[quote=CA renter][quote=SK in CV]The bolded part. If they’re already running at the bare miniumum, how can they cut if tax rates go up? I’m guessing this example really doesn’t apply since this business isn’t making anywhere near $250K a year.
AN, I spent the first 20+ years of my career with small business consulting being a big part of my practice. I worked with them on increasing profits, cost cutting, and saving taxes. Never once was I involved in a decision making process where there was such a thing as a “target profit”, where the owner would consider cutting employees in order to hit that target. We did operational projections and budgets, and taxes were a by-product, not a driver until after the projections were complete.[/quote]
Ditto what SK said. I’ve also worked for a number of small and medium-sized businesses. Like SK, I have never heard anyone say that they had a “target profit.” Additionally, nobody ever said they were going to shrink the business/shrink capacity because of taxes.[/quote]
SK, I already said before how they would cut if tax rates goes up. Get the other spouse who currently work part time to work there full time. So, net family take home stays the same to support their current life style. At the same time, they’ll cut their employee hour some more or eliminate that position all together. The type of small business I’m talking about probably wouldn’t use your service, so you probably never see their thought process.
CAR, I’ve also worked for small, medium, large businesses. I’ve seen my pay freeze and cut, bonuses freeze. It’s only common sense that as a boss, you’ll squeeze your employees first before you take a hit on your take home pay. Taxes directly affect their take home pay. How much it affect their decision will depend on how close to the edge of that decision they are before the tax increase.
Anyways, like I told dumbrenter earlier, my anecdotal examples isn’t meant to prove that there’s a causation between increasing taxes and reducing wage, which would lead to decreasing demand and GDP. Maybe the majority of the businesses don’t do this. I don’t have data to prove one way or another. However, it’s meant to disprove SK’s statement that higher marginal tax is stimulative. There’s no data on the mass scale to prove that and I gave anecdotal example that disprove it. The data he did provide show no real clear correlation much less causation of increasing top rate is stimulative.
