business income. This policy path is completely at odds with the administration's attempts to boost small business spending. Of course, that policy path has additional flaws of its own.

It is understandable that the administration wants to see a boost in business investment for new plant equipment, vehicles, computers, and other capital purchases. Unemployment has remained high and the uncertainty holding the economy hostage has sidelined some $2 trillion in retained earnings, according to The Wall Street Journal.
Maintaining the research and development (R&D) tax credit will avoid having current investments pulled out of the economy and creating losses in the near-term (though the private sector would pick up the slack in the long-term). And the ability to write down capital quickly could prove a substantial incentive for investment. Increased business spending would also be good for jobs and productivity.

However, even if the tax cuts work as planned, they won't be enough to lead the economy out of recovery. While the R&D credit would be permanent, the investment credit would only be for one year. This means the short-term investment in 2011 will be partially stolen from 2012 and 2013 just as we've seen with the aftermath of 2009's Cash for Clunkers program. In fact, if the credit was too effective, it might cause a significant decline in GDP for 2012 and beyond, a prologue of which we are watching now in the housing market in the wake of the First-Time Homebuyer Credit's negative impact on sales and home prices.

An even worse scenario for the administration would be if the small business tax cut did not inspire any new investment to come off the bench. Many small businesses already write off up to $250,000 on equipment and other capital investments. So small businesses would have to significantly increase what they spend to see a tax benefit. Yet tax advisor Maureen McGetrick says that businesses like small retail stores and consulting firms don't need to spend more than $250,000 in any given year. "You don't see a lot of small businesses making that type of investment," she told the Journal.

Further still, businesses are only likely to invest once their debt has been brought down significantly, and when they see a near-term benefit for the investment. Just because a fisherman could invest in upgrades to his boat doesn't mean he has the demand for the additional lobsters or cod he might pull in.

On the stimulus side, all the evidence of the past two years—and historical evidence from examples like Japan—shows that dumping cash into runways and railroads is unlikely to create sustainable economic growth. And even if the spending does create a positive spark, the current proposed $50 billion in infrastructure spending will have a diluted effect in the near-term since the American Recovery and Reinvestment Act's stimulus spending isn't even complete yet.

The true danger is that the increased taxes required to pay for this stimulus (and the previous additions to the deficit) won't be a net benefit to the economy. The top 3 percent of the economy consumes one fourth of purchased goods in America. Those top three are also big savers, which is necessary for investment to flourish in a post-cheap money world.

One of the presuppositions of the Obama plan is that since savings don't help the economy, it would be better to tax the rich (who are savers), and give that money to spenders to stimulate the economy. But on the contrary, without savings—cash put in the bank—far less capital would be available to borrow for productive private sector investments. "If you don't put money in the local bank," says William C. Dunkelberg, chief economist at the National Federation of Independent Business, "we can't finance any of these investment expenditures. It's that simple." The U.S. has a dismal savings rate as it is.

Increasing the top marginal tax rates to generate $650 billion to $900 billion in federal revenues over the next 10 years means that the same amount of money won't be invested in the economy as consumption or savings. If the government can find a way to get a better return with that cash than the private sector, however, then the White House may be able to make a strong argument for the tax cut in retrospect. Historical data suggests this won't be the case.

The near-term goal for the administration should be fighting uncertainty. Nervousness about future tax increases—either in 2011 or beyond—has frozen many businesses in their tracks. Regulatory concerns are keeping the banking industry holding tightly to its cash. And the administration's failed attempts to deal with housing and unemployment have consumers less than enthused about dialing up their credit lines again. A confusing tax proposal that has contradictory ends isn't the best way to bring certainty to this market.

Anthony Randazzo is director of economic research at Reason Foundation.

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  1. Caption Contest!

    “And the milktoast* throws a phantom left!”

    “Kiss the ring, bitches! BTW it doubles as my cockring!”

    *Yeah I know, poor spelling. Zip your face.

    1. It takes a special kind of stupid to pose for photos like that one.

      1. Looks like the interior a church.

        Atheist wimp campaigning in a church and striking an awkward boxing stance.

        Double or triple irony, I lose count.

    2. “And if you actually ever throw a punch like this, kiss your metacarpal goodbye.”

      1. They call it a “boxer’s fracture” for a reason. But that reason is that “rotten boxer’s fracture” doesn’t scan well.

      2. Not to mention that he’s leaving his face wide fucking open for a counter with a hook. Do you suppose he’s ever thrown a punch in his life?

    3. Ya, seriously — why ARE there so many pictures of this guy throwing air punches?

    4. “The white Shaft.”

      1. Raaaacist!

  2. Two parts of this are logically incorrect, so I had to stop reading.

    1) “Many small businesses make more than $250,000 a year?though they don’t earn enough for it to make financial sense to file their taxes in the corporate bracket.”

    So if they’re getting around corporate taxes by filing as an individual, they’re already gaming the system. If the worst case scenario is that you have to file your business as a business, what’s wrong with that?

    2) “Your local dry cleaner or grocer likely brings in more than $250,000, but then has to pay their few employees from those earnings, leaving the owners with take home pay far below the rich man’s threshold. It is these employers and entrepreneurs that would be hit hard by a rate increase on the top two tax brackets.”

    That’s all tax deductible, bringing income under 250k, meaning they will not be impacted by the tax hike.

    The writer of this article does not understand taxes.

    1. Agreed. Is Obama talking about individual income taxes, or corporate income taxes?

      Although it must be said that many (perhaps most?) small businesses are not corporations, and are instead sole proprietorships, limited liability companies or partnerships, all of which generally are pass-through entities for tax purposes.

      But yes, the writer does seem to be a little confused about how income taxes work.

    2. Are you guys for reals?

      Every time I see Obama talk about this, it makes me angry, because it’s like he thinks we’re stupid or something…

      Then I find a slew of people who don’t know the difference between an S corporation and a hole in the ground.

      http://en.wikipedia.org/wiki/S_corporation

      For Christ’s sake!

      I don’t always know everything about what I’m talking about, but shouldn’t you at least know something about it?

      1. Are you serious?

      2. Yes, I’m familiar with an S-corp. It’s a pass-through, unlike a C-corp. I practice tax law for three (long, miserable) years before moving to a different section of the firm.

        The article was unclear if that’s what it was talking about.

        I have heard/seen other similar reports, in which it is not clear whether the person is talking about corporate income or individual income, or in which the person has confused AGI with taxable income.

        There’s a big difference between an S-corporation “making” $250,000 and a member of that S-corp having $250,000 in taxable income.

        1. I practiced tax law, rather.

          I need to practiced my typing skeelz, `parently.

        2. Well outside of tax law?

          Civilians call that “nit-picking”.

          This article was for a general audience…

          If he’d written it exact enough to please every tax lawyer, it would be so tedious no one would bother reading it. …except tax lawyers.

          1. Tell me about it. I got about 2/3 of the way down the S-corp wikipedia article before I banged my head on the keyboard.

            1. None of you understand the profits-to-earnings ratio.

              1. And even fewer of you understand what it takes to run a successful business. What happens when you hire an employee that steels 25k from you and it puts a dent in your cash flow. Then you have a big tax bill and you are put on the ropes. You guys talk like business is a book, it’s fucking tough out there. You guys are a bunch of pussies that could not survive outside of accounting and academia.

    3. I noticed both of those inconsistencies, too.

      Revenue is not profit and it’s profit that’s reported as personal income that’s the issue here.

    4. One more time?

      If Obama wants to do away with the S-Corporation, then he should just say so?

      If you guys want to do away with the S-Corporation, then why don’t you just say so?

      If you like the negative impact on the economy from punitively taxing S-Corporations that make over $250,000 a year–then why don’t you just say so?

      It’s because you don’t know the difference between an S-Corp and a hole in the ground, isn’t it?

      1. This.

        As a part owner of an S-Corp its amazing how stupid some of these comments sound.

        Pass thru corporations, bitches. Learn about it.

      2. If you like the negative impact on the economy from punitively taxing S-Corporations that make over $250,000 a year–then why don’t you just say so?

        Right – because that’s exactly what I said.

        Don’t know where you’re getting all that from. Nowhere have I ever indicated anything like what you’re suggesting. Unbunch your knicker, dude.

        1. Knickers, rather. Both of them, not just one.

      3. Obama not only doesn’t want to get rid of s-corporations, he made them better by exempting net s-corporation profits from the upcoming 3.8% medicare surtax. Think of it as a gift to the plaintiff’s bar.

        1. Was that before, after or part of ObamaCare?

          ’cause if he’s mandating coverage and then cutting a surtax, then I hope he doesn’t do me any more favors.

        2. So, rereading your comment, he’s decided not to raise our medicare surtax, and I’m supposed to thank him for that?

          Am I supposed to thank him for not raising my income tax to 90% too?

    5. You stupid “progressives.” Thank you for showing us what we already knew: that liberal swine don’t know anything about how the economy actually works.

      The S-Corp analysis is great, but let’s not forget a few other things: sole proprietorships, Limited Liability Companies, and Limited Liability Partnerships. If you make a profit with ANY of these structures, it reports on the owner’s/member’s INDIVIDUAL taxes. This is not “gaming the system” — it is THE LAW.

      Now do you want to play the asinine game of “well, $250,000 is a lot of money”? Because if so, you will just confirm that you really do think that jobs are created by protectionism, inflation and deficit spending instead of capital investment.

      1. I wasn’t being sarcastic — thanks for the S-Corp analysis, Ken. You weren’t part of the “swine” comment. Same for you, BSP.

    6. “‘Your local dry cleaner or grocer likely brings in more than $250,000, but then has to pay their few employees from those earnings, leaving the owners with take home pay far below the rich man’s threshold. It is these employers and entrepreneurs that would be hit hard by a rate increase on the top two tax brackets.’

      That’s all tax deductible, bringing income under 250k, meaning they will not be impacted by the tax hike.”

      Yeah, I thought we were supposed to be the ones who knew our ass from a hole in the ground. Maybe they should talk to someone that has at least read a Schedule C at some point?

    7. Those box seats at Yankee Stadium are deductible, too. Why the fuck else would anyone jump through all the fucking hoops hung for the self-employed.

    8. A business owner who runs a sole proprietorship or partnership is “gaming” the system? What on earth are you talking about? You only pay corporate taxes if you are set up as a corporation. All the writer is saying is that under certain circumstances, a business owner may find themselves paying more taxes if they set up as a corporation, so they choose not to. That’s hardly gaming the system. They’re not required to set up as a corporation no matter how much they make. You don’t understand business.

  3. “Obama may appear to be concerned with the health of small businesses in America…”

    Not that you’d notice.

    1. The key word is “appear.” I don’t understand how after 20+ months of this guy, anyone can furrow his brow in puzzlement when he says one thing (“I’m concerned about small business! No one’s taxes will go up! You can keep your health care plan if you like it!”) and does another.

      Here’s a clue, fools: Barack Obama lies. All the time. To anyone, on any subject whatsoever, great or small, if it can be useful to his goals. And he can do it with a perfectly straight face, because he’s good at it.

      1. I wonder if maybe he is just bad at sarcasm.

  4. Whatever the truth of the matter, the American people need to know how he managed to become a “natural born” American citizen between 1981 and 2008..

    Given the destructive nature of his plans for America, as illustrated by his speech before Congress and the disastrous spending plan he has presented to Congress, the sooner we learn the truth of all this, the better.

    If you Don’t care that Your President is not a natural born Citizen and in Violation of the Constitution, then Delete this, and then lower your American Flag to half-staff, because the U.S. Constitution is already on life-support, and won’t survive much longer.

    If you do care then Forward this to as many patriotic Americans as you can, because our country is being looted and ransacked! TO THE WEAK-KNEED REPUBLICANS AND DEMOCRAT?..TO ALL THE COMMUNIST IN THE IG,FBI,CIA,AND U.S. Senators and the left wing media outlets?..Wake up america!!!! This goverment is the most corrupt we have had in years. The good old boy network is very much in charge.Mr. obama and pelosi are the puppet masters.How many of their good friends benefited by the agreement ” what a farce. All of the u.sSenators voted for this. I am ashamed to say I voted for the these corupted self serving politicians.With good reason they picked an out of towner to be president.All u.s departments need an overhaul. We need to rid ourselves of the puppet masters and the dept heads that bow down to obama and pelosi.I am sick of the lip service I have been getting from these dummies over violations, their friends are getting away with.in the goverment . Barack Hussein Obama , threatens friends and bows to Mmslim.
    INPEACH OBAMA ,GOD OPEN YOUR EYES.///For us there are only two possiblities: either we remain american or we come under the thumb of the communist Mmslim Barack Hussein OBAMA. This latter must not occur.THE COMMANDER.
    OBAMA goes about his business by speaking the lie. II Thessalonians 2 says that he comes “with all deceivableness of unrighteousness.” Revelation 13:12 says, “and he spoke as a dragon….” Revelation 17 tells us that he was a false prophet, a prophet being one whose calling it is to speak and to teach. The armies of the world may have guns and tanks and bombs to bring people into submission; but the power of speech and ideas is a mighty power. In his initial attempts to destroy the cause of God Obama used a serpent to deceive the woman with crooked speech: “You will be like God.” Now he uses a “dragon” who speaks crafty, lying words. His speeches will be heard by millions who will hang on his persuasive rhetoric. The content as well as the form of his speech will attract. Like most false prophets, he will even be sincere and passionate. But he is a liar. He adds dashes of truth to the mix, so that his lie tastes like truth. He will use all the right catchwords, using the language of the church, even throwing in a Bible text or two. But he is the ultimate Liar, and will deceive many.
    OBAMA will use every tool available: school teachers, politicians, news broadcasters, artists, musicians, scientists and doctors, lawyers and businessmen. All will be pressed into the service of OBAMA to deceive men. But especially he will use those whose calling it is to persuade and to teach — men who claim to be preachers of the gospel of Jesus Christ.
    THE COMMANDER,,, REPOST THIS IF YOU AGREE .. THE END OF AMERICA.

    1. I was doubting you there at first, but the all caps finish just brought it home.

      1. When I was an undergraduate, my buddies and I saw to it that R. Head was on all sign-up sheets. They even ordered “him” a tee-shirt once.

    2. That post is so bad, it makes me wonder if it was written by a Progressive trying to make the Tea Party look like a bunch of raving lunatics.

      1. Sadly, it seems that there are plenty of raving lunatics still spouting this kind of shit. As if there aren’t plenty of real reasons to dislike Obama without making shit up.

        1. As soon as Obama’s out of office, I’m turning on these jokers like a pit bull.

      2. I was thinking the exact same thing. I have been on other websites and I have seen this exact same BS. None of the actual Tea Party people I have read online or talked to in person talk or write like this. The only time I ever hear anything about Obama’s birth cert. is when progressives are talking about birthers, but I have yet to actually meet a real live birther.

        Whoever wrote it needs to do 2 things:

        1. Find the fucking space bar.
        2. Dont let the fucking parrot play with the caps lock.

    3. Not this again.

      1. I am the only who starts hearing “The End of America” sung to the tune of “The Age of Aguarius” when you do it in all caps like that?

        I am? Okay, never mind.

        1. “This is the dawning of the END OF AMERICA! THE END OF AMERICAAA!!! AAAAMEERRRRICAAAAAAAAA!!!! AAAMMEEEERRRRICCCAAAA!!!”

          1. That song makes me want to become a nudist. Cant really explain why.

    4. You know, I bought some peaches recently that had dark, bruised (?) centers. I think you’re right to blame this on Obama, but really, I should just be repeating it the way you said it so elegantly:

      INPEACH OBAMA

      Concise. Beautiful.

      1. In Soviet Russia, peach impeaches you!

        Is okay, I don’t get it either! See my show in Branson Missouri!

    5. Hello, COMMANDER. I see you’ve surfaced again.

      1. I just pictured Janet Napolitano chasing after some fat harry half naked lunatic with a butterfly net.

        1. I want to repost your article, COMMANDER, but I’m having trouble with “copy and paste”. My computer has low memory. Can you help?

      1. ik,r?

    6. tl;dr

      Nonetheless I have an odd desire to shove a peach inside the President. But that’s just silly. Surely it requires a special session of Congress to INPEACH OBAMA!

  5. LOL. Obama looks terrified.

    1. I thought that was his “concerned chipmunk” impression.

      ‘Course, a lot of folks look goofy when they’ve got their fight face on, but that it pretty unusual.

  6. See this classic piece by a small businessman who explains why he is not hiring

    http://www.rense.com/Why I Am Not Hiring.pdf

    1. This year, our provider demanded a 28% increase in premiums?for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect.

      ** rising intonation ** Uh, uh, uh!
      You’ll be hearing from us.

  7. Thanks for the tip!

  8. Thanks for the tip!

  9. “proposed a permanent extension of the research and development credit”

    “letting businesses write down 100 percent of their capital investments over a one-year time frame”

    “proposed allowing income tax rates on those making more than $250,000 to go up”

    Why so much complicated bullshit?

    “It is understandable that the administration wants to see a boost in business investment for new plant equipment, vehicles, computers, and other capital purchases.”

    Sounds like the beginning of a bubble for those things.

    1. I am going to start buying old Fryalators and pizza ovens at low low interest and no money down. Then I am going to polish them and sell them to pizza restaurants. Then I am going to write a book about flipping pizza ovens and sell it to people who want to make a quick buck on the equipment market.

      8 – 10 years down the road, I am going to appear on the news as a guest discussing the equipment bubble crash and explain why buying equipment you dont need just because it is cheep is not a good business model and how this caused the bubble to crash eventually and then i am going to also explain why small business are not thriving and refuse to hire, because they are upside down on their business equipment.

  10. It has finally dawned on me what Obama means by “small businesses”.

  11. Thanks for the tip.

  12. The debate is focused largely on whether or not to raise taxes on the rich in order to chip away at the deficit.

    BWAHAHAHAHA! Chip away at the deficit! Funniest stuff I’ve read this week. Oh wait. You were serious?

    1. Let’s say that the deficit is expected to rise by $1.8T next year, a $.5T increase from this year, and instead it rises by $1.6T.

      In government math that translates to a $.2T cut in the deficit.

      1. I believe you mean “a $200 BILLION dollar reduction in benefits! Just a half-step away from pure anarchy!”

    2. It’s not about cutting the deficit. Shitcanning the “Bush tax cuts for the wealthy” is purely symbolic.

    3. Everyone grab a bucket, were going to bail out the Pacific Ocean.

  13. I was talking to Hazel about this the other day, and I just fell into the same trap I was talking about then…

    The fact of the matter is that Obama is a moron. Only a moron would punitively punish small businesses at a time when the Fed was yelling for more action on the economy…

    Why would you do something to actively discourage small businesses to hire at a time when your presidency may hinge on where the unemployment rate is in 2 years?

    The simplest explanation? He’s a moron. He has no idea what he’s doing–he’s makin’ it up as he goes along. He doesn’t know that punitively taxing small businesses that make more than $250,000 a year will adversely effect the economy!

    He doesn’t know that. He’s a remarkably stupid man.

    I’ve seen some more complicated explanations, but is there a simpler explanation? I don’t think so.

    1. He views taxation as a matter of fairness, and will try to sell it with whatever lie he thinks people will believe.

      He doesn’t give a shit about the economy, unemployment, or small business. All he cares about is destroying wealth and growing government. That’s it.

      And yes, that makes him a remarkably stupid man.

      1. I disagree, sarcasmic. I think people WANT to believe he has a conscious, nefarious agenda. Because that would make sense. I believe it is more terrifying to contemplate the possibility that our system elects people, and gives them the power of gods, who are completely out of their element and are no more qualified than the “common” man that put him in that position.

        In other words: I think what makes him “stupid” is that he actually believes he’s saving the economy.

        1. I agree that government is little more than idiots telling the experts what to do.

          In the case of our current president, not only is he an idiot, but he’s an idiot who worships government.

          His agenda is not nefarious. He is not mean spirited. He’s just a fool who worships government and truly believes that as long as government is growing that society will benefit.

          If he has to destroy the economy in order to penalize the rich for seeking profits while taking over health care and banking, then so be it.

          In his mind we’re better off in the long run the bigger government gets.

    2. I agree, Ken. I was sitting in my home yesterday, having a nice breakfast, enjoying the view and, for some reason, thinking about Big Prez O. And I came to the same conclusion: I really, really believe he just doesn’t have a clue about reality. And worse, I think he’s made a living (a nice one!) at bullshitting people with catch phrases, emotional stimulation, and that condescending tone of voice.

      Here’s what did it for me: how does a “professor of constitutional law” (as he apparently was — although they’ve not yet released copies of the hiring documents, Commander!!!) not know that he proposes policies that are blatantly unconstitutional, even under existing precedent? I don’t think it’s spin — I think he really doesn’t know the law. And if he doesn’t know a field that he has a degree in, why would he know anything else?

      1. He understands that the Constitution is an impediment to government, and he sees that as a bad thing.
        He also understands that his policies are in violation of restrictions put upon government by the Constitution, and he does not care.

        1. “He understands that the Constitution is an impediment to government, and he sees that as a bad thing.”

          Some fucking constitutional scholar. Jesus this is the whole point of the constitution in the first place. Anyone that has studied the constitution and its history for more that twenty or thirty seconds would understand this and if Obama studied it, then he is obviously acting nefariously if he thinks it is something he can work around, or if he simply sees it as a hinderence to his plan.

    3. Worst Case of Affirmative Action Ever

      1. “Worst Case of Affirmative Action Ever”

        I don’t think it was that at all.

        1) He was against Iraq at a time when Iraq was really unpopular–so the party broke for him instead of Clinton (who was a hawk).

        2) He was a Democrat at a time when the country was really sick of Republicans.

        3) He didn’t make any big mistakes during his campaign.

        Race may have made him more appealing in certain districts, but I wouldn’t want anyone to think I thought he was a moron and promoted because of his race…

        I think he’s a moron because he’s a moron. George W. Bush was a well meaning moron too–and I bashed him with the best of the bashers too.

        That’s the way it works for me. I bash stupid presidents for being stupid. Jerry Brown is stupid too. We haven’t had a smart president in at least 10 years–maybe 18. Race has nothing to do with it.

        1. All politicians are morons

          F.A. Hayek famously argued in The Road to Serfdom, that in politics, the worst get on top, and outlined three reasons this is so. First, Hayek makes the point that people of higher intelligence have different tastes and views. So, as Hayek writes, “we have to descend to the regions of lower moral and intellectual standards where the more primitive instincts prevail,” to have uniformity of opinion.

          Second, those on top must “gain the support of the docile and gullible,” who are ready to accept whatever values and ideology is drummed into them. Totalitarians depend upon those who are guided by their passions and emotions rather than by critical thinking.

          Finally, leaders don’t promote a positive agenda, but a negative one of hating an enemy and envy of the wealthy. To appeal to the masses, leaders preach an “us” against “them” program.

          http://mises.org/daily/4739

        2. Nixon was smart, but evil.

          I’m more than ready for Zombie Nixon to take over the white house.

          1. Not on the economy, he wasn’t (smart, that is).

            1. Smart people can disagree on policy and make mistakes.

              Stupid people occasionally do the right thing, but only by accident.

        3. Bullshit. His lack of talent, experience and policy positions (e.g., “prestent”) and the media’s total dismissal of his associations (e.g., Ayers, Wright, Jones, etc.) are proof positive that if he had been white, he would not know be POTUS.

          1. But he is white (as much as he is black).

          2. “Bullshit. His lack of talent, experience and policy positions (e.g., “prestent”) and the media’s total dismissal of his associations (e.g., Ayers, Wright, Jones, etc.) are proof positive that if he had been white, he would not know be POTUS.”

            That’s your opinion, and you’re welcome to it.

            Just for posterity? I don’t want people to think anything I said had anything in common with what you said.

            We both think Obama’s an idiot? That’s apparently the beginning and the end of everything our opinions have in common.

            Race didn’t have anything to do with my opinion–and if that’s what yours was about? Then I don’t want to accidentally step in any of your opinion or let any of it get on me.

            Have a nice day.

    4. Last night I was chatting with someone about the Obama administration, and he described BHO and his top advisers as “destructively clueless.”

      I thought that was pretty good. It is possible to be harmlessly clueless, but these people are not. He said he was trying to be charitable and give them the benefit of the doubt they weren’t fucking up the country on purpose, so he had to chalk it up to plain old destructive cluelessness.

      1. God is speaking to my Barack.

    5. I’ve thought for some time now, that Obama simultaneously knows exactly what he’s doing… and has no fucking clue what he’s doing.

    6. Obama wants to destroy the economy he is not a moron. The plan is working well.

  14. The money they’ll “make” in 10 years off of this “taxing the rich” won’t cover the deficit for even 1 year. Hell, they could tax the “rich” at 100% and it wouldn’t be enough even if the “rich” were stupid enough to keep working.

    1. even if the “rich” were stupid enough to keep working.

      Like they’d have a choice in the matter. (Doctors, I’m looking in your direction…)

      1. Doctors, I’m looking in your direction…

        Channeling MNG are you?

    2. Yes, it will. Tax hikes on the rich cure all ailments.

      1. Externalities!!!

  15. I don’t understand the point of taxing capital investment at all. When a company purchases an expensive piece of equipment the seller of the equipment will usually make a profit that is taxable. It seems to me the same activity is being taxes twice if the the buyer is taxed too.

    1. This is feature not bug.

    2. That very argument has been tried in litigation way back in the early days of the federal income tax as well as in state-level litigation against sales tax and other state taxes.

      For the most part, it has been utterly and decidedly unsuccessful.

  16. I divide my officers into four classes; the clever, the lazy, the industrious, and the stupid.
    Each officer possesses at least two of these qualities. Those who are clever and industrious are fitted for the highest staff appointments. Use can be made of those who are stupid and lazy. The man who is clever and lazy however is for the very highest command; he has the temperament and nerves to deal with all situations. But whoever is stupid and industrious is a menace and must be removed immediately!

    Obama must go!

  17. Tax cuts => Let the people keep their money.

    Stimulus => Take the money from the people, let the politicians take their cut off the top, then give what’s left back to those people who can convince the politicians they need it most.

    No brainer to me.

    1. The problem with tax cuts is that people can’t be trusted to spend their money properly. Only graduates of Ivy League schools can do that. Besides, those rich people have their ill-gotten gains taxed a little more. It’s not like they acquired that wealth through honest means like working for the government.

      1. I’m still waiting for my iPad voucher. When do I get my iPad???!!!

        HEY! that guy with a top hat over there has an iPad! This is not fair. No, NOOO!!! the rich should not be allowed to have these things!!!

        I mean how else do you stop a tantrum like this? Just give the fucker his iPad or you wont get elected.

  18. If you look at history, when empires decline and fall, they often end up with Obama types as they are falling. Such mondern day “Neros” usually have delusions of grandeur about revitalizing the Empire, although it’s decline and decay is evident.

    1. Fucking Nero…making the empire collapse 400 years after he died.

      1. Julian, Diocletian, or Theodosius are probably better examples. At least Constantine had enough awareness to figure out where the actual power of the empire was, and where the cultural winds were blowing, and adjust accordingly. I don’t think Obama’s personality is flexible enough to do the same.

        1. If Obama made a lot of noise about returning the country to its old-timey roots, Julian would be the perfect example.

  19. If the tax on the $250k+ crowd goes up, and I’m a small business owner who claims business profits as personal income and whose profits exceed $250k, what are my options as far as re-structuring the legal status of my business such that its profits aren’t taxed as personal income?

    1. Couldn’t you just incorporate your business and then pay yourself a salary?

    2. You’re no fucking patriot!

      1. Don’t be so fast, Joe! I would actually support letting the tax expire on the $250k+ crowd if I knew it was actually going to be levied on income that was truly “personal” as opposed to business.

        In asking the question, I was trying to pick at the complaint typically raised in opposition to letting the tax cut expire, i.e. that it will kill small businesses whose owners are currently claiming their business income as personal income.

        If there is an easy way for these guys to report that income as business income instead of personal the the “expiration will kill small businesses” meme is less compelling.

  20. Thanks for the tip.

  21. Couldn’t you just incorporate your business and then pay yourself a salary?

    If its a C corporation, it will pay taxes on its net income.

    Say your corporation has a million bucks a year, net, before you take your cut.

    If its a C corp, it pays you your salary, then pays corporate tax on what’s left, and you pay income tax on your salary. The whole million is taxed as either corporate income or personal income.

    If its an S corp, you pay income tax on the whole million.

    1. What are the advantages of an S-corp over a C-corp?

      Seems like it would boil down to: “Is the tax rate on the salary I’m planning to pay myself out of the company’s profits likely to be higher than the corporate tax rate?” If yes then you want a C-corp. If no then you want an S-corp.

      But I’m sure its not as simple as that.

  22. You pathetic Rush-wingers make me sick. You don’t understand money like I do. It’s probably because you’re also a bunch of Christ-fags who get your economic “information” from Cato.

    1. ARFARFARFARFARFARFARFARF!!!!!

    2. No…no…no…

      Alex Liefson is the Rush wingman.

    3. God is speaking with my Barack.

  23. You younger people may not be familiar with this but the Beatles did a song called TAXMAN back in 1966. The lyrics are frighteningly similar to our current tax system. (IF YOU TAKE A WALK, I’LL TAX YOUR FEET!….TAXMAN!)

  24. This makes no sense. You are claiming, I think, that a small business, that NETS over 250,000.00 cannot afford something like a 4% tax increase. If I could net that I would be delighted to pay the tax. This is especially true when one realizes that the bill for this one is over a TRILLION dollars over 10 years. I have no problem with Obama hate but this one is simply unreasonable. You should, at least, be a little reasonable.

    1. You understand that we have an employment issue in this country, right?

      And that taxing money away from small businesses means they have less money with which to expand and hire people?

      How many times have countries successfully taxed their way out of a recession? Are you under the impression that taxing away business proceeds will have no discernible effect on business spending?

      A smart President would be slashing taxes to encourage growth at this point–not raising them. I think President Obama could stand to be a little reasonable. Apart from electioneering, what he’s saying doesn’t make any sense.

  25. I would like to make what is hopefully a simple point. To say that a business “makes” $250K a year is to confuse revenue and profit.

    If a small business has revenue of $250K, then after all your expenses, the owner will be taxed on what’s left. At a 20% operating profit margin, that means their annual income is $50K.

    If a small business has profit of $250K, that means their revenue is around $1.25 million (assuming, again, 20% margin). The workers’ salaries come out of that $1.25 million, and the owner is taxed on what’s left–that is, the $250K.

    The author of this article suggests the workers are paid off the $250K. So, our hypothetical owner is making around $50K, and is not affected by the $250K+ tax rate change.

    S-corps, c-corps, LLCs, LLPs, etc–all that stuff matters, but what matters a lot more is whether we’re talking about revenue or profit. This article does not make that distinction clear.

    1. My understanding is that we’re talking about $250,000 in reported earnings before taxes.

      And I don’t see why that should matter.

      The negative impact on squandering the productive resources of entrepreneurial activity on government largess are the same whether the entrepreneur’s take home pay is $250,000 or $2.5 million.

      …especially when we’re talking about there being so much in the way of unemployment right now. There are millions of marginally unemployed people out there right now–and marginally employed people too…

      Lowering an entrepreneur’s take home pay means those marginally unemployed people are more likely to stay that way for longer–and the marginally employed? Well they’re more likely to become marginally unemployed, aren’t they.

    2. You’re clear on the point that we get less economic activity as economic activity becomes less profitable–yes?

      SUPLIY KRUV!

      He’s making economic activity more expensive. …at a time when we need more economic activity. Not less.

      1. Ken, I agree with what you’re saying but I think you’re also missing the point Tom O. is trying to make. Reading the part of the original article that talks about who would be hit by the higher taxes, it says:

        “Your local dry cleaner or grocer likely brings in more than $250,000, but then has to pay their few employees from those earnings, leaving the owners with take home pay far below the rich man’s threshold. It is these employers and entrepreneurs that would be hit hard by a rate increase on the top two tax brackets.”

        It certainly sounds from this like the author of the article is confusing profit with revenue. If he can make such a very basic mistake, it renders everything else in the article less credible. I think it was this point which is being brought up here, not the broader point regarding whether or not higher taxes would be a good thing (I agree with you that raising taxes would be a bad idea for many reasons).

        1. Joe Z: Yes, exactly. To confuse the two may be convenient for polemical purposes, but it’s not useful in terms of understanding the actual math of the proposed legislation.

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