For another, imagine the hooplah the Czar created with his evidently popular on small business tax increases.
First, here is an email that asks us what the hell we are talking about:
Oh Great and Dreadful Czar,Think youre confused? Check out this from long-time reader and financial ace JF:
I am the owner of a small gunsmithing business in rural NW Georgia. My number of employees is zero, and I do not expect to be able to hire anyone, or even turn an actual profit for a few more years. I am a bit confused by the statements you made in your article on presidential math.
I can deduct all expenses, such as payroll (if I had a payroll), before calculating my income tax. I expense my tools, rent, etc; depreciate my machinery pay any costs of doing business and then am taxed on any profits I make. Now I chose to establish the business as a C Corp and so I pay double taxation if I take any profits out of the company. First the company has to pay taxes on the company profits and then I pay taxes on any payout I receive. However, if I was an LLC, S corp, partnership or sole proprietor I would have to pay taxes on any profits made by the company as a part of my regular income. Those taxes, however, are still after I pay for payroll, rent and any other expenses. I am able to deduct payroll taxes from my 'profits' currently, and so I am uncertain of your model.
You need to take an accounting course - or talk to a CPA. A small business is not "income taxed" on gross receipts. They are allowed to deduct salaries, payroll taxes, operating expenses, etc. After that, the net "might" be taxable to the owners (whether distributed to them or not). But your calculations are way off the mark.Yikes. Well, there you have it.
Perhaps this helps?
Revenues 2,000,000 Costs (other than payroll) 400,000 Payroll (incl FICA,medicare) 304,000 Net to Owner 1,296,000 Tax (avg 32%) 414,720 Tax if AMT 28%) 362,880
Gus keeps 881,000-933,000.
Of course, type of business could cause large changes in profitability. Personal service (law, investment management, etc) - the costs would be lower (major cost rent) because no inventory required. If small manufacturing, then $400,000 is probable. Either way, Gus keeps a significant portion. I left out state income taxes which might take an additional 8-10%. I am assuming this is a Sub-S corp or LLC. Can't imagine there are many small businesses still around structured as corporations. I used an average of 32% for Gus because, surely, he has some sort of deductions (mortgage, charity, property taxes, etc.)
So an additional tax of 3% would cost Gus $38,800 more in taxes. Would he eliminate one employee earning $38,800 so as to maintain his 881-933k? Possibly. Would he be incentivized to add to staff? Probably not.
You used Accounts Payable when I think you meant Operating Expenses. A/P is a static "Balance Sheet" term - a snapshot at a certain point in time as it were. The expenses belong on the income statement as an offset to revenues.
Although, referring up to RKBs message, the fact that he is double-taxed means that the Czar would be reluctant to award Gus only a 36% effective tax rate: the Czar has heard repeatedly from small business owners who echo Mitt Romneys claim that they are paying 50% to 60% when all taxes are factored in. We welcome your thoughts, and appreciate you both challenging the claims. Let it not be said that dreadful means intentionally promoting inaccurate information.
Fortunately, not all the news was bad for the Czar. The aptly named Ghost writes in:
Dread Czar-Thanks, Ghost.
In the depths of Abaddon, your nether army swells large. I am pleased to report your nightmare campaign is showing good progress on stimulating those of lower intelligence to work harder.
This ghostly minion was quite surprised, and a little annoyed when one of the slightly prominent Twitter people he follows retweeted this.
As If this explains the President's poor performance.
PS, Apologies for the email, my customary method of using flayed skin of the damned was delayed by the post office. AGAIN.
What the hell was that link? It takes you to Obamas personal website, There, you find a bunch of video clips of Mitt Romney from the debate; in each, he makes a statement... then, someone cuts in to say That isnt true, without very much evidence at all to back up the claim. In fact, one of the claims used to challenge a Romney claim was the very one Romney tore apart during the original debate as based on a misunderstood element in the Paul Ryan draft plan that was corrected long ago.
Well, the Czar would guess that if you are really desperate to believe that Obama performed well in the debate, you might be inclined to accept these as counterarguments. Too little, too late, of course... but let us be honest. Most Democrats clearly wrote off the debate as a loss and are focusing on the second Presidential debateas they should.
Know what the President could do? He could have a clip of Mitt Romney from the debate, and then immediately jump to video of Ringo Starr singing, since the net effect would be the same.