Posted by bad_luck on 10/17/2012 11:15:00 AM (view original):

Posted by MikeT23 on 10/17/2012 11:11:00 AM (view original):
Isn't that what I said?    Is it worth the risk to go from 195k to 208k?   I don't think so.   You have to hire/manage another person.   Increase expenses and hope he produces 80k and not 60k.    All to make what amounts to a poverty level increase?

Even if he only produces 60k you don't lose money because the tax rates are marginal. You only pay the higher rate on the first dollar earned over X.

Posted by MikeT23 on 10/17/2012 11:11:00 AM (view original):
Isn't that what I said?    Is it worth the risk to go from 195k to 208k?   I don't think so.   You have to hire/manage another person.   Increase expenses and hope he produces 80k and not 60k.    All to make what amounts to a poverty level increase?

Posted by MikeT23 on 10/17/2012 11:18:00 AM (view original):

Posted by bad_luck on 10/17/2012 11:15:00 AM (view original):

Posted by MikeT23 on 10/17/2012 11:11:00 AM (view original):
Isn't that what I said?    Is it worth the risk to go from 195k to 208k?   I don't think so.   You have to hire/manage another person.   Increase expenses and hope he produces 80k and not 60k.    All to make what amounts to a poverty level increase?

Even if he only produces 60k you don't lose money because the tax rates are marginal. You only pay the higher rate on the first dollar earned over X.

The objective of a business shouldn't be "Don't lose money."   There is risk involved in hiring and producing more.    Taxing at a higher rate doesn't reduce the risk once you move into the next tax bracket.

Posted by jvford on 10/17/2012 11:22:00 AM (view original):

Posted by MikeT23 on 10/17/2012 11:11:00 AM (view original):
Isn't that what I said?    Is it worth the risk to go from 195k to 208k?   I don't think so.   You have to hire/manage another person.   Increase expenses and hope he produces 80k and not 60k.    All to make what amounts to a poverty level increase?

Of course it's worth the risk.  You don't think every smart businessman would jump at the prospect of netting an additional 13K?  And poverty level increase?  You don't think an extra 1K per month is relevant to that owner?  You don't think his wife would love to have some additional shopping money?  Or more money for the kids education?  Not to mention the increase in market share that the company gains.  

Posted by jvford on 10/17/2012 11:27:00 AM (view original):

Posted by MikeT23 on 10/17/2012 11:18:00 AM (view original):

Posted by bad_luck on 10/17/2012 11:15:00 AM (view original):

Posted by MikeT23 on 10/17/2012 11:11:00 AM (view original):
Isn't that what I said?    Is it worth the risk to go from 195k to 208k?   I don't think so.   You have to hire/manage another person.   Increase expenses and hope he produces 80k and not 60k.    All to make what amounts to a poverty level increase?

Even if he only produces 60k you don't lose money because the tax rates are marginal. You only pay the higher rate on the first dollar earned over X.

The objective of a business shouldn't be "Don't lose money."   There is risk involved in hiring and producing more.    Taxing at a higher rate doesn't reduce the risk once you move into the next tax bracket.

There is risk in being in business.  Nobody goes into business saying "I don't want to take any risks".

That being said, I think you're getting caught up in tax brackets and missing the point on marginal tax rates.

Would you have felt it was less risky in my example if the tax rate was only 25% and you netted 15K instead of 13K?

Posted by MikeT23 on 10/17/2012 11:58:00 AM (view original):
I don't consider it "risk adverse".   Hiring people is nice.  Keeping them employed is better.   Don't know if you've ever had to let someone go.  It's not fun.   I'd rather not take someone away from a potential career for a 4-6 month job with me so I can make another $250 a week.    Perhaps I lack to ruthlessness to have go from small business to big business.    And, of course, I don't care to put myself out there for an additional 13k so the goverment can tax me at a higher rate.   Maybe if I had more faith in my government to spend wisely and allow me to sustain a certain level of revenue, I'd be more willing to a bigger risk to grow my business.

But, to be fair, I doubt I'm doing any hiring under either candidate regardless of tax rate.   The economy isn't going to go back to 2006 in the next 4 years regardless of who's running the show. 

Posted by MikeT23 on 10/17/2012 11:59:00 AM (view original):
But, again, businesses run on the bottom line.   Anything that affects bottom line is a factor.  To pretend it isn't is to just prefer not to live in reality.

Posted by bad_luck on 10/17/2012 12:06:00 PM (view original):

Posted by MikeT23 on 10/17/2012 11:58:00 AM (view original):
I don't consider it "risk adverse".   Hiring people is nice.  Keeping them employed is better.   Don't know if you've ever had to let someone go.  It's not fun.   I'd rather not take someone away from a potential career for a 4-6 month job with me so I can make another $250 a week.    Perhaps I lack to ruthlessness to have go from small business to big business.    And, of course, I don't care to put myself out there for an additional 13k so the goverment can tax me at a higher rate.   Maybe if I had more faith in my government to spend wisely and allow me to sustain a certain level of revenue, I'd be more willing to a bigger risk to grow my business.

If you won't hire someone in order to net an additional $13k, then there probably isn't a magic tax rate that will make you comfortable hiring that person. Even if your tax rate is zero, you're still only looking at an increase of $384 a week.

But, if demand for your product was robust and hiring that employee would increase your gross revenue by $500,000, I'm sure you'd do it, even if the increase to your personal income was taxed at 39% instead of 35%.

Posted by jvford on 10/17/2012 12:09:00 PM (view original):

Posted by MikeT23 on 10/17/2012 11:59:00 AM (view original):
But, again, businesses run on the bottom line.   Anything that affects bottom line is a factor.  To pretend it isn't is to just prefer not to live in reality.

In the scenario of increasing demand for your product, tax rates are irrelevant to hiring.

Posted by MikeT23 on 10/17/2012 12:09:00 PM (view original):

Posted by bad_luck on 10/17/2012 12:06:00 PM (view original):

Posted by MikeT23 on 10/17/2012 11:58:00 AM (view original):
I don't consider it "risk adverse".   Hiring people is nice.  Keeping them employed is better.   Don't know if you've ever had to let someone go.  It's not fun.   I'd rather not take someone away from a potential career for a 4-6 month job with me so I can make another $250 a week.    Perhaps I lack to ruthlessness to have go from small business to big business.    And, of course, I don't care to put myself out there for an additional 13k so the goverment can tax me at a higher rate.   Maybe if I had more faith in my government to spend wisely and allow me to sustain a certain level of revenue, I'd be more willing to a bigger risk to grow my business.

If you won't hire someone in order to net an additional $13k, then there probably isn't a magic tax rate that will make you comfortable hiring that person. Even if your tax rate is zero, you're still only looking at an increase of $384 a week.

But, if demand for your product was robust and hiring that employee would increase your gross revenue by $500,000, I'm sure you'd do it, even if the increase to your personal income was taxed at 39% instead of 35%.

It all depends on what is required and how it affects the bottom line.   I'm not Microsoft.  I can count nickels.   And, according to Obama, 98% of small businesses are in the same boat as me.