Two other things the rich don't want you to know about taxes

[Lydia Leftcoast]

1. Businesses and individuals are taxed differently.

Individuals are taxed on the basis of all their income minus a few minor deductions.

Businesses are taxed on the basis of their income minus all legitimate business expenses. (When I went free-lance, I was delighted at the new tax deductions I was eligible for.)

This difference is not well known among the American public, the fact that hiring people or developing new products or upgrading its facilities actually REDUCES a company's taxes.

Furthermore, taxes alone cannot ruin a company, because a company that posts a loss pays no taxes. This is one way that large corporations avoid taxes. They use stupid accounting tricks to show a PAPER loss.

2. A favorite right-wing myth is that raising corporate taxes will cause companies to raise prices, but that's nonsense.

Here's why:

Suppose a company has sales of $1,000,000 and legitimate business expenses of $999,000. In such a case, the company pays corporate tax on $1000, not on the full $1,000,000.

Now suppose that corporate taxes are raised 10%, and the company has stupid executives, who decide to raise prices 10% to compensate. OK, now the company takes in $1,100,000. If its expenses stay the same ($999,000), it now has to pay taxes on $101,000 instead of on $1,000.

Remember these points the next time a right-winger tries to tell you that "taxes kill jobs."

[Gman]

1. My knee jerk response to "taxes kill jobs" is

and tax incentives create jobs, like restoring the tax incentives for bringing jobs back to the US.

[county worker]

14. When businesses have high taxes they tend to put money into the business.

When taxes are low the take they money as personal income.

[DCKit]

2. Lydia, oh Lydia, you don't speak up much, but when you do..... nt

[HughBeaumont]

3. Exhibit A: GE.

K & R. Always good to have a perspective from someone who, you know, actually WALKS THE WALK.

How ARE the American people so easily CONNED? The myths they buy into don't even make a damned bit of sense.

PS - this article is a point of reference from the OP:

http://www.wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html

[Lydia Leftcoast]

5. Americans are not encouraged to THINK

THINKING is for nerds.

[seabeyond]

4. but... i would like to differentiate from the TRUE small business and corps.

you talk about when you went freelance...

but i know when we owned a business for 6 yrs, we really paid the taxes on it and sometimes it was hard. to. let. money. go. not to put in our pocket, but so we had more of a cushion if times were so profitable and paying bills and wage.

we paid them, and not begrudgingly. but.... it was hard, lol cause there were times we were tight and payroll was coming up and other expenses.

i am saying, the small business are the ones paying.

[crickets]

6. Excellent points. K&R -nt

[Egalitariat]

7. How does raising corporate income taxes affect the decisions of people who are considering

investing in small businesses or in new business lines for existing big businesses?

[Lydia Leftcoast]

8. People are taxed like...people

The tax implications of investing in a business depend on what kind of business it is: sole proprietorship, partnership, corporation (and which type of corporation).

In a sole proprietorship, the only form I can speak about from experience, investments usually consist of buying equipment or supplies, advertising and marketing, hiring consultants, or taking continuing education that is relevant to the job. These are all deducted from total earnings on Schedule C. The profit or loss computed on Schedule C is then taxed as personal income for the owner, but because of the business expense rules, someone who has self-employment income ends up with more deductions than the average person.

If a corporation starts a new line of business, the start-up costs (R&D, product/service development, advertising, building or leasing facilities, etc.) are all paid for with pre-tax dollars.

[Lydia Leftcoast]

9. This deserves a kick

:kick:

[deaniac21]

10. You were delighted at the new tax deductions. I don't know what to say...

[Lydia Leftcoast]

11. What new tax deductions?

If there are any, I'm not eligible for any of them.

[deaniac21]

12. You were...

(When I went free-lance, I was delighted at the new tax deductions I was eligible for.)

[Lydia Leftcoast]

15. Oh, you don't mean "new this year"!

I became eligible to deduct things like buying business cards, shipping book manuscripts by FedEx, buying office equipment, attending professional conventions, etc.

[county worker]

13. Business is taxed on net income. Net income is revenue minus expense.

If it is a corporation it files a return. If it is an S corp or partnership or private business the net income or loss is passed on the the owner as a calculation in their taxable income.

You can't compare people and business.

[Cairycat]

16. K & R - Thank You

I often need example numbers to see a point. You explained this beautifully.

[True Earthling]

17. I've never heard this one...

"2. A favorite right-wing myth is that raising corporate taxes will cause companies to raise prices, but that's nonsense."

The usual RW rant is that raising taxes kills jobs. Prices are more sensitive to labor expense, commodity prices, capacity utilization and competition than taxes.