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How does it effect everything they do? Whether the tax rate is 20% or 50% the business could be run the same way, any investments, etc are going to be paid before taxes and hence aren't effected by the tax rate. In fact, higher taxes will encourage more investment.
Anyhow, you are speaking as if businesses are taxed on their gross profit, but they aren't. Labor, investments, etc are all deductible expenses. After tax profit is usually paid out to shareholders, not used for the business. The business is going to make every effort to use pre-tax dollars for the business.
It effects why they invest in the first place. If the government is going to take 50% of their profits then they may not want to even opperate the business. Businesses are hard to run and opperate and by taking 50% of the profits they are reducing the reason to be in business by 50%. People are in it for the money, not to create jobs or for the economy. Now they have to invest even more, like you said, to make up the difference. That means more of their own time and labor trying to expand just so they can make as much as they should have been making in the first place.
Or they could invest in something that doesnt have a 50% tax rate. Stocks, bonds, real estate...passive investments that make less but are much less troublesome then a business, especially when the FED is demanding half your profits. And these investments create very little jobs.
It effects why they invest in the first place. If the government is going to take 50% of their profits then they may not want to even opperate the business. Businesses are hard to run and opperate and by taking 50% of the profits they are reducing the reason to be in business by 50%.
This is just yet more commentary that isn't based in reality. People aren't investing in businesses because the dividends, they are investing because they hope the value of the business appreciates. When an owner sales shares in his business he doesn't pay corporate taxes on it, but rather capital gains taxes.
Raising the corporate tax rate won't change incentives, instead they create incentives to increase investments, after all that is how you get a business to become more valuable.
Its amazing to what degree all rhetoric about low taxes isn't based in reality.
Quote:
Originally Posted by maschuette
That means more of their own time and labor trying to expand just so they can make as much as they should have been making in the first place.
The owner's labor is fully deductible and hence not subject to corporate taxes.
Quote:
Originally Posted by maschuette
Or they could invest in something that doesnt have a 50% tax rate. Stocks, bonds, real estate...
This is funny, are you not aware that investing in stocks is investing in a business? I wonder what you think stocks are....
This is just yet more commentary that isn't based in reality. People aren't investing in businesses because the dividends, they are investing because they hope the value of the business appreciates. When an owner sales shares in his business he doesn't pay corporate taxes on it, but rather capital gains taxes.
Raising the corporate tax rate won't change incentives, instead they create incentives to increase investments, after all that is how you get a business to become more valuable.
Its amazing to what degree all rhetoric about low taxes isn't based in reality.
The owner's labor is fully deductible and hence not subject to corporate taxes.
This is funny, are you not aware that investing in stocks is investing in a business? I wonder what you think stocks are....
You seem to think that tax wright offs are the same as tax credits. Their not, if a business spends 1 million in labor then they dont save that million dollars, they save only 35% of 1 million, so they still lose 650,000. So if you raise the tax limit and a business is not able to grow for whatever the reason, the economy for example, then they wont spend more, instead they will cut more. And they will take the tax hit and keep the rest. Then, in turn, their profits go up because cost go down then their stock value goes up and their business appreciates. They make more both ways. This is what businesses have been doing since the recession.
The owners labor is deductible but that doesnt make working more any less tiresome. Which may cause them to not want to grow and instead cut.
I do know that stocks are investments into businesses but you dont have to pay corporate tax rates on stocks, that was my point.
You seem to think that tax wright offs are the same as tax credits. Their not, if a business spends 1 million in labor then they dont save that million dollars, they save only 35% of 1 million, so they still lose 650,000.
Huh? We aren't talking about savings we are talking about deductions. If a business spends $1 million in labor it can deduct $1 million in labor that year, they pay no taxes on that labor. So why would a higher corporate tax rate prevent hiring? It wouldn't, wages are paid with pre-tax dollars.
Yet most people are convinced that higher taxes is going to result in less jobs, its an amazing example of how effective propaganda can be.
Quote:
Originally Posted by maschuette
The owners labor is deductible but that doesnt make working more any less tiresome. Which may cause them to not want to grow and instead cut.
Again...huh? The issue is how corporate taxes effect incentives. The owners don't pay corporate taxes on their wages which will be their primary source of income from the business, so how exactly would higher corporate tax rates change their incentives?
Quote:
Originally Posted by maschuette
I do know that stocks are investments into businesses but you dont have to pay corporate tax rates on stocks, that was my point.
Right, that is because the corporation has already paid the taxes on their earnings, you have to pay income taxes on the dividends and capital gains taxes on the appreciation. There is no difference, the fact that you cited it as an alternative is absolutely bizarre.
Huh? We aren't talking about savings we are talking about deductions. If a business spends $1 million in labor it can deduct $1 million in labor that year, they pay no taxes on that labor. So why would a higher corporate tax rate prevent hiring? It wouldn't, wages are paid with pre-tax dollars.
Yet most people are convinced that higher taxes is going to result in less jobs, its an amazing example of how effective propaganda can be.
Again...huh? The issue is how corporate taxes effect incentives. The owners don't pay corporate taxes on their wages which will be their primary source of income from the business, so how exactly would higher corporate tax rates change their incentives?
Right, that is because the corporation has already paid the taxes on their earnings, you have to pay income taxes on the dividends and capital gains taxes on the appreciation. There is no difference, the fact that you cited it as an alternative is absolutely bizarre.
Taxes effect profits so businesses may cut cost to increase profits. That means more job cutting.
Corporate taxes effect after-tax profit. If a business could cut costs and increase profits why in the world would it wait for a tax increase to do?
Corporate taxes effect after-tax profit? No they dont, corporate tax is the first tax and then any dividends after that are considered income that is taxed a second time. Why would they wait for a rise in corporate taxes? Because they would be making less money. Not that it matters, no one in their right mind is going to raise corporate taxes in this economy with unemployment at 9%.
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