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> so raising taxes on corporate income won’t affect employment > It means that profits are pointless except as a way of announcing to your stockholders (and ho

> so raising taxes on corporate income won’t affect employment > It means that profits are pointless except as a way of announcing to your stockholders (and hostile takeover specialists) that your company is a going concern, a thriving business. You don’t need profits to ‘reinvest’, to finance the expansion of your company’s workforce or output What is he talking about? Higher taxes prevent business owners from hiring more people and from being able to offer decent wage growth. Lower profits de-incentivize companies from taking the risk of starting and running a business and having employees. 80% of small businesses had NO employees. Incentivizing these 23M businesses to hire just 1 person would be dramatic. Small businesses accounted for 63.3% of net new jobs from the third quarter of 1992 until the third quarter of 2013. [1] This article acts as if Apple and other mega-corps ARE the economy. Raising taxes is counter intuitive if we want to create more jobs, especially those that will be more rewarding to people. [1] https://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2016_WEB.pdf https://www.sba.gov/sites/default/files/advocacy/SB-FAQ-2016...

dismantlethesun 9y ago
The corporate income tax rate is a progressive system just like the personal income tax. At the lowest bracket (<$50,000), you pay 15%. At the highest bracket ($18 million+), you pay 35%. Small businesses with NO employees (e.g. the 80% of such), are typically pass-through entities not subject to corporate income tax rates, or are making far far less than 18 million dollars. One could easily see a proposal to raise the tax on the highest bracket, or create an even higher bracket (e.g. companies earning 100 million or above), and tax that at 40%.
- exclusiv 9y ago
  Yes - pass through entities like LLCs pay whatever the owners personal rates are. This is usually higher than 15%. Small and mid-sized businesses often pay more than larger companies despite the progressive rates because they don't have access to legal workarounds or don't have strategic offsets. S-corps are generally the highest and they're prevalent in tech startups of course. "[The] study provides valuable data that confirms small businesses currently pay a higher effective tax rate than many large corporations." [1] The author's suggestion that you don't need profits to reinvest is incredibly naive. My company doesn't hire when profits are low. It's too risky for most companies to do that. So we have some work to do there and we should invest in our small businesses because they 1) produce the bulk of new jobs and 2) produce jobs and environments that are more rewarding. [1] http://www.accountingweb.com/tax/individuals/s-corporations-pay-highest-effective-tax-rates http://www.accountingweb.com/tax/individuals/s-corporations-...
  - uiri 9y ago
    LLCs get to choose their tax treatment. They can be taxed as a pass-through entity (e.g. like an S corporation) or they can be taxed like a C corporation. Pass-through taxation is often cheaper because LLCs are often used to wrap limited liability around a partnership, sole proprietorship or to create a simple wholly owned subsidiary separate from its parent.
lucaspiller 9y ago
I'm not sure if it's the same in the US, but here in Europe most countries differentiate between corporate taxes, which you pay on profits, and employment taxes/social security contributions, which you (as a company) need to pay for each employee. For small businesses the profits are typically what the directors 'take home' as their salary, so raising corporate taxes would impact them (however that could be countered by lowering personal income taxes), but it wouldn't cut the cash flow available for hiring employees.
hxta98596 9y ago
> What is he talking about? What are you talking about? > Higher taxes prevent business owners from hiring more people and from being able to offer decent wage growth. No. I'm not in favor of high taxes but this statement is not supported at a theory level nor empirically. For one thing, employees and wages are pre-tax. Basically this type of labor economics stuff really should focus on the "elephant in the office": either an employee creates more profit than they cost or they do not. Tax levels make minimal difference here, if at all, even worse is tax topics get easily politicized, used to manipulate and distract from the real labor issues worth studying and discussing. Also, the small business statistics you mention are misleading. I'm sure it was not on purpose but to be clear: That is 80% of ALL businesses are nonemployer (not 80% of small businesses). Does that feel right? 80% of businesses are one person businesses? Feels high, no? What percentage of people living around you are in this group? The figure is misleading because the "23 million small businesses" counted to get 80% are not all real businesses, relatively few are. 23 million is based on the number of business tax returns filed not the number of proper going concern business businesses. There is a difference. Millions of those 23M business tax returns do not represent a "business" in the sense of an entity that would or could support hiring of an employee - it's not that type of business nor trying to be. There are various reasons for a business tax return to be filed by someone or group, including the obvious tax benefits offered right now today for small businesses. "Home office" deduction anyone? I think a business that generates somewhere around $1000 must file taxes for it but a "business" that earns nothing might also still file and be counted... But I do agree with you 100% how small businesses are crucial to this country and they need support, legal and economic support, and they need to be able to hire new people and offer apprenticeships and compete locally and globally. Unfortunately the trend is going against this. Also here is a pew link with related info from a different angle: http://www.pewsocialtrends.org/2015/10/22/three-in-ten-u-s-jobs-are-held-by-the-self-employed-and-the-workers-they-hire/ http://www.pewsocialtrends.org/2015/10/22/three-in-ten-u-s-j...
- exclusiv 9y ago
  If taxes were 100% what would happen? Businesses would turn into non-profit slaves. It may not be linear but suggesting higher taxes have no impact on hiring or wage growth is naive. I personally have a guarantee for 400k on a line of credit, 20+ employees and when we have low profit years I ask if its even worth it. I can make close to the same as an independent consultant and have a lot less to worry about. Yes, taxes are on profits, but you simply don't hire when profits are low. You try to extract more from what you have and utilize contractors to fill in. > either an employee creates more profit than they cost or they do not Some employees are necessary to run the business and are not on the revenue side. When profit is low you try not to hire non-revenue employees and you might let some go. Business owners are in it to make money. If the government takes more of the profits - there's both less cash available in the bank to reinvest after you cover your liability and there's less incentive to run a business. Nobody gets any salary bumps when profit is low. Our problem is not employment but lack of any wage growth, esp. as debt and expenses like housing and education have skyrocketed. > Millions of those 23M business tax returns do not represent a "business" in the sense of an entity that would or could support hiring of an employee - it's not that type of business nor trying to be But millions do. Also - "not trying to hire" is also partially based in the unfriendliness that comes along with running small business with employees. > 80% of businesses are one person businesses? Feels high, no? What percentage of people living around you are in this group? That 80% is of small businesses, not all businesses. But no it doesn't feel high. And it doesn't say one person businesses. An LLC can have several members but no employees. That number doesn't feel off to me. We're talking about real estate agents, plumbers, electricians, carpenters, hairdressers, barbers, interior designers, independent software engineers and other technical consultants, etc. Each occupation has 200-600k people. You're downplaying the 23M, but can you agree there's millions to activate? We also don't need to activate them to hire full-time. If they hire part-time that's a huge win too. Many of these businesses have a lot of apprenticeship to offer and are jobs that are rewarding because you accomplish something every day. I know countless people and small partnerships making 150k-1M that have no employees. This includes blue and white collar occupations. When I talk with them about expanding their business and hiring - they're mostly just scared of making that commitment because they think it will be too much of a headache. And it is a headache and a lot of risk. Some states are worse than others.

dismantlethesun 9y ago

The corporate income tax rate is a progressive system just like the personal income tax. At the lowest bracket (<$50,000), you pay 15%. At the highest bracket ($18 million+), you pay 35%. Small businesses with NO employees (e.g. the 80% of such), are typically pass-through entities not subject to corporate income tax rates, or are making far far less than 18 million dollars. One could easily see a proposal to raise the tax on the highest bracket, or create an even higher bracket (e.g. companies earning 100 million or above), and tax that at 40%.

exclusiv 9y ago
Yes - pass through entities like LLCs pay whatever the owners personal rates are. This is usually higher than 15%. Small and mid-sized businesses often pay more than larger companies despite the progressive rates because they don't have access to legal workarounds or don't have strategic offsets. S-corps are generally the highest and they're prevalent in tech startups of course. "[The] study provides valuable data that confirms small businesses currently pay a higher effective tax rate than many large corporations." [1] The author's suggestion that you don't need profits to reinvest is incredibly naive. My company doesn't hire when profits are low. It's too risky for most companies to do that. So we have some work to do there and we should invest in our small businesses because they 1) produce the bulk of new jobs and 2) produce jobs and environments that are more rewarding. [1] http://www.accountingweb.com/tax/individuals/s-corporations-pay-highest-effective-tax-rates http://www.accountingweb.com/tax/individuals/s-corporations-...
- uiri 9y ago
  LLCs get to choose their tax treatment. They can be taxed as a pass-through entity (e.g. like an S corporation) or they can be taxed like a C corporation. Pass-through taxation is often cheaper because LLCs are often used to wrap limited liability around a partnership, sole proprietorship or to create a simple wholly owned subsidiary separate from its parent.

lucaspiller 9y ago

I'm not sure if it's the same in the US, but here in Europe most countries differentiate between corporate taxes, which you pay on profits, and employment taxes/social security contributions, which you (as a company) need to pay for each employee. For small businesses the profits are typically what the directors 'take home' as their salary, so raising corporate taxes would impact them (however that could be countered by lowering personal income taxes), but it wouldn't cut the cash flow available for hiring employees.

hxta98596 9y ago

> What is he talking about? What are you talking about? > Higher taxes prevent business owners from hiring more people and from being able to offer decent wage growth. No. I'm not in favor of high taxes but this statement is not supported at a theory level nor empirically. For one thing, employees and wages are pre-tax. Basically this type of labor economics stuff really should focus on the "elephant in the office": either an employee creates more profit than they cost or they do not. Tax levels make minimal difference here, if at all, even worse is tax topics get easily politicized, used to manipulate and distract from the real labor issues worth studying and discussing. Also, the small business statistics you mention are misleading. I'm sure it was not on purpose but to be clear: That is 80% of ALL businesses are nonemployer (not 80% of small businesses). Does that feel right? 80% of businesses are one person businesses? Feels high, no? What percentage of people living around you are in this group? The figure is misleading because the "23 million small businesses" counted to get 80% are not all real businesses, relatively few are. 23 million is based on the number of business tax returns filed not the number of proper going concern business businesses. There is a difference. Millions of those 23M business tax returns do not represent a "business" in the sense of an entity that would or could support hiring of an employee - it's not that type of business nor trying to be. There are various reasons for a business tax return to be filed by someone or group, including the obvious tax benefits offered right now today for small businesses. "Home office" deduction anyone? I think a business that generates somewhere around $1000 must file taxes for it but a "business" that earns nothing might also still file and be counted... But I do agree with you 100% how small businesses are crucial to this country and they need support, legal and economic support, and they need to be able to hire new people and offer apprenticeships and compete locally and globally. Unfortunately the trend is going against this. Also here is a pew link with related info from a different angle: http://www.pewsocialtrends.org/2015/10/22/three-in-ten-u-s-jobs-are-held-by-the-self-employed-and-the-workers-they-hire/ http://www.pewsocialtrends.org/2015/10/22/three-in-ten-u-s-j...

exclusiv 9y ago
If taxes were 100% what would happen? Businesses would turn into non-profit slaves. It may not be linear but suggesting higher taxes have no impact on hiring or wage growth is naive. I personally have a guarantee for 400k on a line of credit, 20+ employees and when we have low profit years I ask if its even worth it. I can make close to the same as an independent consultant and have a lot less to worry about. Yes, taxes are on profits, but you simply don't hire when profits are low. You try to extract more from what you have and utilize contractors to fill in. > either an employee creates more profit than they cost or they do not Some employees are necessary to run the business and are not on the revenue side. When profit is low you try not to hire non-revenue employees and you might let some go. Business owners are in it to make money. If the government takes more of the profits - there's both less cash available in the bank to reinvest after you cover your liability and there's less incentive to run a business. Nobody gets any salary bumps when profit is low. Our problem is not employment but lack of any wage growth, esp. as debt and expenses like housing and education have skyrocketed. > Millions of those 23M business tax returns do not represent a "business" in the sense of an entity that would or could support hiring of an employee - it's not that type of business nor trying to be But millions do. Also - "not trying to hire" is also partially based in the unfriendliness that comes along with running small business with employees. > 80% of businesses are one person businesses? Feels high, no? What percentage of people living around you are in this group? That 80% is of small businesses, not all businesses. But no it doesn't feel high. And it doesn't say one person businesses. An LLC can have several members but no employees. That number doesn't feel off to me. We're talking about real estate agents, plumbers, electricians, carpenters, hairdressers, barbers, interior designers, independent software engineers and other technical consultants, etc. Each occupation has 200-600k people. You're downplaying the 23M, but can you agree there's millions to activate? We also don't need to activate them to hire full-time. If they hire part-time that's a huge win too. Many of these businesses have a lot of apprenticeship to offer and are jobs that are rewarding because you accomplish something every day. I know countless people and small partnerships making 150k-1M that have no employees. This includes blue and white collar occupations. When I talk with them about expanding their business and hiring - they're mostly just scared of making that commitment because they think it will be too much of a headache. And it is a headache and a lot of risk. Some states are worse than others.