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View Diary: Sunday Train: Sustaining Our Suburbs (93 comments)

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  •  Yes, and so ... (1+ / 0-)
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    RMForbes

    ... shifting the basis of the taxbase is a distributional change ... would it be one that favors more labor intensive industry?

    I don't know, sometimes Input-Output impacts are not what you'd think off the top of your head.

    Start 2010 with Lesbian Creative Works, 100% Yuri from ALC Publishing

    by BruceMcF on Sun Sep 05, 2010 at 09:48:41 PM PDT

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    •  Size does matter (0+ / 0-)

      Obviously, the single owner/operator like an independent long haul trucker that has a 1 to 1 relationship with gross reciepts and gross profit pays the maximum percentage of their income in payroll taxes. Shifting the costs to their gross receipts would be a significant tax cut and would reduce the price they need to charge their customer to maintain the same profit margin. It will make them more competitive. The smaller the business with the higher percentage of their costs in payroll will benefit the most. Larger corporations with lower percentages of their costs in labor would end up paying far more than the do currently. More importantly, the business would not be able to reduce the effective federal tax rate by reducing payroll. That downward pressure on wages would be completely removed.

      Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

      by RMForbes on Mon Sep 06, 2010 at 09:53:23 AM PDT

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      •  I'm sorry, I'm completely not following this (1+ / 0-)
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        RMForbes

        First of all, today payroll is completely tax deductible, so your statement

        the business would not be able to reduce the effective federal tax rate by reducing payroll

        makes no sense. In fact, from a purely mathematical point of view, higher corporate profit taxes should encourage hiring, because it lowers the marginal cost of the employee.

        Second, it's quite possible for a business to gross $1m and legitimately only make a tiny profit because of payroll and expenses, or even to lose money. If you're not deducting payroll and expenses, you tax the $1m business that employs 20 people and the $1m business that employs only one the same.

        Fry, don't be a hero! It's not covered by our health plan!

        by elfling on Mon Sep 06, 2010 at 12:19:45 PM PDT

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        •  Payroll taxes are deductable from income (0+ / 0-)

          taxes because they are paid before profit is calculated. Payroll taxes increase the cost of payrolls by 7.65% (a little over 9% if you include unemployment) no matter how many employees you have and how large the business. Driving down the cost of your payroll will reduce your effective tax rate, the amount of all the taxes you must pay. Completely removing the employee from the calculation would reverse this downward pressure on wages that now exists.

          Hope that clarifies it for you.

          Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

          by RMForbes on Mon Sep 06, 2010 at 12:49:45 PM PDT

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          •  Not really (1+ / 0-)
            Recommended by:
            RMForbes

            Keeping income that will be taxed at the full income tax rate to save paying 7.65% isn't a winner if you're looking to minimize taxes.

            It may be the right thing to do for cash flow, of course.

            Fry, don't be a hero! It's not covered by our health plan!

            by elfling on Mon Sep 06, 2010 at 03:18:54 PM PDT

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            •  I'm sorry I thought you had read my diary (0+ / 0-)

              The income tax would also be reformed by increasing the minimum taxable income from the current $400 to $75,000 into a truly progressive income tax without deductions, credits, shelters or any other way to game the system. Everyone including corporations and Wall Street gamblers would be required to pay the same progressive marginal rates on all their income from every income source over $75K.

              The current payroll tax would be replaced by shifting the costs of the current tax off the gross earnings of the employee and onto the gross business receipts of every business. Since the total of all gross business receipts is many times more than the total of all the gross payrolls the rate of the new tax could be much lower. I think it would need to be between 3-5% to generate equal or greater federal revenues.

              Both of these reforms together would allow the 80% of Americans that bring home a paycheck to take home the 25% that is currently being withheld from their paychecks. Most Americans would have 25% more available payroll dollars to cover their expenses. Billions more payroll dollars would be flowing in local economies even longer than the do now because the new gross business receipts tax would be a lower rate and the payroll dollars would be allowed to circulate in the economy instead of being withheld from the economy.

              None of these ideas would actually reduce any taxes. The tax real tax burden is just shifted back to the wealthy where it belongs. It's an absolutely progressive tax system top to bottom.

              Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

              by RMForbes on Mon Sep 06, 2010 at 03:50:00 PM PDT

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              •  It doesn't necessarily hit only the wealthy (0+ / 0-)

                It is true that the total gross receipts from all businesses are in excess of all payrolls, but it's not at all true at the individual business level.

                There are businesses - legitimate, honest businesses - that earn 3% or less profit on their gross revenue - that is 97% of the money that comes in is paid out to suppliers or to workers. Some are large, like supermarkets; some are small.

                It's simply a fact that a company that grosses $1m on expenses of $500,000 is in a totally different financial situation than a company that grosses $1m with expenses of $990,000. A 3% gross receipts tax on the second business puts it $20k in the hole.

                Fry, don't be a hero! It's not covered by our health plan!

                by elfling on Mon Sep 06, 2010 at 09:26:25 PM PDT

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                •  I work for a computer software company (0+ / 0-)

                  that sells Point of Sale software to retail businesses. As part of my duties I have helped hundreds of small business owners setup their POS systems including setting up the included business accounting software. We use a double entry accounting system unlike most of our competition. Yes I am aware of the costs of payroll taxes and how profit margins are maintained. If a business has a cost, any cost, that is steady or the same amount each month like their lease then they can calculate the amount of sales they would need to turn a profit. If the costs are more variable like utilities or payroll then it makes it a little more difficult. But a steady percentage can be easily worked into the sales price of their products or services because it's a steady percentage on the gross. Yes it will increase the price charged to the customer for some businesses (if their payroll costs are currently lower than 3% of their gross receipts) but some would be able to lower prices too. Either way the profit margin would not necessarily need to be effected.

                  Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                  by RMForbes on Tue Sep 07, 2010 at 03:42:52 PM PDT

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                  •  Software would be fine under gross receipts (0+ / 0-)

                    The companies hurt would be the ones with large non-labor (materials and equipment, rent, etc) expenses, because they're deductible from profits and not part of payroll, but they're not deductible from gross receipts.

                    Perhaps you haven't thought this through.  A gross receipts tax would be really painful for any infrastructure-intensive business.  Such as railroads.

                    -5.63, -8.10. Learn about Duverger's Law.

                    by neroden on Tue Sep 07, 2010 at 09:31:20 PM PDT

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                    •  You will have to give me an example (0+ / 0-)

                      Even a owner/operator pays 15.3% self employment tax which is both the employees and the employers portion of the payroll tax less unemployment because you do not qualify for unemployment if you are self employed.

                      Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                      by RMForbes on Wed Sep 08, 2010 at 07:02:30 AM PDT

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                  •  Retail businesses tend to deal in low cost goods (0+ / 0-)

                    But there are business to business operations that resell components (either singly or by combining products in an interesting way) that are a much larger portion of their cash flow than their payrolls. Even something like a car dealership is this way.

                    Fry, don't be a hero! It's not covered by our health plan!

                    by elfling on Tue Sep 07, 2010 at 09:56:19 PM PDT

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                    •  Of course many businesses will have cost (0+ / 0-)

                      components larger than their payrolls but will their payrolls still be more than 3% of their gross receipts. How much more business will the business realize when their customers have 25% more payroll dollars to spend?

                      I'm not sure if the gross business receipts tax would have to be even 3% to cover the revenue currently covered with payroll taxes. Because of the removal of the payroll withholding which removes 25% of gross payroll dollars before they can circulate in the economy, the new tax would automatically increase economic activity. I do not have a way to accurately model this which makes it difficult to settle on a accurate rate required to replace payroll taxes.

                      Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                      by RMForbes on Wed Sep 08, 2010 at 06:57:13 AM PDT

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                      •  What matters is that some businesses (0+ / 0-)

                        after paying payroll, after paying expenses, won't clear 3% of the gross to be able to pay those taxes. Even if the payroll tax goes away. You don't want companies taking out loans to pay their income tax.

                        Fry, don't be a hero! It's not covered by our health plan!

                        by elfling on Wed Sep 08, 2010 at 10:41:20 AM PDT

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                        •  And you still miss the point (0+ / 0-)

                          the current payroll taxes increase the cost of payroll, it's accounted for on the cost side of the ledger. The new tax also is an included cost of doing business and it too is accounted for on the cost side of the businesses ledger. Profits and profit margins are calculated after all costs are removed including the cost of this tax. If the profit margins decrease as they will for some of the larger businesses and big corporations, yes they might need to raise their prices slightly.

                          Every business we deal with and we deal with hundreds, have an average labor cost of about 45%. Some of the larger chain stores have labor cost down around 30%. Some of the smallest operations which out number the larger ones by about 2 to 1, have payroll costs of over 50%, some as high as 60%. Yes the payroll tax only increases the cost of most business by a little over 9% which is about 4% of these businesses gross receipts but their customer will have 25% more available income to spend on their products or services. The payroll dollars will stay circulating in local communities longer because the 25% payroll withholding does not get removed from the economy before it circulates, instead it is removed slowly every time it changes hands. This will rebuild our economy from the ground up, the way economies operate naturally.

                          Really don't mind if you sit this one out. My words but a whisper -- your deafness a SHOUT. I may make you feel but I can't make you think..Jethro Tull

                          by RMForbes on Wed Sep 08, 2010 at 12:27:42 PM PDT

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      •  Um, that analysis is simply wrong (0+ / 0-)

        "Obviously, the single owner/operator like an independent long haul trucker that has a 1 to 1 relationship with gross reciepts and gross profit pays the maximum percentage of their income in payroll taxes."

        Nope nope nope.  Gross receipts taxes gross income, payroll tax on a self-employed person taxes NET income.

        In other words, the gross receipts tax hurts businesses with high non-labor expenses.  Like that truck purchase.

        -5.63, -8.10. Learn about Duverger's Law.

        by neroden on Tue Sep 07, 2010 at 09:29:39 PM PDT

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