What honestly would happen if we raised taxes on Americans who make 250.000 dollars a year?

The people who make $250,000 to $500,000 a year aren't the obscenely wealthy people, like John Kerry and his wife, or John Edwards with his 28,000 square foot house, or the Rockefellers or the Rothschilds or the Kennedys. The people who make this amount of money are individuals who own their own business. They have employees. They have normal business expenses, just like IBM or Microsoft or WalMart or Netflix or any other business.

Whether that income is taxed as a corporation, or whether the business income flows to the individual owners for them to pay the income taxes, the fact remains that someone somewhere writes a check to the IRS at least once a quarter. That means cash coming out of someone's pocket, or some company's pocket. That's real cash, by the way, just like the real cash that's deducted from your paycheck for taxes.

Let's say you have a company and at the end of the year, that company had $1.2 million in revenues and $800k in expenses. That leaves $400k of taxable income. That DOESN'T mean that the owner is walking away with $400k in his pocket! Some of this money has to be invested, to prepare for future business expenses (like new equipment and machinery or buildings), or simply to have cash reserves to keep the company going if sales go down in a year or 2 or 10. Some of this money has to remain in the bank, untouched, in order for the company to comply with terms of their various business loans. And some of this "income" isn't cash yet - it's products shipped and billed for, but the customer hasn't paid yet.

Okay, now let's say the tax rate on that $400k is 29%. That's $116k that has to come out of the cash on hand. Now the company's after-tax income has dropped to $284k.

But what if that tax rate gets raised to 39%? Now you're talking $156,000 just in income taxes. After tax income has just dropped from $284k to $244k.

And at 50%? Now the tax is $200k and the after tax income is $200k.

Sound like a lot? Maybe. But not unreasonable for a business owner who works 55-80 hours per week, every week, and has 8 or 9 employees who are paid and get health insurance. Again, that after-tax income isn't all in cash. It isn't money that the owner can just take out and do whatever he wants to do with it.

And what happens when the increased tax rate requires that business owner to come up with an extra $30k or $40k or $100k IN CASH to pay taxes? Well, the biggest expense for most companies is employees - salaries and benefits. So if you're a business owner and your bottom line just dropped by $80k, chances are you're going to have to let someone go. Or 2 someones. The government may have gotten an extra $100k from ONE business owner, but it also lost the income taxes and FICA/Medicare contributions from the people who were laid off. If a company has to let go enough people, the loss in taxes from employees will even out with the gain in taxes from the employer. Meaning, no change in revenue to the government, but more people are now out of work and expecting government benefits because of it.

Do you see now why higher taxes on corporates and higher taxes on "evil rich people" are nothing but a shell game?

The top 1% of income earners in the US already pay nearly 40% of all income taxes collected by the IRS. That's "income earners", not the top 1% of the wealthiest people. The wealthiest people have their funds sheltered, their homes and cars sheltered, and have all kinds of loopholes so that their income reported to the IRS doesn't necessarily reflect the actual income that they benefited from. The obscenely wealthy individuals (who are in all political parties) won't see any increase in their taxes at all. The people who will see the increase are the income earners who don't have the non-profit foundations and charities to funnel their income to. The income earners who own businesses and give the rest of us jobs, in other words, are the people who will see their taxes go up. And when their taxes go up, they either take their jobs overseas, they shut down and retire, or they let people go.

There's no upside to trying to tax only the wealthy income earners.

Here, read this article from the Wall Street Journal.

People don't want to admit what would happen. They just like the idea of getting more goodies from the government that they don't have to work for. The vast majority of small businesses are at the $250K level and that would cause these employers to raise prices, cut services, stop hiring new employees, or they would lay people off. Do people really think that these businesses would just accept the loss of profit and say, "Oh well..."?

Well, if Obama wins and tries to raise my taxes to the levels he is talking about, the following will happen.

1. I will shut down two of my businesses.
2. I will sell the other 4 businesses.
3. I will pull 100% of my investments out of the US.
4. I will retire somewhere tropical.
5. My donations to charititable organizations will be going overseas with me.

I am not like Alec Baldwin. I will not hesitate to move away and take my investments with me. I did not sacrifice my whole life to have what I have worked and saved and sacrificed for be taken away in a socialist government grab.

ATJ...great information. Thanks.

we will lose more small business's fewer jobs will be created

I ran a business for 20 years, didn't make a lot of money but was very good at what I did and kept the place busy, kept people working, etc. It doesn't take a Phi Beta Kappa to realize that a company can generate 250000.00 if its even remotely successful. Take a car dealership that moves 25 units a month, average retail price = $23000.00 x 25, you do the math. Where is the incentive?? Oh yeah, I get it, lets nationalize everything so everyone shares in the collective profit.... What a crock of stinking bad beer Obama is getting set to bottle and distribute to the american business owner and we all know who is going to have to pick up the tab for this BS.. DUMMYCRATS following this pied piper to the "herring barrel on 4 November. If the stakes weren't so high, if the media wasn't so obvious in there love affair with Senator Obama. Today we are talking bailouts and congressional hearing on CEO's who took down there ships, if this mess really caves in we could be talking about a rope and mob justice on these "Changers".

jobs will be lost small employers who are trying to make it in the American dream will take a big hit and people will lose jobs. Check this out Nicole: Here is a quick look into 3 former Fannie Mae executives who have brought down Wall Street.
Franklin Raines was a Chairman and Chief Executive Officer at Fannie Mae. Raines was forced to retire from his position with Fannie Mae when auditing discovered severe irregulaties in Fannie Mae's accounting activities. At the time of his departure The Wall Street Journal noted, ' Raines, who long defended the company's accounting despite mounting evidence that it wasn't proper, issued a statement late Tuesday conceding that 'mistakes were made' and saying he would assume responsibility as he had earlier promised. News reports indicate the company was under growing pressure from regulators to shake up its management in the wake of findings that the company's books ran afoul of generally accepted accounting principles for four years.' Fannie Mae had to reduce its surplus by $9 billion.
Raines left with a 'golden parachute valued at $240 Million in benefits. The Government filed suit against Raines when the depth of the accounting scandal became clear. http://housingdoom.com/2006/12/18/fannie-charges/ . The Government noted, 'The 101 charges reveal how the individuals improperly manipulated earnings to maximize their bonuses, while knowingly neglecting accounting systems and internal controls, misapplying over twenty accounting principles and misleading the regulator and the public. The Notice explains how they submitted six years of misleading and inaccurate accounting statements and inaccurate capital reports that enabled them to grow Fannie Mae in an unsafe and unsound manner.' These charges were made in 2006. The Court ordered Raines to return $50 Million Dollars he received in bonuses based on the miss-stated Fannie Mae profits.
Tim Howard - Was the Chief Financial Officer of Fannie Mae. Howard 'was a strong internal proponent of using accounting strategies that would ensure a 'stable pattern of earnings' at Fannie. In everyday English - he was cooking the books. The Government Investigation determined that, 'Chief Financial Officer, Tim Howard, failed to provide adequate oversight to key control and reporting functions within Fannie Mae,'
On June 16, 2006, Rep. Richard Baker, R-La., asked the Justice Department to investigate his allegations that two former Fannie Mae executives lied to Congress in October 2004 when they denied manipulating the mortgage-finance giant's income statement to achieve management pay bonuses. Investigations by federal regulators and the company's board of directors since concluded that management did manipulate 1998 earnings to trigger bonuses. Raines and Howard resigned under pressure in late 2004.
Howard's Golden Parachute was estimated at $20 Million!
Jim Johnson - A former executive at Lehman Brothers and who was later forced from his position as Fannie Mae CEO. A look at the Office of Federal Housing Enterprise Oversight's May 2006 report on mismanagement and corruption inside Fannie Mae, and you'll see some interesting things about Johnson.Investigators found that Fannie Mae had hidden a substantial amount of Johnson's 1998 compensation from the public, reporting that it was between $6 million and $7 million when it fact it was $21 million.' Johnson is currently under investigation for taking illegal loans from Countrywide while serving as CEO of Fannie Mae.
Johnson's Golden Parachute was estimated at $28 Million.

WHERE ARE THEY NOW?
FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor
TIM HOWARD? Howard is also a Chief Economic Advisor to Obama
JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected to run Obama's Vice Presidential Search Committee

IF OBAMA PLANS ON CLEANING UP THE MESS - HIS ADVISORS HAVE THE EXPERTISE - THEY MADE THE MESS IN THE FIRST PLACE. Would you trust the men who tore Wall Street down to build the New Wall Street ?

That $250,000 refers to taxable income to individuals, not gross income to businesses or pre tax income to individuals.

Still, with higher taxes, those who make $250k plus will find ways to shelter more of their money from taxes and reduce their overall tax liability.

It is possible that Mr. O is talking about raising the bar on Social Security Taxes. If so, there aren't loopholes in the system that would permit sheltering income from additional taxes. Tax revenues could increase substantially if the limit is raised or removed. it wouldn't matter if the taxes were initially classified as Social Security taxes and earmarked for the Social Security Trust fund. Those funds are used in general revenues anyway.

The idea is good and it is but one possible solution that will undoubtedly be considered by either party when push comes to shove.

It's going to happen. Your choice doesn't matter.

We'd have more money. Unless you really meant $250. and not $250,000.

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