Sunday, August 26, 2012

Fair share: No one is right if everyone is wrong...

Doing the math in the tax increase debate
...Republicans or Democrats alike should all recognize this to be a craven tactic to deflect us from the real strategy of protecting wealthy campaign donors from paying an extra $46,000 on each added $1,000,000 of earnings.
So much for calling the tax increase a “job killer”. Yet Republican leaders — McConnell, Boehner, Cantor, etc. — are schooled to insert the “job killer” phrase into every sentence — a standard propaganda technique, of course. The bet is that if people hear it enough, they will think it true. In fairness, the same technique is employed by Democrats and by Obama, with their unceasing appeal that the wealthy pay their “fair share”. Who is to say that 35% is not a fair share or what, precisely, would be a fair share?
How many thousands must that small business owner be taking home for those $30 and then $46 nicks to add up to one such employee’s paycheck? The answer: $371,000 — and that pertains only to earnings above the $250,000 bracket subject to the tax increment. (97% of all small businesses earn $250,000 or less per year)
Here's the math: The $129,150 of income between Obama's $250,000 floor and 2011's top bracket of $371,150 would have an added tax of 3% (the increase from 30% to 33%) or $3875 (rounded). For that tax bill to become the $15,000 needed to claim that a minimum wage employee had to be fired to pay it, one would have to earn an additional $241,850, which, taxed at the 4.6% increment, is $11,125 ($3,875 + $11,125 = $15,000). The added income incurring $15,000 in added taxes is therefore $129,150 plus $241,850, or $371,000.

So a small business owner would have to be taking home $621,000 ($250,000 + the extra-taxed $371,000) to claim that in order to pay the added tax burden he or she would have to fire one minimum wage employee. And, by extension, that owner would have to be taking home almost $1,000,000 to claim it cost two such jobs. And so on, for every additional job to be killed.

Another point: We ask why is the owner allowing so much income to flow into his or her form 1040 where it is subject to personal income taxes? The 4.6% tax applies only to money taken out of the business, so the claim that it is a “job killer” is backward. If the money is instead spent in the business, it isn’t taxable. The 3% of small businesses that Obama cites as yielding more than $250,000 to their owners per year — possibly much more — could avoid his tax if they plowed the money back into the business. One could even say that the proposed tax added to personal income is an incentive to leave the money in the business where it might even be a “job creator”.

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