Streams

30 Issues: Businesses and Taxes

True/ False: A Tax on the Wealthy is a Tax on Small Business

Tuesday, September 21, 2010

Bill Rys, tax counsel for the National Federation of Independent Business, and Robert Reich, public policy professor at the University of California at Berkeley and author of Aftershock: The Next Economy and America's Future, give their takes on the claim that a tax on the wealthy is a tax on small business.

Local Robert Reich Appearances 
Tuesday September 21, 2010 7:00pm at Barnes and Noble, 150 East 86th Street, New York, NY
Thursday, September 23 7:00pm at The Strand, , 828 Broadway, New York, NY

Guests:

Robert Reich and Bill Rys

Comments [54]

Eugenia Renskoff from Brooklyn

Hi, to Barbara, the woman who called to say that in the 90s, her boss took $10,000 that was supposed to be hers and did something with it for himself. Legal or not, it was more than mean. She should have sued. I know it is a pain to sue and deal with lawyers, but you have to defend your rights. All the same, I understand why she didn't sue. Eugenia Renskoff

Sep. 21 2010 06:30 PM
noname

to Anon- taxed...
Eight Guys?
Hey- in my neighborhood (similar to what you Describe) a driveway take THREE guys TWO days... guess the contractor convinced you that 8 are needed (five to hold the flag?)

And that's not tax money going there... it's added to the house's principal... and subtracted from its (eventual) sale price.

I love it when math wimps and accounting flunkies describe tax law!

Sep. 21 2010 01:45 PM
amalgam from Manhattan by day, NJ by night

@ Lori form Montclair - You state:

"And, then there's all the people on here ranting about how THEY are entitled to other people's earnings and calling those people (at work right now so they can't participate) GREEDY!"

As part of the USA's nearly 100 years of progressive income tax history, yes, certain low-income segments of society are entitled to "other people's earnings."

This is the American society that you were most likely born into, and entitlements have helped to lower the grinding deprivations of poverty to many millions. Now that's America and that's liberal.

Sep. 21 2010 12:29 PM

lori
it's the weakness of the argument, don't shoot the messenger.

Sep. 21 2010 12:10 PM
Chris Garvey

When you get to take a deduction for equipment depends on depreciation schedules, which have varied over the years, somewhat unpredictably. But you pay taxes every year.
It's also nice to keep a cash cushion to carry you through demand downturns, like the ones the banks induced in 2008 and 1929. If that cash is in your account at tax year end, and is from that year's profit, the IRS takes a big chunk.
The bigger the chunk, the more comparatively attractive is overseas investment in lower tax venues.

Sep. 21 2010 12:06 PM
JP from NJ

anon from taxed to the max in NJ

Boo hoo, noo... First, If your paying 50 cents on the dollar because you make over 250 grand a year then you really, really need to hire a new accountant. Second, hiring 8 guys to re due your driveway does way more for the economy then buying some cheap crap you don’t need thats made in China at Macy's. Third, even if you only take home 125 grand a year after taxes, yes you are rich. Not enough to live in NYC area for property taxes? Then your living way above your means and its time to send the kids to public school and commute from further out to NYC like everyone else….

Sep. 21 2010 12:05 PM
anon

To NoName:

Guess you don't work in construction! Okay, we did other repairs to our, wait for it, 4 bedroom house with peeling paint, original bathrooms, etc.

What a cheap shot! Trust me, the people who've been able to do this work and earn a fair wage do not share your smug, sitting home on your arse attitude.

And, sorry to tell you this because I know you want it to be a trust fund, but we got this house the old fashioned way: decades of hard work and saving.

Sep. 21 2010 12:04 PM
Lori from Montclair, NJ

Not a very balanced discussion. One smallish fry lobbyist (peppered with calls from disgruntled former employees of small businesses and a guy who got bad tax advice) vs. Robert Reich?

And, then there's all the people on here ranting about how THEY are entitled to other people's earnings and calling those people (at work right now so they can't participate) GREEDY!

Got Irony?

(yep, I'm on line too but I volunteer ALL day long...and, I'm also a liberal, or at least I think I used to be, before we all became such whiners)

Sep. 21 2010 11:54 AM
steve from rockaway

the reason we of the less-welloff don't notice or don't care about the growing domestic inequality is that we now can afford so much more than we did before --- cars, tv's, i pads, celphones, designer clothes... but that is built on the sweatshops of china and the third world and the rape of the planet. We are as insensitive to this aspect of inequality as the super-rich are to domestic unfairness.

Sep. 21 2010 11:52 AM
superf88

Business Morality Litmus Test --

"The Employee Parking Lot Test"

i have advised folks trying to gauge a business (as a place of employment or possible partner) which has an employee parking lot to take a look at the far corners of the lots, where the lowest paid employees are relegated to park.

are these workers driving clunkers or decent transportation? are these owners sharing the wealth?

huge.

Sep. 21 2010 11:50 AM
Edward from NJ

Chris Garvey from Amityville wrote: "They slow the growth of new businesses who use profits to buy equipment and do research to increase production."

If a business is using profits to buy equipment and do research, those aren't profits anymore. They're expenses. You don't pay taxes on expenses.

Sep. 21 2010 11:48 AM

there is only one incentive to hire. is business good. no one will hire just because taxes are low. only if there is a business need

Sep. 21 2010 11:47 AM
Laura from UWS

BRAVO to Robert Reich. Many thanks for the sanity.

Can we have MORE Robert Reich please?

Thanks.

Sep. 21 2010 11:47 AM

The problem is for the last 30 years we have been hearing cutting taxes = good; raising taxes = bad. Along with the mantra that helping the rich results in good stuff tickling down to the rest. So the result is that Americans have consistently voted against their interests. Trickle down is a myth. But the argument is so simple and easy to grasp our lizard brains can no lnoger accept any other narrative. Plus everyone thinks they could be rich some day so they'll eventually benefit from lower tax rates once they get there (which most of us never will). It's like the lottery -- we keep playing even though the odds are totally against any one of us winning.

Sep. 21 2010 11:45 AM

in the news this week
Poverty rate hits 15% in America

Sep. 21 2010 11:44 AM
Amy from Manhattan

Just about 3 years ago, "The Onion" gave its take on "trickle-down" economics: http://www.theonion.com/articles/reaganomics-finally-trickles-down-to-area-man,2302/.

But the Reagan tax cuts did create jobs--just not in the US! How much did we ever hear about "outsourcing" before those tax cuts?

Sep. 21 2010 11:44 AM
Chris Garvey from Amityville

Tax rates above 28% decrease revenue.
Revenue is flat from 18% to 28%.
So it is counterproductive to revenue to tax income above 28%.
Rates above 18% are like driving with your foot on the brake pedal, a waste of energy.
High rates only serve to protect the already very rich against competition from those who are trying to get rich. They slow the growth of new businesses who use profits to buy equipment and do research to increase production.

Sep. 21 2010 11:43 AM
sherman from New York, NY

If leaving the tax cut for the richest in the country will stimulate the economy and create jobs, where are the jobs? They've had these cuts for the past ten years. Have we forgotten how many jobs were lost at the beginning of the last administration?

Sep. 21 2010 11:39 AM
JC from NNJ

The "tax cuts" for the "rich" have been in effect for several years now... if they are so effective in helping the recovery, why are we not SEEING much recovery? PERSONS who make over $250k are not going to hire more people or spend much more than they already do -- BUSINESSES hire people, and those expenses deduct from what is taxed.

Sep. 21 2010 11:39 AM
Chris Garvey from Amityville

Tax rates above 28% decrease revenue.
Revenue is flat from 18% to 28%.
So it is counterproductive to revenue to tax income above 28%.
Rates above 18% are like driving with your foot on the brake pedal, a wast of energy.
High rates only serve to protect the already very rich against competition from those who are trying to get rich. They slow the growth of new businesses who use profits to buy equipment and do research to increase production.

Sep. 21 2010 11:39 AM
Stephen from Connecticut

Note that to make his point, Mr. Reich slides very quickly into talking about "the wealthy." They are much easier to grab money from than "the small business person" who is supposed to be the subject of this discussion. For that person, the question is, is the society better off if the business person has the money to put into a busienss, or in the hands of the government to redistribute.

Sep. 21 2010 11:38 AM
John from Fanwood NJ

If we make the tax rates for the under $250K earners, don’t we dig a much deeper hole for the future than just not extending the cuts for the rich. I’m no Tea guy or Libertarian but the only way to fix future deficits is to increase revenue.

Sep. 21 2010 11:37 AM
Amy from Manhattan

I don't usually quote myself, but (from yesterday):

"To the caller who was concerned about the cost of being required to extend greater health coverage to his employees, employers who do this will get a tax benefit. I believe this is a tax credit, not just a deduction. Pres. Obama explained this to an employer who asked how he could afford insurance at an event earlier this summer; I don't know why the administration isn't publicizing this better!"

Sep. 21 2010 11:37 AM
Jim

Can he also address cap and trade? Is it a job killer?

Sep. 21 2010 11:35 AM

Finally! Thank you Robert Reich! "Supply Side Economics" a/k/a "trickle down" -- It was and is a dismal failure. And we are still going down that road...

Sep. 21 2010 11:32 AM
noname

to Anon- taxed...
Eight Guys?
Two Weeks to repave a driveway?
What size estate is That on??

Sep. 21 2010 11:31 AM
Unheard from NYC

The health care issue in the U.S. is a joke. Corporations for some reason, probably potential taxes, don't want our government to provide health care. These corporations better get into the medical business if they aren't already because that is where all of our money is going to go. No more buying anything but food and medicine. How does that make sense for Walmart or Apple? Don't they want to sell us products or are they content to sell to other markets? Small business should be shouting for something like Medicare for all.

Sep. 21 2010 11:31 AM
Upstate ALan from upsate

There should be NO question about whether to provide tax breaks to the rich.

IF more stimulus is needed/desired then more tax breaks should go to the middle class ONLY.

Economists all say that $1 given to the middle lower class will actually be spent and be more stimulative to the economy than $1 given to the rich who will spend that money less often.

Sep. 21 2010 11:29 AM
peter from NJ

It seems Mr Rys likes to ignore facts that hurt his case and exaggerate the math that makes it.

He fails to understand or Truthfully explain:
What, sir is a marginal tax rate?
How does the 1st 300,00 get taxed when there's a tax cut on the 1st 250,000?
How do you pay employees.. During the year from Income, or at the end of the year, out of Savings?

This is how his position turns to garbage!

Sep. 21 2010 11:28 AM

who better to pay for the wars, schools and police than those who have benefited the most from our good economy?

don't they have low taxes in the 3rd world. is that what we want?

Sep. 21 2010 11:28 AM
Liam from East Elmhurst

Who thinks the entire tax system as it is is the problem?
I dunno, there are a lot of people doing very badly and there are still a lot of people having a great time.
Seems there should be more for everyone.

Sep. 21 2010 11:27 AM
The Truth from Becky

False.

Sep. 21 2010 11:27 AM
peter from NJ

It seems Mr Rich likes to ignore facts that hurt his case and exaggerate the math that makes it.

He fails to understand or Truthfully explain:
What, sir is a marginal tax rate?
How does the 1st 300,00 get taxed when there's a tax cut on the 1st 250,000?
How do you pay employees.. During the year from Income, or at the end of the year, out of Savings?

This is how his position turns to garbage!

Sep. 21 2010 11:27 AM
Louis Sena from Long Branch

All I know is , when Clinton raise taxes my Bus. flourish. When Bush cut taxes my bus slump year after year while my health care rose and rose.

Sep. 21 2010 11:26 AM
Ezequiel Herrera from NJ

Mr. Lehrer:
Please be mindful that what Republican Candidate for Gov. Carl Paladino recently called A.G. A. Cuomo, re: A public debate between the two, is an obscene word in the Spanish language.
It is use to berate and denigrate a person in a very repugnant and offensive manner. Please forgo the use of such language for the sake of morality and civility.

Sep. 21 2010 11:23 AM

Hahaha, "why should that $10,000 go to the government?"

Because maybe schools and roads aren't such a bad thing?

I've had it with the no-taxcut-for-rich-people-is-ever-enough nonsense, at some point we have a responsibility to pay for the stuff we want to have, the kind world we want to live in. Taxes are not inherently evil, and I'm sick of these anti-tax jokers who always want to have it their way. Please, go Galt and spare the rest of us. I hear Somalia makes a great Libertarian Paradise. It doesn't matter whether we're in an economic boon or a downcycle, for these anti-goverment ideologues, cutting taxes is ALWAYS the answer and it's time for them to own up to their religion for what it is.

Sep. 21 2010 11:22 AM

This guy is a total jerk! Does he expect us to believe this BS?

Sep. 21 2010 11:22 AM
NYCarl from EV

Someone please call BS on this guest!

The small business owner caller is trying to do it, but he needs help!

Simple math: Increasing the taxes on PROFIT over $250K, that is an incentive for businesses to SPEND more on employees.

Sep. 21 2010 11:20 AM
NANCY M from NEW YORK CITY

Brian, you are getting at the true point here, greed.
Employers used to boast about providing American jobs as opposed to shipping them overseas. In terms of "uncertainty" the code word for resisting tax increases, let employers hire and if it is too expensive, lay the new hires off. The cost of increased unemployment taxes is not significant and employers have had no problem laying off workers up to now.

Sep. 21 2010 11:19 AM
kevin baker from Manhattan

Mr. Rys mentions that he represents 350,000 small-business owners, which sounds impressive. The number of small businesses in the U.S. today, according to the New York Times? 29 million.

In other words, he has been hired by a small elite, who can afford to fund lobbyists such as himself. Tax 'em!

—from another small business owner.

Sep. 21 2010 11:19 AM
George

NO!!!

Brian is wrong. A small businessman making $300,000 will not pay taxes on $300,000. He would get the cut on the first $250,000 and pay the extra tax only on the last $50,000. So at 3.5%, his extra tax would be $1750, not $10,000 as Brian said.

An important difference. Please correct.

Sep. 21 2010 11:18 AM
Bob London from NYC

The argument that increased taxes will hurt hiring holds no weight. If you are taking out of your small business $300,000 if you wish to pay less taxes hire some one for $75,000 to invest in the business, the tax savings will pay for half the employee

Sep. 21 2010 11:18 AM
Leo in NYC

The non-partisan CBO looked at 11 methods for creating jobs and rated tax cuts 11th out of 11. Tax cuts are a poor stimulus.

Looking at the bigger picture, income for the vast majority of Americans has remained flat or in some cases decreased relative to inflation over the past decades. People are working harder and earning less.

But the economy has grown enormously over the same period. All of that excess wealth has gone to the rich. The top income tier has gotten massively richer while everyone else has struggled.

Taxing the wealthy at a higher rate is a key piece of our forgotten social contract that allows us to structure the economy to advantage the most people in the most sustainable way.

Sep. 21 2010 11:17 AM
Jack from Astoria

Come on, Bill Rys. You are using anecdotal evidence and conjecture to make your point, and you have no hard data. The best analysis I have seen shows clearly that only 1.5 % of small business owners will be affected.

Is it all right if I personally don't pay taxes next year? I promise to spend the money on something that will help stimulate the economy.

Sep. 21 2010 11:15 AM
Edward from NJ

Brian - a business that takes in 300,000 would only pay 1500 more -- not 10,000. As you yourself often point out, it's the marginal rate.

Sep. 21 2010 11:15 AM
Evelyn from Montclair, NJ

Taxes are levied after expenses (e.g. payroll, business improvements, charitable donations, etc.), so if taxes rise, rather than pay Uncle Sam, new businesses will hire more employees, expand or improve their businesses.

Sep. 21 2010 11:14 AM
Shar in AZ from Arizona (MS in SW)

1) S corp and employs 20 - 50 workers??? Reality check please
2) IRS hampered by privacy rules to analyze IRS returns??? Reality check please
3) Anecdotal info of a select group vs statistics, reality check please

Sep. 21 2010 11:14 AM
Sam from Chelsea

I'm curious if your guest and/or the GOP would support letting the tax cuts for the top 2% of earners expire if the IRS were able to exempt those individuals in that tax bracket who owned a "small business". I am guessing he still would not.

Sep. 21 2010 11:13 AM
NYCarl from East Village

I am a small business owner (5 employees).

+$250K profit/year businesses should go out and spend/invest more in employees and thus helping the economy.

Reducing taxes on over $250K only provides an incentive to NOT hire.

The math is very simple here. These small businesses (such as mine) ONLY pay taxes on profit! No-one should have sympathy for us when we make over $250K/year.

I have had one year where I almost crossed that line and yes I paid a lot in taxes, but I also had a ton of money.

Sep. 21 2010 11:13 AM
anon from taxed to the max in NJ

Thank you for this discussion! I've been talking about this a lot and it seems to me a real disconnect.

Many small/mid sized business owners WILL be impacted by this tax increase. My husband is a small biz owner (15 employees, with 2 partners) and, given the slow economy and pending Fed tax increases (they already absorbed a State tax increase), they are not willing to expand or assume additional risk right now.

Why would they do so when the risk remains high but the rewards are less? Makes no sense. And, no, giving them opportunities to borrow more or invest more in this climate is not stimulating (unless the Fed can also guarantee that they can stimulate demand!).

Also, when did "$250K" become the new Millionaire? If a person in that tax bracket clears 50 on the dollar it's a miracle and then add in NYC area property taxes, tuitions, commuting costs, etc. (all of which are not deductible to people in this tax bracket), there isn't enough left for the helicopter pad on the front lawn.

Reich is an impressive guest but he will not give a balanced perspective on the issue.

p.s. I'm presently redoing my driveway, 8 guys working for 2 weeks -- I'd rather give our "tax" money to direct goods/services. That's something that the folks in the lower tax brackets are not in a position to do. (I will be able to do less of after tax increases)

(Now I expect all the people sitting home on their butts to get up in arms and rant about how they're entitled to a redistribution of wealth...sigh)

Sep. 21 2010 11:13 AM

only little people pay taxes, that's what accountants are for!

Sep. 21 2010 11:13 AM
rick pettit from manhattan

what I don't get: even if you're rich and run a business, isn't your salary kept separate from the business? raise taxes on the income. why would we need to raise taxes on the busineses? RP

Sep. 21 2010 11:12 AM
Edward from NJ

True. But if they *really* hate to pay those taxes, they can hire more employees and reduce their profits. Win - win.

Sep. 21 2010 11:11 AM
ymg1@hotmail.com from Manhattan

Of course cutting taxes creates jobs. Look at how many it created over the past ten years! OK, don't look at that. Just act like you are rich and then you understand why you want your taxes cut.

Sep. 21 2010 10:31 AM

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