U.S. Treasury Secretary Timothy Geithner told the Senate Finance Committee Feb. 15 that Congress should “revisit” long- standing rules that give businesses a choice of paying taxes as a corporation or through a structure such as a partnership through which they can report business income on individual tax returns.
That's right - double-taxation is coming here, if Timmae has his way.
Well, here's my response Turbo: This is one small business that will close the afternoon you do that.
“It strikes me that Secretary Geithner’s proposal to potentially force businesses to be taxed as corporations runs contrary to the administration’s objectives,” he said. “Most small to mid-sized businesses in the U.S. are structured as pass-through entities in order to avoid double taxation.”
Exactly. That's why Cuda is a single-member LLC. Double-taxation at a 35% rate is outrageous; it results in a total federal income tax rate of about 57%. Add the ~15% in FICA and Medicare to that and I have a marginal tax rate over 60%. I won't work at all if I only get to keep 36% of my money.
Here's the math:
$100,000 gross $15,000 FICA/Medicare $29,750 Corporate Income Tax (35%) $19,338 Personal Income Tax (35%) ======== $35,912 Actual Income left, or 36% of what you made
Get taxed twice? No, I won't. I don't have to produce. And if you drive the marginal federal income rate to 57%, I will choose to sit on my ass instead. It's not worth working when I only get to keep 36% of what I earn. I will choose instead to earn zero and become a leech.
You already steal nearly half of my money; stealing even more will result in your getting zero and the economy getting zero.
As such your tax revenues will go down if you make this change.
Go ahead and do it Turbo - given that small business creates most of the jobs in this country, that change will cause the economy and federal revenues to collapse.
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How To Kill Small Business in forum [Market-Ticker]
Visualcsharp
Posts: 343
Incept: 2009-12-19
Round Rock, TX
Just a slight typo, Karl. Leach -> leech. I've seen this one made quite frequently here at TF. :) I'm under the impression the intention of leech**** is to evoke images of the disgusting creature.
Fortunately, Congress, as dumb as it is, is a lot smarter that Geithner. It is still astonishing, not only that he became Treasury Secretary, but that he continues to hold that job.
I suppose, though, if this were to come to pass, you could pay yourself a variable monthly income that happened to equal the monthly profits.
They really don't understand the first thing about the dreaded private sector, do they?
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The preservation of liberty depends upon the intellectual and moral character of the people. As long as knowledge and virtue are diffused generally among the body of a nation it is impossible they should be enslaved. - John Adams
Yeah I think they are going to do it. And it will simply hasten the collapse.
The day it happens is the day I go sit on the beach under an umbrella with a pineapple full of booze. I did it before and will do it again.
Go ahead and tax me more Turbo - I'm at my limit of tolerance for it.
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I don't care if it makes sense -- only if it makes money. -- Me Bank (n): See scam, fraud and theft.Eat a bankster -- they're low-carb. What part of "shall not be infringed" was unclear?
Unfortunately socialists cannot comprehend your logic because they believe that all wealth is created by labor. Try running your argument past an admitted socialist sometime.
that change will cause the economy and federal revenues to collapse.
He couldn't create that result any more efficiently if he INTENDED it...
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"...But people better realize that the worst-case scenario could actually happen.9/11 happened. This can happen. An economic 9/11, the likes of which we've never seen." Gerald Celente
I won't work at all if I only get to keep 36% of my money.
I'm with you on that Karl. My business is also a single-member LLC, and a disregarded entity for tax purposes.
However, I think your math example is incorrect. Corporations pay taxes on net profits, don't they? Thus if you paid yourself a salary equal to the gross profits, the corporation would have no net profit, and would pay zero in taxes.
-Uwe-
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“Whenever the legislators endeavor to take away and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any further obedience.” - John Locke
However, I think your math example is incorrect. Corporations pay taxes on net profits, don't they? Thus if you paid yourself a salary equal to the gross profits, the corporation would have no net profit, and would pay zero in taxes.
Go talk to your CPA about that Uwe.
It doesn't work if you actually make a lot of money; the IRS will rule that an excess distribution and butt**** you.
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I don't care if it makes sense -- only if it makes money. -- Me Bank (n): See scam, fraud and theft.Eat a bankster -- they're low-carb. What part of "shall not be infringed" was unclear?
My brother's anesthesia provider business would be affected by this as well. He and his partner are the two main employees doing all the work (putting people under, basically). It would reduce his income from comfortable 6 figures into lower 5 figures instantly.
Yeah, **** that. I've run a Sub-S, a C Corp and now an LLC.
The C Corp was a forced conversion for a whole host of reasons. You force everyone in the Sub-S and LLC umbrella to pay and report under FEINs (we all have 'em, they're just unused as they're "disregarded entities") and you INSTANTLY rat**** every small businessman out there.
**** that; I'll shut down before I'll pay.
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I don't care if it makes sense -- only if it makes money. -- Me Bank (n): See scam, fraud and theft.Eat a bankster -- they're low-carb. What part of "shall not be infringed" was unclear?
Wearedoomed
Posts: 3611
Incept: 2009-01-14
slightly red state
Online
Uwe: What Gen said. It's a similar deal to taking a dividend from a one-person S corporation (and paying less total income tax than taking salary only). If you take too much dividend vs. salary, the Feds will not be pleased.
End_the_bubbles
Posts: 9602
Incept: 2009-03-25
The New 3rd World
Let's just state the obvious -
COLLAPSE is their GOAL!
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In the long run even the most despotic governments with all their brutality and cruelty are no match for ideas. Eventually the ideology that has won the support of the majority will prevail and cut the ground from under the tyrant's feet and rise in rebellion to overthrow their masters.
As a sole proprieter, and not incorporated, would I dodge this? (My tax person is out today) Or is the gist of this, forcing all businesses to incorporate?
Not exactly on topic, but it points out Geithner's position, is the following from former IMF chief economist Simon Johnson on Project Syndicate.
Quote:
LOS ANGELES – In a recent interview, United States Treasury Secretary Tim Geithner laid out his view of the nature of world economic growth and the role of the US financial sector. It is a deeply disturbing vision, one that amounts to a huge, uninformed gamble with the future of the American economy – and that suggests that Geithner remains the senior public official worldwide who is most in thrall to the self-serving ideology of big banks.
The political tin ear this comment reveals is stupefying, considering all of the sucking up the administration has been doing to the business lobby of late.
What they COULD do is just permit C corps to deduct their dividends paid, which would cure the double taxation issue. The reduced tax rate for qualified dividends and the corporate tax deduction for dividends received would go away as part of the bargain.
