[quote=AN]dumbrenter, to make it clear, my friends aren’t blaming anyone. You’re making an assumption and it’s completely wrong. I actually didn’t ask for their opinion. I just look at their actions over the last 4 years and extrapolate what would happen if their net income decrease further. When demand start decreasing a few years ago, they didn’t do anything, hoping their demand will come back. When it didn’t and it start to affect their net take home, they start to reduce their employee’s time. So, based on their action then, I would extrapolate that if their net income decrease due to higher taxes, they would decrease their employee’s time, so that their net take home would maintain at the same level. This is also common sense to me, because I would do the exactly the same thing. If you can offload the cost to someone else, you would. The employees will always get hit first before the employer. These businesses area already running at bare minimum and there’s no fat left to cut. These business owners have expenses to pay (life expenses), which they rather not cut. They can easily offset the increase taxes by cutting the cost of paying their employee and have the spouse who are currently working part time to work full time. Their net pay would maintain at similar level. This is also inline with what I was saying that during good times when demands are increasing, they would gladly take less growth due to higher taxes. However, during bad time, they will squeeze everyone else first before they squeeze themselves.[/quote]
AN, like I told you, I was just speculating. You once again state that it is decreased demand that is forcing them to cut their employee’s time. Which makes sense. But then you make an extrapolation from there to include a causation of taxes which is incorrect. As net income goes down, the tax liability goes down too….reduction of employee’s time is because the employee’s time is not translating to increased top line. Again, not related to taxes.
On a convoluted note, increasing employee’s compensation will actually decrease the tax liability (due to compensation being a deductible expense), but again, no sane person would do it.
I wish your business friends the best, and agree with you that everything gets cut before the take home living expenses; just differ about the cause.
