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Sole Proprietors and the 250K/year marginal rate argument

Discussion in 'Political Discussion' started by PatsFanInVa, Apr 14, 2011.

  1. PatsFanInVa

    PatsFanInVa PatsFans.com Supporter PatsFans.com Supporter

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    Conservative meme: 2/3 of small businesses file individual tax returns not business tax returns, so a marginal rate increase at 250K+ whacks small businesses.

    Due Diligence question: How many of these unincorporated businesses hire anybody other than the sole proprietor?

    It seems like a dicey proposition to claim that you will kill jobs by a higher marginal rate at 250K, because sole proprietors will not hire people. The gut response is "really? Then how are they sole proprietors in the first place?"

    So the follow up question is: Can you in fact even hire employees, and be filing taxes on a personal tax return for your business?

    Is there enough flexibility in the individual income tax rules to make this make any semblance of sense?

    In such arrangements, how many people other than the sole proprietor in question are employed, nationwide?

    Again, it strikes me that a guy paying his taxes on the individual form is unlikely to be a "job creator."

    Fill me in, entrepreneur types. I got better so I can't sit at home googling today.

    Thanks

    PFnV
  2. IcyPatriot

    IcyPatriot ------------- PatsFans.com Supporter

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    #87 Jersey

    I have to hit the road ... you got it about right. I stay in a lower tax bracket by working my depreciation - continually investing in my business. Which actually is how the system is designed ... to keep the economy moving. Those that don't want to keep investing in their business should pay more taxes because they are not contributing in any better way to keep the economy strong and stable.

    While I am at it ... any here make sure to try to buy more Made in America?

    If not ... start ... before it is too late.
    Last edited: Apr 14, 2011
  3. PatriotsReign

    PatriotsReign On the Roster

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    I'm a loyal "Buy-American" when it comes to cars...too bad we don't make much quality electronic stuff anymore....
  4. The Brandon Five

    The Brandon Five Rookie

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    #75 Jersey

    The sole in "sole proprietor" refers to the ownership not the number of people involved in the activities of the business.

    Sole Proprietorship - Lawyers.com

  5. patsfan13

    patsfan13 Hall of Fame Poster PatsFans.com Supporter

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    Go to the Forbes Flat Tax and these problems are solved, of course the politicans like the President would lose the class envy tax the other guy card.
  6. DarrylS

    DarrylS PatsFans.com Supporter PatsFans.com Supporter

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    Talk about a stupid comment.. as long s 50% of congress is made up of millionaires this will never happen.

    When you talk about an equitable tax system, every other congressman and women should recuse themselves as they have an obvious conflict of interest.

    There will never be tax equity in our lifetimes.. the rich will continue to get richer and the rest will all be bottom feeders.
  7. patsfan13

    patsfan13 Hall of Fame Poster PatsFans.com Supporter

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    The millionaires in congress engineer their own tax breaks (or in the case of many dems don't bother to pay). They are driven by the power they aquire doling out tax 'breaks' for worthy supplicants/donors and still have the issue to demonize others (ie 'the rich') to fool the rubes.

    I agree it is tough to get a flat tax through because it disrupts business as usual in Washington.
  8. chicowalker

    chicowalker On the Roster

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    OT: Does Buy American matter much when many "foreign" autos are made here in the US?

    (I've actually never bought an American made car -- though I've only bought 2 new cars in my lifetime -- neither time was there an American car that was the best choice.)

    ------

    Icy, love the idea in general, but not sure how to make it work. That's partly because I often want to buy the right product for me. As it turns out, the rower I just bought is made in the US, which was nice to see. (Though who knows whether parts are imported?)

    otoh, just yesterday was buying something where the salesman noted that my older version had been made in the US -- they've since gone offshore.

    On occasions where there's no preference going in, though, and you can see competing items next to each other on the shelf, it's a good idea to try to keep in mind, though I wonder how often the choice actually exists, unfortunately.
    Last edited: Apr 14, 2011
  9. chicowalker

    chicowalker On the Roster

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    OT (sorry, patsfan): More partisan garbage -- trying to take over as chief righty partisan in wolfie's absence?

    Sad folks like you are blinded to the wrongdoings of half the pols out there just because of a letter next to their name.
    Last edited: Apr 14, 2011
  10. patsfan13

    patsfan13 Hall of Fame Poster PatsFans.com Supporter

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    Which pubbie legislators have been shown to not be paying their taxes. Specific examples are appreciated. I am not partisan, on the thread about the CR I ripped Boehner, and the pubbie leadership for their phony budgets cuts.
  11. chicowalker

    chicowalker On the Roster

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    You asked that same question recently and were given your list.

    Since you think pubbies don't have tax and other ethical shortcomings, ignore the facts when presented to you and think that class warfare is strictly a dem tactic, your cries of not being partisan ring empty.
  12. patsfan13

    patsfan13 Hall of Fame Poster PatsFans.com Supporter

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    As i recall they were for other corruption not taxes. IIRC all the perps were not in office, like the current crop who 'forgot' to pay taxes. Thanks for playing though.
  13. chicowalker

    chicowalker On the Roster

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    OT: They were taxes and other corruption, I believe.

    and whether they're currently in office is irrelevant to your last statement, unless you think the games congress plays is a new thing -- which I'm sure you don't, since it would reflect very poorly on the pubbies.

    Thanks for playing, though.
  14. Mrs.PatsFanInVa

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    #24 Jersey

    Speaking of playing --- it would be an interesting part of the game to know why you were such a big supporter of Christine O'Donnell in the Delaware primary when the IRS had dinged her twice by putting tax liens on her property because she'd not paid her taxes.
  15. IcyPatriot

    IcyPatriot ------------- PatsFans.com Supporter

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    #87 Jersey


    I agree ... I try to buy as much made in America as possible ... I also do not shop at Walmart.
  16. Patsfanin Philly

    Patsfanin Philly Rookie

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    #95 Jersey

    For small businesses, it's easier from an accounting point of view to be a sole proprietor than a corp or an S--corp. You file a schedule C ( profit or loss from a business) with your individual 1040 form and you're done.
    There are 22 million of them so it is likely the most common form of business in the US...
    How to Start a Sole Proprietorship
  17. PatsFanInVa

    PatsFanInVa PatsFans.com Supporter PatsFans.com Supporter

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    Actually I did this for years at a time, but did it for self only. Ah, the old Schedule C. Went and looked at this year's model, and indeed, both labor as a cost of goods and contract labor are on schedule C.

    So back to where I started... the claim is that taking a higher marginal rate from someone making 250K -- that's after expenses, of course -- will dissuade small businessmen from doing business.

    Icy's got it right, working your expenses is huge, which encourages putting money back into the biz.

    So now we go to question 2 - how many sole proprietorships actually do have employees other than the taxpayer himself?

    And come to think of it if you're taxing the guy making the 250K, and that's after the cost of employees (as well as other expenses,) doesn't that encourage having labor costs, i.e., employees?

    If I'm about to make 260K this year, but I could get more sleep and have some kid do my scut work, AND keep my earnings in the <250K bracket, wouldn't I be more likely to do it if I'm taking home less of that 10K I'm making at the higher marginal rate?

    Icy's point is that plowing the money back in the biz is the only way to escape the taxes.

    How does a higher tax at $250K make me want to make more than 250K after expenses and deduction? It would put a premium on making sure I do NOT keep 250K of the money my business makes, which necessitates spending on the business -- including hiring employees.

    Someone tell me how the tax on the 250K/year set works out the other way -- your AGI ends up going down as you spend on things you expense on the Schedule C, right? And that includes labor, both hired labor and contract labor.

    Or am I remembering that wrong?

    PFnV
  18. reflexblue

    reflexblue PatsFans.com Supporter PatsFans.com Supporter

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    #91 Jersey

    No, i posted the list and it was tax evasion. Thanks for playing though, or trying to play.
    Last edited: Apr 14, 2011
  19. chicowalker

    chicowalker On the Roster

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    Still never been in one
  20. PatriotsReign

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    Do people here see households making $250K as "Wealthy Americans"?

    I can tell you bluntly that $250K is not wealthy at all. Especially if you live in the Mid-Atlantic, Northeast or west coast. It is comfortable at most.

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