OT- ‘Since when does our great free-market country punish success’…

[Veritas]

The only economy that will grow under these draconian tax increases that do affect the poor, contrary to all these bleeding hearts’ opinions here, will be the all cash, underground economy. It should be thriving.

[SK in CV]

[quote=luchabee]

We simply don’t live in the same reality (and I’m not judging your reality). So, I will not try to convince you that taxing individuals and businesses decreases economic activity and job creation.

In my reality, however, I have been thinking about starting two businesses, and hiring at least one employee, but I keep thinking of all the start-up costs and taxes in CA and I consistently lose my motivation to get going on it with a passion. However, that is just me, I’m sure. Maybe I’ll wait to get started in 2010 or so, after we see what pans out with the economy, healthcare, etc.[/quote]

Please do try to convince me. If my opinion changes, then I win, not lose. Please show me compelling empirical evidence that small marginal tax rate increases damage the economy. (or conversely, that marginal tax rate reductions improve the economy) I’m more than willing to consider the possibility. I have just never seen it. And I have looked, maybe in the wrong places. My anecdotal experience as a business advisor over the last 30 years tells me the same thing. Business owners complain about taxes. And then continue to do whatever they need to do to make their business grow. Never once did any of them (and there were hundreds) tell me that they didn’t hire because income taxes were too high. Not once.

With regards to starting a new business, which CA taxes are you referring to? Annual LLC or minimum Franchise tax? I don’t have a recollection of those changing significantly in recent years, have they?

[SK in CV]

[quote=luchabee]

We simply don’t live in the same reality (and I’m not judging your reality). So, I will not try to convince you that taxing individuals and businesses decreases economic activity and job creation.

In my reality, however, I have been thinking about starting two businesses, and hiring at least one employee, but I keep thinking of all the start-up costs and taxes in CA and I consistently lose my motivation to get going on it with a passion. However, that is just me, I’m sure. Maybe I’ll wait to get started in 2010 or so, after we see what pans out with the economy, healthcare, etc.[/quote]

Please do try to convince me. If my opinion changes, then I win, not lose. Please show me compelling empirical evidence that small marginal tax rate increases damage the economy. (or conversely, that marginal tax rate reductions improve the economy) I’m more than willing to consider the possibility. I have just never seen it. And I have looked, maybe in the wrong places. My anecdotal experience as a business advisor over the last 30 years tells me the same thing. Business owners complain about taxes. And then continue to do whatever they need to do to make their business grow. Never once did any of them (and there were hundreds) tell me that they didn’t hire because income taxes were too high. Not once.

With regards to starting a new business, which CA taxes are you referring to? Annual LLC or minimum Franchise tax? I don’t have a recollection of those changing significantly in recent years, have they?

[SK in CV]

[quote=luchabee]

We simply don’t live in the same reality (and I’m not judging your reality). So, I will not try to convince you that taxing individuals and businesses decreases economic activity and job creation.

In my reality, however, I have been thinking about starting two businesses, and hiring at least one employee, but I keep thinking of all the start-up costs and taxes in CA and I consistently lose my motivation to get going on it with a passion. However, that is just me, I’m sure. Maybe I’ll wait to get started in 2010 or so, after we see what pans out with the economy, healthcare, etc.[/quote]

Please do try to convince me. If my opinion changes, then I win, not lose. Please show me compelling empirical evidence that small marginal tax rate increases damage the economy. (or conversely, that marginal tax rate reductions improve the economy) I’m more than willing to consider the possibility. I have just never seen it. And I have looked, maybe in the wrong places. My anecdotal experience as a business advisor over the last 30 years tells me the same thing. Business owners complain about taxes. And then continue to do whatever they need to do to make their business grow. Never once did any of them (and there were hundreds) tell me that they didn’t hire because income taxes were too high. Not once.

With regards to starting a new business, which CA taxes are you referring to? Annual LLC or minimum Franchise tax? I don’t have a recollection of those changing significantly in recent years, have they?

[SK in CV]

[quote=luchabee]

We simply don’t live in the same reality (and I’m not judging your reality). So, I will not try to convince you that taxing individuals and businesses decreases economic activity and job creation.

In my reality, however, I have been thinking about starting two businesses, and hiring at least one employee, but I keep thinking of all the start-up costs and taxes in CA and I consistently lose my motivation to get going on it with a passion. However, that is just me, I’m sure. Maybe I’ll wait to get started in 2010 or so, after we see what pans out with the economy, healthcare, etc.[/quote]

Please do try to convince me. If my opinion changes, then I win, not lose. Please show me compelling empirical evidence that small marginal tax rate increases damage the economy. (or conversely, that marginal tax rate reductions improve the economy) I’m more than willing to consider the possibility. I have just never seen it. And I have looked, maybe in the wrong places. My anecdotal experience as a business advisor over the last 30 years tells me the same thing. Business owners complain about taxes. And then continue to do whatever they need to do to make their business grow. Never once did any of them (and there were hundreds) tell me that they didn’t hire because income taxes were too high. Not once.

With regards to starting a new business, which CA taxes are you referring to? Annual LLC or minimum Franchise tax? I don’t have a recollection of those changing significantly in recent years, have they?

[SK in CV]

[quote=luchabee]

We simply don’t live in the same reality (and I’m not judging your reality). So, I will not try to convince you that taxing individuals and businesses decreases economic activity and job creation.

In my reality, however, I have been thinking about starting two businesses, and hiring at least one employee, but I keep thinking of all the start-up costs and taxes in CA and I consistently lose my motivation to get going on it with a passion. However, that is just me, I’m sure. Maybe I’ll wait to get started in 2010 or so, after we see what pans out with the economy, healthcare, etc.[/quote]

Please do try to convince me. If my opinion changes, then I win, not lose. Please show me compelling empirical evidence that small marginal tax rate increases damage the economy. (or conversely, that marginal tax rate reductions improve the economy) I’m more than willing to consider the possibility. I have just never seen it. And I have looked, maybe in the wrong places. My anecdotal experience as a business advisor over the last 30 years tells me the same thing. Business owners complain about taxes. And then continue to do whatever they need to do to make their business grow. Never once did any of them (and there were hundreds) tell me that they didn’t hire because income taxes were too high. Not once.

With regards to starting a new business, which CA taxes are you referring to? Annual LLC or minimum Franchise tax? I don’t have a recollection of those changing significantly in recent years, have they?

[luchabee]

SK: There is too much noise and variables in an economy for me to present certain proof that a very small increase in the marginal tax brackets will “damage” the economy. However, absence of proof is not evidence of absence.

I am confident, though, that these increases will destroy some small businesses at the margins, costing jobs. For example, there is this recent business study showing the following (from a tax law professor’s site):

“Consistent with the growing tax burden on small-business owners, as well as the growing body of evidence linking higher tax burden with limited entrepreneurial growth and higher closure rates, this study has found that tax problems constitute an important reason for bankruptcy filings for a sizable number of entrepreneurs. Interestingly, those entrepreneurs that attribute their business collapse to tax problems do not come from disadvantageous background. Instead, the average entrepreneur in the bankruptcy sample that has faulted tax problems for his financial woes was typically older male, white, native-born, well-educated and an experienced business owner. Nonetheless, the typical entrepreneur with tax problem in the bankruptcy sample was facing enormously higher debt burden with more than five times as much debts as other entrepreneurs in the bankruptcy sample.

While this study confirmed the prevalence of tax problems as a cause of business failure, it did not ascertain the exact nature of the tax problems faced by many of these entrepreneurs in bankruptcy. Future research might explore the pervasiveness and the nature of tax debts among bankruptcy petitioners; ascertain the amount of tax debt bankruptcy entrepreneurs typically report at the time of bankruptcy filing; identify the tax burden at the time of bankruptcy filing relative to outstanding debt and income of the petitioners; and determine the characteristics of bankruptcy petitioners that tend to report tax obligations.”

http://taxprof.typepad.com/taxprof_blog/2009/06/taxes-as-a.html

Perhaps you experienced a survivor bias in your experience, dealing with well capitalized and healthy corps that could afford to higher a business advisor?

So, whether it is real or imagined, it does look like this study does confirm an association with taxes and bankruptcy, at least businesses at the margins that had high levels of debt, leverage, nominal profits, etc. And I know a lot of businesses in that situation. Also, of course, it doesn’t show how much new business is hampered by people who “don’t want to deal with the taxes and regulation,” whether LLC fees, business franchise tax, permits, licenses, required insurance, ordinary income tax, etc.

Besides, my original point, as you may remember, was that a simple-then-and-now-comparison with respect to tax rates is not instructive. We all know the AMT has crept up, as well. Throw in higher state taxes, as in CA, and you have a recipe for disaster with a little cap and trade for flavoring.

[luchabee]

SK: There is too much noise and variables in an economy for me to present certain proof that a very small increase in the marginal tax brackets will “damage” the economy. However, absence of proof is not evidence of absence.

I am confident, though, that these increases will destroy some small businesses at the margins, costing jobs. For example, there is this recent business study showing the following (from a tax law professor’s site):

“Consistent with the growing tax burden on small-business owners, as well as the growing body of evidence linking higher tax burden with limited entrepreneurial growth and higher closure rates, this study has found that tax problems constitute an important reason for bankruptcy filings for a sizable number of entrepreneurs. Interestingly, those entrepreneurs that attribute their business collapse to tax problems do not come from disadvantageous background. Instead, the average entrepreneur in the bankruptcy sample that has faulted tax problems for his financial woes was typically older male, white, native-born, well-educated and an experienced business owner. Nonetheless, the typical entrepreneur with tax problem in the bankruptcy sample was facing enormously higher debt burden with more than five times as much debts as other entrepreneurs in the bankruptcy sample.

While this study confirmed the prevalence of tax problems as a cause of business failure, it did not ascertain the exact nature of the tax problems faced by many of these entrepreneurs in bankruptcy. Future research might explore the pervasiveness and the nature of tax debts among bankruptcy petitioners; ascertain the amount of tax debt bankruptcy entrepreneurs typically report at the time of bankruptcy filing; identify the tax burden at the time of bankruptcy filing relative to outstanding debt and income of the petitioners; and determine the characteristics of bankruptcy petitioners that tend to report tax obligations.”

http://taxprof.typepad.com/taxprof_blog/2009/06/taxes-as-a.html

Perhaps you experienced a survivor bias in your experience, dealing with well capitalized and healthy corps that could afford to higher a business advisor?

So, whether it is real or imagined, it does look like this study does confirm an association with taxes and bankruptcy, at least businesses at the margins that had high levels of debt, leverage, nominal profits, etc. And I know a lot of businesses in that situation. Also, of course, it doesn’t show how much new business is hampered by people who “don’t want to deal with the taxes and regulation,” whether LLC fees, business franchise tax, permits, licenses, required insurance, ordinary income tax, etc.

Besides, my original point, as you may remember, was that a simple-then-and-now-comparison with respect to tax rates is not instructive. We all know the AMT has crept up, as well. Throw in higher state taxes, as in CA, and you have a recipe for disaster with a little cap and trade for flavoring.

[luchabee]

SK: There is too much noise and variables in an economy for me to present certain proof that a very small increase in the marginal tax brackets will “damage” the economy. However, absence of proof is not evidence of absence.

I am confident, though, that these increases will destroy some small businesses at the margins, costing jobs. For example, there is this recent business study showing the following (from a tax law professor’s site):

“Consistent with the growing tax burden on small-business owners, as well as the growing body of evidence linking higher tax burden with limited entrepreneurial growth and higher closure rates, this study has found that tax problems constitute an important reason for bankruptcy filings for a sizable number of entrepreneurs. Interestingly, those entrepreneurs that attribute their business collapse to tax problems do not come from disadvantageous background. Instead, the average entrepreneur in the bankruptcy sample that has faulted tax problems for his financial woes was typically older male, white, native-born, well-educated and an experienced business owner. Nonetheless, the typical entrepreneur with tax problem in the bankruptcy sample was facing enormously higher debt burden with more than five times as much debts as other entrepreneurs in the bankruptcy sample.

While this study confirmed the prevalence of tax problems as a cause of business failure, it did not ascertain the exact nature of the tax problems faced by many of these entrepreneurs in bankruptcy. Future research might explore the pervasiveness and the nature of tax debts among bankruptcy petitioners; ascertain the amount of tax debt bankruptcy entrepreneurs typically report at the time of bankruptcy filing; identify the tax burden at the time of bankruptcy filing relative to outstanding debt and income of the petitioners; and determine the characteristics of bankruptcy petitioners that tend to report tax obligations.”

http://taxprof.typepad.com/taxprof_blog/2009/06/taxes-as-a.html

Perhaps you experienced a survivor bias in your experience, dealing with well capitalized and healthy corps that could afford to higher a business advisor?

So, whether it is real or imagined, it does look like this study does confirm an association with taxes and bankruptcy, at least businesses at the margins that had high levels of debt, leverage, nominal profits, etc. And I know a lot of businesses in that situation. Also, of course, it doesn’t show how much new business is hampered by people who “don’t want to deal with the taxes and regulation,” whether LLC fees, business franchise tax, permits, licenses, required insurance, ordinary income tax, etc.

Besides, my original point, as you may remember, was that a simple-then-and-now-comparison with respect to tax rates is not instructive. We all know the AMT has crept up, as well. Throw in higher state taxes, as in CA, and you have a recipe for disaster with a little cap and trade for flavoring.

[luchabee]

SK: There is too much noise and variables in an economy for me to present certain proof that a very small increase in the marginal tax brackets will “damage” the economy. However, absence of proof is not evidence of absence.

I am confident, though, that these increases will destroy some small businesses at the margins, costing jobs. For example, there is this recent business study showing the following (from a tax law professor’s site):

“Consistent with the growing tax burden on small-business owners, as well as the growing body of evidence linking higher tax burden with limited entrepreneurial growth and higher closure rates, this study has found that tax problems constitute an important reason for bankruptcy filings for a sizable number of entrepreneurs. Interestingly, those entrepreneurs that attribute their business collapse to tax problems do not come from disadvantageous background. Instead, the average entrepreneur in the bankruptcy sample that has faulted tax problems for his financial woes was typically older male, white, native-born, well-educated and an experienced business owner. Nonetheless, the typical entrepreneur with tax problem in the bankruptcy sample was facing enormously higher debt burden with more than five times as much debts as other entrepreneurs in the bankruptcy sample.

While this study confirmed the prevalence of tax problems as a cause of business failure, it did not ascertain the exact nature of the tax problems faced by many of these entrepreneurs in bankruptcy. Future research might explore the pervasiveness and the nature of tax debts among bankruptcy petitioners; ascertain the amount of tax debt bankruptcy entrepreneurs typically report at the time of bankruptcy filing; identify the tax burden at the time of bankruptcy filing relative to outstanding debt and income of the petitioners; and determine the characteristics of bankruptcy petitioners that tend to report tax obligations.”

http://taxprof.typepad.com/taxprof_blog/2009/06/taxes-as-a.html

Perhaps you experienced a survivor bias in your experience, dealing with well capitalized and healthy corps that could afford to higher a business advisor?

So, whether it is real or imagined, it does look like this study does confirm an association with taxes and bankruptcy, at least businesses at the margins that had high levels of debt, leverage, nominal profits, etc. And I know a lot of businesses in that situation. Also, of course, it doesn’t show how much new business is hampered by people who “don’t want to deal with the taxes and regulation,” whether LLC fees, business franchise tax, permits, licenses, required insurance, ordinary income tax, etc.

Besides, my original point, as you may remember, was that a simple-then-and-now-comparison with respect to tax rates is not instructive. We all know the AMT has crept up, as well. Throw in higher state taxes, as in CA, and you have a recipe for disaster with a little cap and trade for flavoring.

[luchabee]

SK: There is too much noise and variables in an economy for me to present certain proof that a very small increase in the marginal tax brackets will “damage” the economy. However, absence of proof is not evidence of absence.

I am confident, though, that these increases will destroy some small businesses at the margins, costing jobs. For example, there is this recent business study showing the following (from a tax law professor’s site):

“Consistent with the growing tax burden on small-business owners, as well as the growing body of evidence linking higher tax burden with limited entrepreneurial growth and higher closure rates, this study has found that tax problems constitute an important reason for bankruptcy filings for a sizable number of entrepreneurs. Interestingly, those entrepreneurs that attribute their business collapse to tax problems do not come from disadvantageous background. Instead, the average entrepreneur in the bankruptcy sample that has faulted tax problems for his financial woes was typically older male, white, native-born, well-educated and an experienced business owner. Nonetheless, the typical entrepreneur with tax problem in the bankruptcy sample was facing enormously higher debt burden with more than five times as much debts as other entrepreneurs in the bankruptcy sample.

While this study confirmed the prevalence of tax problems as a cause of business failure, it did not ascertain the exact nature of the tax problems faced by many of these entrepreneurs in bankruptcy. Future research might explore the pervasiveness and the nature of tax debts among bankruptcy petitioners; ascertain the amount of tax debt bankruptcy entrepreneurs typically report at the time of bankruptcy filing; identify the tax burden at the time of bankruptcy filing relative to outstanding debt and income of the petitioners; and determine the characteristics of bankruptcy petitioners that tend to report tax obligations.”

http://taxprof.typepad.com/taxprof_blog/2009/06/taxes-as-a.html

Perhaps you experienced a survivor bias in your experience, dealing with well capitalized and healthy corps that could afford to higher a business advisor?

So, whether it is real or imagined, it does look like this study does confirm an association with taxes and bankruptcy, at least businesses at the margins that had high levels of debt, leverage, nominal profits, etc. And I know a lot of businesses in that situation. Also, of course, it doesn’t show how much new business is hampered by people who “don’t want to deal with the taxes and regulation,” whether LLC fees, business franchise tax, permits, licenses, required insurance, ordinary income tax, etc.

Besides, my original point, as you may remember, was that a simple-then-and-now-comparison with respect to tax rates is not instructive. We all know the AMT has crept up, as well. Throw in higher state taxes, as in CA, and you have a recipe for disaster with a little cap and trade for flavoring.

[EconProf]

The record on tax cuts and their stimulative effect on the economy is not hard to find: goggle Reagan Tax Cuts or Kennedy Tax Cuts Revenue Effects, and you will find a variety of studies, articles, statistics, etc.
The clear message: total government revenues collected go UP in the years following the tax cut as the economy expands and people earn more and pay more in our progressive tax rate structure. For this to work, the tax rates have to first be high enough to discourage work, investment, risk-taking, etc. Kennedy cut marginal rates from a wartime-inspired 90% to 70% in the early 1960s and investment and the economy took off. Revenues increased from $94 billion to $153 billion from 1961 to 1968 (up 33% after inflation).
The early 1980s Reagan tax cut, once fully in effect in January of 1983 stimulated investment, hiring, and the economy to increase revenues by 54% by 1989 (28% after inflation).
With top federal rates now around 40%, there is less room for the stimulative effect to outweigh the effect of lower absolute rates, so there is some debate as to whether rate cuts would be revenue neutral or even decrease total revenues. But as to whether different tax rates and tax types affect behavior, that argument has long been settled.

[EconProf]

The record on tax cuts and their stimulative effect on the economy is not hard to find: goggle Reagan Tax Cuts or Kennedy Tax Cuts Revenue Effects, and you will find a variety of studies, articles, statistics, etc.
The clear message: total government revenues collected go UP in the years following the tax cut as the economy expands and people earn more and pay more in our progressive tax rate structure. For this to work, the tax rates have to first be high enough to discourage work, investment, risk-taking, etc. Kennedy cut marginal rates from a wartime-inspired 90% to 70% in the early 1960s and investment and the economy took off. Revenues increased from $94 billion to $153 billion from 1961 to 1968 (up 33% after inflation).
The early 1980s Reagan tax cut, once fully in effect in January of 1983 stimulated investment, hiring, and the economy to increase revenues by 54% by 1989 (28% after inflation).
With top federal rates now around 40%, there is less room for the stimulative effect to outweigh the effect of lower absolute rates, so there is some debate as to whether rate cuts would be revenue neutral or even decrease total revenues. But as to whether different tax rates and tax types affect behavior, that argument has long been settled.

[EconProf]

The record on tax cuts and their stimulative effect on the economy is not hard to find: goggle Reagan Tax Cuts or Kennedy Tax Cuts Revenue Effects, and you will find a variety of studies, articles, statistics, etc.
The clear message: total government revenues collected go UP in the years following the tax cut as the economy expands and people earn more and pay more in our progressive tax rate structure. For this to work, the tax rates have to first be high enough to discourage work, investment, risk-taking, etc. Kennedy cut marginal rates from a wartime-inspired 90% to 70% in the early 1960s and investment and the economy took off. Revenues increased from $94 billion to $153 billion from 1961 to 1968 (up 33% after inflation).
The early 1980s Reagan tax cut, once fully in effect in January of 1983 stimulated investment, hiring, and the economy to increase revenues by 54% by 1989 (28% after inflation).
With top federal rates now around 40%, there is less room for the stimulative effect to outweigh the effect of lower absolute rates, so there is some debate as to whether rate cuts would be revenue neutral or even decrease total revenues. But as to whether different tax rates and tax types affect behavior, that argument has long been settled.

[EconProf]

The record on tax cuts and their stimulative effect on the economy is not hard to find: goggle Reagan Tax Cuts or Kennedy Tax Cuts Revenue Effects, and you will find a variety of studies, articles, statistics, etc.
The clear message: total government revenues collected go UP in the years following the tax cut as the economy expands and people earn more and pay more in our progressive tax rate structure. For this to work, the tax rates have to first be high enough to discourage work, investment, risk-taking, etc. Kennedy cut marginal rates from a wartime-inspired 90% to 70% in the early 1960s and investment and the economy took off. Revenues increased from $94 billion to $153 billion from 1961 to 1968 (up 33% after inflation).
The early 1980s Reagan tax cut, once fully in effect in January of 1983 stimulated investment, hiring, and the economy to increase revenues by 54% by 1989 (28% after inflation).
With top federal rates now around 40%, there is less room for the stimulative effect to outweigh the effect of lower absolute rates, so there is some debate as to whether rate cuts would be revenue neutral or even decrease total revenues. But as to whether different tax rates and tax types affect behavior, that argument has long been settled.

[Author]

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