Will someone please explain this to me about the Bush tax cuts???

[AnArmyVeteran]

I've heard over and over again how the super rich and corporations are hoarding their money because they 'feel' uncertain about possible upcoming regulations or the repeal of the Bush tax cuts for the rich. 

Corporations have huge treasuries full of cash. I understand businesses which might hold back if there might not be a demand for their products, but to increase their stockpiles of money they have been firing workers for the last few years. So on one hand they are saying they won't build their businesses because there are afraid of lack of demand, but they keep firing people to make sure the demand will never materialize. I know it's a game, a charade to deliberately affect the 2010 midterm elections, but why aren't democrats exposing their manipulative tactics?

Businesses claim that if the Bush tax cuts expire at the end of this year they won't be able to hire new workers, but WITH the Bush tax cuts in place the past nine years they only created a paltry one million jobs while Bush was president. That's a dismal job creation of only 125,000 jobs for each year while the Bush tax cuts have been in effect. So why in the hell are democratic leaders letting them get away such a blatant lie? 

Under Clinton, when the tax rate was approximately 4% more than it is now a whopping 22.4 million jobs were created. That fact completely counters the lame excuses being used by businesses and republicans today. So again, why are democratic leaders not exposing the obvious lies being told by businesses and republicans?

A lot of democrats are even beginning to side with republicans to extend or make the Bush tax cuts permanent, even though the lower tax rate has done virtually nothing to increase job growth. 

I wonder how the United States was able to have low unemployment with tax rates close to 90% in the 50s and over 70% in the 60s. At that time the US was creating the biggest middle class in the history of the world and we were number one in the world in manufacturing and production. The high tax rate didn't seem to hurt our economy at all and because of having the additional taxes coming into the treasury we were able to build our infrastructure. 

But republicans and businesses say higher taxes would cripple innovation and the creation of new businesses. According to them everyone who has an idea or wants to create a new product would just stop in their tracks, stay home and do nothing. I wonder if Bill Gates and Steve Jobs first looked at the tax code before they began creating their products and businesses in the 1970s. The republican argument is ludicrous so why are democratic leaders letting them get away with their con game on the American people? 

[crim son]

1. I'm pretty sure

the decision to extend the cuts has absolutely nothing to do with what's best for the economy and everything to do with political contributions and personal gain, for rethugs and dems alike.

[daylan b]

2. The economy is going to do what its going to do regardless of the tax rate

One only needs to look at the history of tax rates to realize the economy goes both up and down after both tax raises and cuts.

[Hannah Bell]

33. false.

[daylan b]

58. true.

No backs.

Amazing debate skills you have there.

[Hannah Bell]

68. the tax rate affects the direction of "the economy". "the economy" is not an autonomous "thing"

with a mind of its own.

different tax policy = different results.

tax policy is the #1 reason for the concentration of wealth over the last decade & the resultant speculative bubble.

[daylan b]

75. Recessions are not measured by concentration of wealth.

We've had both booms and busts after both tax increases and decreases.

[Hannah Bell]

76. not since kennedy.

[daylan b]

77. Are you replying to my title or my body?

You know, expanding on what you say is actually quite common.

[DrDan]

6. agree

[daylan b]

10. SHUT UP AND PAY YOUR CONFERENCE EXIT FEE

grrrr. sorry.

[DrDan]

12. my check is in the mail

actually, as a long-time Big-8 fan, I shall miss a few big rivalry games - like Mo and Ok.

[madokie]

35. You do mean used to be big 10, right?

That had to be the stupidest thing that they could've done if you ask me.

[Hannah Bell]

34. false.

[Lydia Leftcoast]

3. Argument against the tax cuts No. 1

Hiring people is a legitimate business expense and is therefore paid for with pre-tax dollars.

In other words, the cost of hiring people is one of the many items subtracted from total income before taxes are computed.

Businesses of any size are taxed only on their profits, not their total earnings, and profit = income-expenses.

A business that is in the red owes no income tax, so all this right-wing blather about businesses being forced out by taxes is just that, right-wing blather.

[indepat]

4. Every utterance from the right, I would proffer, is little more than right-wing blather which is

usually an outright lie, duplicitous, misleading, slanted, distorted, one-sided, fallacious, hypocritical, mendacious, reichous, sanctimonious, any of these or all. :)

[taupe]

17. small business cannot keep cash in the business without paying tax

on it. So, if I want to hire 3 new people next year and I am not sure if I will have the revenues to cover their salaries, I would like to have some cash saved up just in case. This cash is after tax. I must pay tax on all earnings. If it leave some cash in the checking account, I must pay tax on it. That is just how it works. So, if we raise taxes on small business people, they will have less cash to grow the business. In other words, they cannot leave cash in the business without paying taxes on it. (Almost all small businesses are LLCs or S Corps. and personal tax rates apply.) There is a big misunderstanding about this.

[Lydia Leftcoast]

22. I'm self-employed myself, so I know all that stuff

When I became self-employed, I was DELIGHTED to learn about the tax breaks that apply to the self-employed and not to people who work for others.

Now I can have some control over how much tax I pay by purposely engaging in tax-reducing activities.

Nobody is going to go out of business due to taxes on retained earnings.

Nice try.

[taupe]

25. I am not following you.

You said "nice try". I don't understand. I simply pointed out that small businesses cannot keep cash in the business without paying taxes on it.

[Lydia Leftcoast]

29. Well, whoopee

It's not a confiscatory tax.

[taupe]

37. We are trying to create jobs

Reducing the working capital of small business by increasing their taxes is totally counterproductive to creating jobs. Unemployment is a huge problem in America and it will not improve until businesses start hiring more people. Taking cash away from them will only increase unemployment.

So many people seem to think that businesses are just oozing cash. This is not the case. Any rapidly growing business will require additional cash in order to grow.

[Lydia Leftcoast]

39. Where I come from, businesses hire more people when they have more customers and/or orders,

not when they get tax breaks without more customers and/or orders. No sane business person is going to hire extra people just to have them sit around doing nothing.

[taupe]

42. You are twisting things around.

Sure, businesses hire when their demand increases. But businesses also create new products and new services. And most of the time, they need to hire new people to develop these products and services. So that is why a business with strong cash flow can develop new products and services, because they can afford it. Many businesses would like to hire additional salespeople. Very few businesses have too many salespeople. The only thing holding them back is lack of cash. Hiring is not all about orders.

Almost all businesses have new areas where they can expand or grow. They are almost always constrained by lack of cash. I know this because I have consulted with small businesses for 27 years. The faster a company grows, the more constrained it is for cash. That's how it works. Timing has a lot to do with it, collecting cash and paying cash out.

What America needs to do is create more jobs. Raising taxes on the fastest-growing small businesses makes no sense.

[county worker]

47. First of all the taxes in the Bush tax cuts are individual income taxes not small business tax.

Next, very few small business owners pay have net income past on to their personal income tax of over $250,000.

As I said businesses do not pay tax on cash on hand. The reason there is no cash many times is because of lack of borrowing in this economy.

Third, the Dems have been trying to pass small business tax cuts and the right has blocked them.

[taupe]

50. Small businesses pay personal tax.

Almost all small businesses are LLCs or S Corps. and as such they do not pay corporate taxes, the profit flows through to the owners and they pay individual rates. I know because I am one.

Any cash in the business is after tax. You do not understand the tax rules. The owners pay taxes on the profits. Any cash in the business must come from the profits, therefore it is after tax. I have owned my own business for 27 years. I know this stuff.

Two thirds of the individuals earning more than $250,000 are small business owners. These are the companies that are the most successful and therefore are growing the fastest and hiring the most people. This is where new jobs come from. We do not want to increase taxes on those who are creating the most jobs.

[county worker]

53. I'm an accountant

That canard about not raising taxes because of jobs don't hunt anymore. That's just right wing propaganda. You should pay your share of taxes just as I do not matter how you make your money. If you can't make it in business get a real job!

[sendero]

73. Blah blah blah,.

.... really these tired excuses for the wealthy not paying their fair share are getting tedious.

Go peddle your Randian BULLSHIT somewhere where the average IQ is as low as yours.

[GOTV]

57. Jobs are created by demand, not paid for out of petty cash ...

... Employees MAKE you money they don't COST you money or you shouldn't be hiring.

If the government cut your taxes to zero you still wouldn't hire unless there was sufficient demand so that they made you money.

If you're looking at the money you have and hiring based on cash on hand then you're not a very good entrepreneur.

[county worker]

46. Wrong, You do not pay tax on cash in the checking account!

Taxes are either payroll, income or in some states inventory and property. There is no tax on cash!

[AnArmyVeteran]

36. Thanks, I appreciate the inputs from you & others in this thread.

[county worker]

43. You have to look at cash flow not income.

A business could have net income because if non cash expenses like depreciation yet not have cash. If you do not have cash you cannot operate. Business have been lacking cash due to loans not being available.

Once there is net income and taxes have to be paid that subtracts from cash flow. Also payroll taxes have to be paid when the payroll is paid so that is also an outflow of cash.

You need to think in terms of cash flow not accounting definition of net income which is what taxes are based on.

Taxes paid are a legitimate business expense. Taxes paid on 2010 profit are expenses in 2011. Your argument does not hold water.

[EC]

5. Spending the money now to create jobs would lower their

tax rate anyway if the * cuts expire so that's just bull that they are afraid of more taxes...


Every time taxes are raised - hiring or expanding goes up so they don't have to pay more in taxes..

[Curmudgeoness]

7. You pose a question that has no answer. Or at least

no answer that would make sense. You are completely correct in saying that the Dems should be making this point---often.

[Warren Stupidity]

8. Yeah it is all bullshit. It starts with bracket collapse.

By eliminating most of the income brackets under the guise of 'simplification' (and what a joke, the tax forms are more complicated than ever) progressivity was almost eliminated from the income tax. It is the key to the assault on income tax progressivity as it lumps professional and highly skilled workers - everyone from doctors to plumbers - into the same tax bracket as bill gates and warren buffet.

Add brackets at the top and make all the brackets COLA and raise the goddamn rates on the goddamn rich.

The solution to our deficit problem, if indeed we have one, is to raise the income tax rates on the rich, not to cut social security benefits and/or increase the regressive payroll tax. And no, entrepreneurial activity will not come to a grinding halt because millionaires have to pay a 70% rate on income over 1,000,000.

[taupe]

18. You know nothing about entrepreneurship.

If tax rates are 70 % on our most successful entrepreneurs they will indeed reduce their activity. I am an entrepreneur and if I only get to keep 30 cent of every dollar I earn, I will go play golf instead. I just ain't worth my time.

[eridani]

23. You're too ignornant to be an entreupreneur if you don't have a clue about marginal tax rates

The 70% tax rate occurs only on income above a given threshold. The rest of your income is untaxed or taxed at much lower rates.

[taupe]

27. Please skip the name calling.

The rest of your income is taxed at graduated rates, not untaxed, otherwise the rate would be a flat 70%, which it is not. And the rest is taxed at lower rates. Of course. what is your point? Marginal rates are important because they impact people's decisions to work more or not. At a 70% marginal rate, people will elect not to work so much, it is simply not worth it to them.

[eridani]

30. You said that you only would have 30 cents left out of every dollar

Sounds like a flat rate to me. Glad that you changed your mind at least. Given 20% real unemployment, why would we want people to work more anyway?

[Warren Stupidity]

32. So you agree that a person with an income of > 1,000,000

would not be keeping only 30 cents on the dollar. So what exactly was your point? How on earth did anyone start a business in the 40s, 50s, 60s and 70s when we had exactly that sort of progressive income tax in place? And finally, you do understand that we are discussing INCOME? You can grow your business quite nicely and not have to pay yourself NeoGuilded Age CEO salaries. What this would hurt is Wall Street Finance House bonuses, not new small businesses.

[taupe]

38. The point is that people make decisions about working at the margin

Not based on their average income tax rate. How much to they get to keep of the last dollar earned?

[Warren Stupidity]

41. And why did we have lots of new businesses and very robust

growth from the 40's to the early 80's? Huh? Your theory and the data seem to be at odds. Rather than mindlessly repeating the neo-liberal canon, perhaps you might want to actually respond to the issues raised in this discussion? Where is the data that backs your new revised assertion? How do you account for the robust growth for the nearly 40 years where we had an actually progressive income tax with very high marginal tax rates?

[taupe]

44. I am a business man, not an historian.

And I do not need data to back up my points. Historical economic data can prove all kinds of contradictory ideas.

My points are based on common sense and 35 years of experience working in the business world.

I do know from experience that when tax rates were quite high, people went to great lengths to avoid paying taxes. They invested in all kinds of tax shelter investments that made very little economic sense, but they wanted to avoid paying taxes.

What exactly is the point you are trying to make regarding taxes?

[Warren Stupidity]

45. "And I do not need data to back up my points."

Then you are engaged in a faith-based argument and we are done.
Have a nice day.

[taupe]

51. So common sense and experience counts for nothing?

After 35 years in business, I have a pretty good understanding of how things work.

[HughBeaumont]

54. The Laffer Curve and Eugenics were pretty well researched.

Doesn't make them correct.

[arbusto_baboso]

62. But you're NOT talking common sense.

Just bullshit right-wing talking points.

Tax rates have NEVER discouraged entrepeneurs. Saying so is bullshit.

[HughBeaumont]

49. Faith based. Enron Economics.

Idiocy.

[taupe]

52. experience and common sense

[arbusto_baboso]

63. Bullshit.

[Yupster]

69. Please understand that no one ever paid a tax rate of 80 %

Until 1986 there were tax write offs and deductions of a whole different magnitude than today.

Have you heard of the limited partnership and tax credit crash of the late 80's?

These were investments that were designed to take advantage of the credits and deductions that were eliminated by the TEFRA of 1986.

For instance I had a Liberty Tax Credit investment that over a 10 year period provided tax credits of 150 % of the original investment regardless of market performance.

All those type programs were wiped out by TEFRA.

You could also deduct car payments, credit card interest and about everything else.

[Lydia Leftcoast]

56. But you obviously don't understand marginal rates or the tax laws

Seems like you need to consult with an accountant.

[Yupster]

70. The small businessowners that would fit into this category

that I know are an interesting breed.

Take a 72 year old guy who owns three restaurants.

He has about $ 5 million invested mostly in tax free bonds. He makes about $ 1 million a year.

His wife and kids want him to retire but he still wakes up at 5 am every morning to run his businesses.

Why does he do it?

Because that's the kind of person he his. He's fiercely independant. He also hates paperwork and hates the government messing with his business.

So should he open a fourth restaurant and hire 14 new workers?

You can't bully this guy. He's not going to open a new place to give 70 % of the money he gets to the government. Push him too far and he'll just retire and shut the whole thing down. That's what his family wants anyway.

-------------------------------------------------------------------------------------

Another guy owns parts of about five different oil companies. His investments are very similar to the first guy but this guy is less than 50 years old.

He's a dealmaker. He trades 10 % of this company for half of that well, and then sells the well for 20 % of a different company together with a frac job. Then after selling, he turns around and starts company number six.

He's constantly flying to Dubai, Norway, the Caribbean and Africa.

His wife is worried sick about him because she doesn't know what's going on and he's already had heart problems and works 16 hours a day when he's home at all.

He hates the government as a roadblock to his businesses. Just figuring out his 401 k is a nightmare because some of his companies have to be included, others don't and it's constantly changing based on his latest deal. His accountant and lawyer are always consulting with each other trying to keep him within whatever new laws are passed while he's flying around starting businesses and making deals. If he doesn't include a company in his 401 k, he can get severly punished. If he includes a company that he shouldn't, he can be severly punished.

He hates this stuff. To him it's just people interfering with his companies.

Six months ago he went to the Bahamas (or was it Bermuda?? can't remember). Anyway, he told me that all he has to do is open an office there and hire one person (groundskeeper/custodian) and he can base his company there.

He doesn't want to do it. He's from a military family. But he won't be in his opinion pushed much further. He's close to going overseas.

[Warren Stupidity]

31. marginal tax rate nt.

[GOTV]

55. If hiring someone means more money in my pocket then I hire them...

... it doesn't matter if the amount is $1 or $0.30. It's independent of my tax rate. It's only a question of will they bring in more than they cost.

So, I'll take your 30 cents and you can go off and play golf - for as long as you can afford to.

[ThomThom]

9. You asked, I'll answer

<<I wonder how the United States was able to have low unemployment with tax rates close to 90% in the 50s and over 70% in the 60s>>


because when the rates were high there was no reason to take that money out of the business instead it was used to expand and create more jobs and pay high wages to keep the good people you had to train the new ones you would be getting.

[taupe]

19. Ever own a business? I didn't think so.

You cannot leave money in a business without paying tax on it. LLs and S Corps are taxed at personal levels.

[ThomThom]

21. I believe you can by doing the things I said

it is when you take profit or personal income you pay taxes
employees pay more taxes if they get a raise but
spending money on assets is not going to be taxed
spending money on training is not taxed
need I say more, I don't think you understand what I meant
if you raise the rate to the point that the government will get a large amount through taxes then the business will be better served to reinvest it

[howaboutme]

11. How so? The USA was doing best when marginal tax rates were 90%

This everything will be good if only we keep the Bush tax cuts is bull shit.

It is fair to say that the USA was doing far better as a nation, and not as refuge for a relative few overpaid CEOs and billionaires, in the 1950s and 60s when tax rates were far higher (like 90% under a Republican President) than they are today.

The rich actually contributed to making the USA a better place instead of sucking on the teats of government and taxpayers via corporate welfare and low tax rates. Also the bulk of the USA had good paying jobs instead of having our jobs sent to China so that the capitalist business elite can create a new 1 billion population marketplace and create a global competitor to the USA.

[Skittles]

13. off to the Greatest Page with ye, ArmyVeteran

yes INDEED

[AnArmyVeteran]

59. Thanks Skittles, but my OP is struggling to stay afloat :(

[Kablooie]

14. If they lose the tax breaks they will INCREASE hiring.

Right now much of their profit come from the tax cuts so they don't have to really work hard to increase sales.

If they lose the tax breaks they will be forced to find ways to increase sales and that will require more workers.

The tax cuts are part of the problem with low employment.

[taupe]

20. This makes absolutely no sense

What is with you people who know absolutely nothing about business and you make these bizarre pronouncements? Go start a business and learn! I have been and entrepreneur for 25 years. I know how business works and you are just ridiculous.

[Kablooie]

26. It only makes no sense to you because you know what your talking about.

[taupe]

28. Thank you.

[HughBeaumont]

48. Appeal to authority. Always fun.

Unfortunately, your talking points do not square with the FACTS.

http://journals.democraticunderground.com/HughBeaumont/120

Have you right-wangers never taken a macro/micro econ course? Even if you have, that never stops you or anyone else from repeating the same "Tax the corporations and it affects all of us. They'll raise their prices to cover their costs!" mantra.

I don't understand how a higher tax rate on profits causes reductions in jobs or a rise in prices. You guys seem to have this notion that businesses are taxed as individuals are and it's simply not true. Corporations are taxed on profits, not expenses. Last I checked, taxes were for maintenance, not prosperity. The ONLY relationship between employee compensation and income taxes is that income taxes are reduced when a business pays more in employee compensation (and therefore has less taxable profits).

The upper 5% of wealth are doing no worse now than they did back when the top income tax rate was 90%. Any robust economy is driven by a middle/working class that's gainfully employed (like, for instance, the middle part of the Clinton years). When the top marginal and corporate tax rates are lower, businesses feel no great need to hire, thus creating large profits and cash stores but a "jobless recovery" in the process (like, for instance, the Bush years).

If the tax rate on business profits is reduced, HOW does that effect the number of people hired? It doesn't. History and current events put the lie to this talking point. Thanks to Bush's tax breaks for the wealthy, corporations are enjoying their lowest tax rates in quite a while, yet the period from 2001-2008 yielded a pathetic average of 49 thousand jobs created per month, including 10 straight months of job losses in 2008. That's even worse than George HW Bush's presidency and falls well short of the 130-150 thousand jobs needed every month to accommodate incoming-outgoing workers.

[Kablooie]

66. I an NOT a right-wanger. I am simply an ignorant liberal.

[HughBeaumont]

72. Er, was responding to our "guest".

You're right. He's the one that's off.

[arbusto_baboso]

64. You are an "entrepeneur" who has the time to...

troll on DU?

Again I say bullshit.

I doubt you've owned any business larger than a lemonade stand.

[Kablooie]

65. I never owned a lemonade stand.

I had a toy coke machine and tried selling small toy cups of coke once.

The neighbors across the street actually paid for a couple of cups --SO I AM AN ENTREPENEURER. (I'm just not a good speller.)

[arbusto_baboso]

74. Well, I was replying to Taupe, but....

Your response certainly made me laugh a bit.

[woo me with science]

24. This is analogous to the argument I've seen from the right:

Extending unemployment benefits is bad for the economy because it allows people to stay home and unemployed. If the benefits are taken away, they will WORK HARDER to get jobs.

[dkf]

15. Companies are hoarding cash because the last time around the credit markets froze and some

Started calling for more collateral.

This is just like how small companies had their lines of credit frozen and couldn't pay their payrolls.

[Synicus Maximus]

16. A possible answer to your question.

"how the United States was able to have low unemployment with tax rates close to 90% in the 50s and over 70% in the 60s. At that time the US was creating the biggest middle class in the history of the world and we were number one in the world in manufacturing and production."

It the 1950s and early 60's the United States was the only large intact economy in the world. Europe and Asia were still recovering from WWII. India was still a British protectorate, most of Africa was still colonies. WWII created the baby boom, more new families needing and wanting more homes, cars and new products. Thereby creating demand. Also production, farming, construction etc. was much more dependent on human labor. Add all these items up and you get low unemployment regardless of the tax rate.

[ItNerd4life]

40. It's not the tax rate, it's what the deductions are for.

The 90% is a lie. Nobody ever paid that percentage.. There were so many tax deductions, most people paid less than they pay now.

In my opinion the economy boomed under Clinton for 2 reasons. 1) The internet created US jobs. 2) He didn't overspend. He kept government spending in check.
Bush allowed jobs to go overseas and didn't keep government spending in check. Under Bush Millions of jobs were created, just not in the U.S. There were no incentives for companies to keep jobs in the U.S., thus the deductions were misplaced.

[Capitalocracy]

60. It's basically blackmail or armed robbery

Give us our tax cuts or there won't be any jobs. Of course, what we need to realize is they're not going to create jobs either way. We need to create jobs by increasing the minimum wage (and therefore demand), helping out small businesses, finding ways to help people create new small businesses (how about a student loan-style loan structure for new small businesses?) and all the other actual effective, progressive things we can do that actually create jobs.

Here's the logical fallacy: Corporations aren't creating jobs because they don't have enough money. BS. They run on as low a cost as they possibly can, which means they will always have the minimum number of workers necessary to do whatever work they need done, and pay them as little as possible. Unless they're the CEO or the people who make pay decisions, in which case they will earn as much as possible, even if it destroys the business. Therefore, the only way to increase the number of jobs is to increase the buying power of the populace, and increasing wages will do little to affect job numbers because the businesses that can afford to hire are already and will always have as few employees as possible, and are unable to fire more and continue operating.

[Quantess]

61. Interesting discussion.

[SmileyRose]

67. super rich and corporations hoarding money ????? I'm shocked. SHOCKED I tell ya.

Obviously this never ever happened in all of human history before B. Hussein Obama (whackjob american hating christian socialist fascist muslim terrorist loving chicago mafia grandma killing kitten eating black dude) got elected.

[McCamy Taylor]

71. Fact: tax cuts for the wealthy are the least productive economic stimulus possible

even worse than military spending which is worse than infrastructure which is worse than medical spending which is less than education, the best way to spend government money if you want to stimulate the economy.

I wrote about this in my journal "Books not bombs". http://journals.democraticunderground.com/McCamy%20Taylor/440

If you want to get the least bang for your federal buck give it away to a bunch of rich folks who already spend as much as they are every going to spend and watch them squirrel it away in a Swiss account. Deficit increases with no corresponding increase in either supply of goods or demand for goods. Tax dollars might as well be going into a black hole.

Plus, I suspect (though can not prove) that the temporary nature of tax cuts for the uber rich encourages them to make as much money as possible in as short a time as possible even if it means gutting corporate America's ability to create an actual product, since the rich want to get their money's worth now and they figure only a sucker will invest in the future when his income might be taxed at a higher rate.