$200,000 per individual and $250,000 per household is too low a number.

Example: John’s Car Repair Shop
John is an “S” corp. or LLC and all profits from that corporation pass through for tax purposes pro rata the percentage of stock own. John owns 100% of the stock and is doing well, last year the shop did two million in sales and after salaries and expenses the business made $200,000.00. John pays himself $100,000.00 a year in salary but he has to pay taxes on $300,000.00. Here is where the problem starts; John doesn’t get to keep all the money he is paying taxes on because the business needed $75,000.00 in capital improvements like a new lift and new computers and tools to fix the cars.

John also needs to keep a prudent reserve of cash in the company of $75,000.00 to cover operating expense and weather a rainy day if the sales are not there in a given month. To make things simple let’s say that John is being taxed at 30% ($300,000 x 30%) or $90,000 on the $150,000 in profit John actually got to take home leaving him with take home pay of $60,000. This scenario creates an actual tax burden on rich evil John of 60%. Let’s tax John 50% because he is so rich and we need the money ($300,000 x 50%) or $150,000 – Johns take home pay of $150,000 = ZERO.

Make the increase at $750,000 and you save hundreds of thousands of small business that are employing millions of workers that are spending money repairing the economy. You may ask “Mark, it is so simple, why don’t they just do that?” The answer is that the meat is in the middle, even if you taxed all income on those earning over $750,000 at 100% there wouldn’t be enough and they know that.

Given all the hassle and risk of running a business the small business owner would be crazy to continue this model. Say whatever you want but if you destroy the small businesses in America the well will truly be dry.

You can shear a sheep many times, but skin it only once.

 

4 Responses to Why raising the taxes on the so called rich won’t work…

  1. Lou says:

    Book-marked, I really like your site! :)

  2. Bobbe says:

    Cool! That’s a clever way of lkoiong at it!

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