Some people just don't get it

[macville]

So I had a friend, who is very very liberal, post a KNS article about the new Hall Tax law that was passed and signed by Haslam. I replied that for me, as a business owner, a reduction in Hall Tax is not only fair, but better for me. Of course, another liberal who has no clue what he's talking about replied that what does the Hall Tax have to do with business owners? Well, only that most businesses in TN are stock based, so most businesses can pay out dividends to stock owners if it wishes. Since most small businesses are LLC's or Sub S, this is very important.

Another great comment from this guy, "You don't create jobs, demand does." That's false because some businesses DO create jobs AND demand, not just meet demand (my business does both).

Then he said that any smart accountant can get past the $1250 limit on the Hall Tax by simply paying out as a bonus. I pointed out that you'd still pay 15.2% FICA tax, federal income tax, state business & unemployement tax, and local business tax on that bonus. My wife also just pointed out that bonuses are actually taxed at a higher tax rate than your normal income tax rate, so it's a really bad idea to do it that way if you can pay out dividends.

I honestly wonder if most people have any clue how businesses work at all. Do most employees understand that a business pays an extra 7.6% on all their wages? That they also pay another % in unemployement on all their wages? Or that many businesses pay a % for workers comp on all their wages? Or that a business pays tax on every single piece of equipment used in their business each year? Every machine, desk, computer, chair, etc. owned by the business. Roughly on every dollar a business pays an employee, the business spends at least another $.15-20 in taxes. People have no clue about any of this stuff.

But hey, lazy people and those who keep making bad choices because they are not forced to make good choices need free stuff ya know?!

[btq96r]

2 minutes ago, macville said:

People have no clue about any of this stuff.

I have what could be called a clue about all that stuff, and I still think capital gains should be taxed as regular income.  Certainly capital gains taxes shouldn't be phased out, as that just means revenue will have to go up somewhere else, as we all know the budget numbers aren't taking the hit alone. 

The only exceptions I'd support are for retirement accounts to be treated special (or left alone altogether if the individual doesn't touch them before retirement age), and an aggregate income amount from wages and returns, being under which, capital gains wouldn't apply.

But yeah, tax unearned income just the same as income.  I find it memorizing that our society asks for more in taxes from a paycheck that was earned through labor versus a return that the individual simply had to have an account open to get.

[Pete123]

People don't realize how hard it is to make a business succeed.  Too many act like businesses are money trees.

Politicians talk about the importance of a job for everyone.  My experience as a small business owner is that our government is in the business prevention business much more than they are in the 'help businesses succeed and add jobs' business.

The sad truth is that relative to politicians you are either at the table or on the menu.  Small business owners are so busy building their businesses that they don't have the time and money to make a difference politically, thus putting us 'on the menu'. 

I strongly recommend membership in the National Federation of Independent Businesses.  Not only are they based in TN, but their lobbyist to the State of TN, Jim Brown, is very, very good.  

Membership doesn't cost that much either.  

[10-Ring]

It's very hard to make a business succeed.  I was fortunate enough to have 3 businesses when I was younger and didn't have a family.  It was okay then, I wasn't getting rich by any means but as I grew a family I opted to go to work for someone else in order to have stability.  It was one thing when there wasn't enough money to go around and I had to eat Ramen for a while, it's different when you can't buy things that your kids need.  I miss the flexibility of being self employed more than anything.  You are kind of your own boss but if you have any chance on succeeding then you know that the client is really the boss.  I'm in the process of restarting one of my businesses back up now but it will strictly be a side venture to make a little money doing something that I enjoy doing. 

[Pete123]

1 hour ago, 10-Ring said:

 You are kind of your own boss but if you have any chance on succeeding then you know that the client is really the boss.  

Amen to that brother.  Usually, customers aren't nearly as nice as an employer when they aren't happy.

[macville]

2 hours ago, btq96r said:

I have what could be called a clue about all that stuff, and I still think capital gains should be taxed as regular income.  Certainly capital gains taxes shouldn't be phased out, as that just means revenue will have to go up somewhere else, as we all know the budget numbers aren't taking the hit alone. 

The only exceptions I'd support are for retirement accounts to be treated special (or left alone altogether if the individual doesn't touch them before retirement age), and an aggregate income amount from wages and returns, being under which, capital gains wouldn't apply.

But yeah, tax unearned income just the same as income.  I find it memorizing that our society asks for more in taxes from a paycheck that was earned through labor versus a return that the individual simply had to have an account open to get.

While I can control how much dividends I get through the stock of my company, many people cannot. That makes it very difficult to plan for taxes when your income suddenly goes up due to a good year on the stock market.

Besides that, a 15% tax on all dividends is by far the most fair way to tax anyhow. The government is supposed to treat everyone with equal protection under the law, but hey, if you make more money, you don't get the equal tax rate.  But I also don't believe success should be punished like we currently do with the tax code. But politicians have been really successful in making the masses believe that being successful is somehow evil so they can pick the pockets easier.

Your last statement is not true in my case. I am my business. I go out and make ALL the money for my corporation (which is co-owned with me by my wife) So any dividends I take from my company was earned through my labor. This is the same for many small businesses.

[btq96r]

58 minutes ago, macville said:

While I can control how much dividends I get through the stock of my company, many people cannot. That makes it very difficult to plan for taxes when your income suddenly goes up due to a good year on the stock market.

Besides that, a 15% tax on all dividends is by far the most fair way to tax anyhow. The government is supposed to treat everyone with equal protection under the law, but hey, if you make more money, you don't get the equal tax rate.  But I also don't believe success should be punished like we currently do with the tax code. But politicians have been really successful in making the masses believe that being successful is somehow evil so they can pick the pockets easier.

Your last statement is not true in my case. I am my business. I go out and make ALL the money for my corporation (which is co-owned with me by my wife) So any dividends I take from my company was earned through my labor. This is the same for many small businesses.

Planning for taxes is pretty simple; set aside a bit more than what you estimate you'll owe in a worst case scenario as it comes in.  I was my own business for a while myself (sub-contractor on DoD contracts) and I had to handle my money using big boy rules.  I was never caught unprepared when my accountant gave me the damage report once he went over all my 1099s and expense spreadsheets.

You're mixing in business taxes, which are separate from capital gains tax.  I'm talking as an individual filer. Not sure if you have a S-Corp or LLC set up, but for this discussion, you and your business are not the same entity tax wise.  If you're taking disbursements from your business as a supplement to your income once the books are even, sorry, it's tax time.  I'd be more sympathetic in a discussion at allowing business revenue to be taxed less if its put back into the business, but once it hits an individual as income (regular or bonus), or investment returns, it needs to be taxed.

Equal protection isn't a tax issue, as taxes aren't punitive (legally anyway).   I don't believe that someone who is successful should be punished, but I do think they can be assessed at a higher rate and we'll all be better for it.

[Chucktshoes]

[macville]

5 minutes ago, btq96r said:

Planning for taxes is pretty simple; set aside a bit more than what you estimate you'll owe in a worst case scenario as it comes in.  I was my own business for a while myself (sub-contractor on DoD contracts) and I had to handle my money using big boy rules.  I was never caught unprepared when my accountant gave me the damage report once he went over all my 1099s and expense spreadsheets.

You're mixing in business taxes, which are separate from capital gains tax.  I'm talking as an individual filer. Not sure if you have a S-Corp or LLC set up, but for this discussion, you and your business are not the same entity tax wise.  If you're taking disbursements from your business as a supplement to your income once the books are even, sorry, it's tax time.  I'd be more sympathetic in a discussion at allowing business revenue to be taxed less if its put back into the business, but once it hits an individual as income (regular or bonus), or investment returns, it needs to be taxed.

Equal protection isn't a tax issue, as taxes aren't punitive (legally anyway).   I don't believe that someone who is successful should be punished, but I do think they can be assessed at a higher rate and we'll all be better for it.

The problem is for personal taxes, it's not easy to figure what exactly your dividends are going to be. Sometimes companies make a good profit, but don't spit out much in dividends due to other business situations and sometimes they do. It's hard to plan for that with how our economy bounces around like a ping pong ball. Heck, last year TN had a huge windfall in sales tax revenue that they were not expecting. If a government can't see that coming, how is the common person supposed to know if their stock is going to pay no, little, or a lot of dividends?

You can try and separate me from my business all you want, but in reality I am the owner of the corporation and the sole money maker for it. Yes, it's a separate entity, but it's still owned and run by me-it's all my money period. It makes far more sense tax wise at the end of the year to take dividends instead of upping my salary and paying FICA, state unemployment, and federal income taxes. The flat 15% federal is not great, but that's lower automatically than just the FICA by itself. But when you start adding in the Hall tax, it starts to become much more unattractive. Plus, why should the state single out ONE form of income for taxation? If I pay hall tax on dividends I still pay sales tax on that money that's already been taxed!

How is telling someone, "because you make more money we are going to treat you differently" not a punishment? I am in the mind that taxation is thief, so if we are going tax people, it better be very little and for a darn good reason. When looking at all of this, I consider the golden rule of "treat others how I want to be treated." I don't want to be taxed very much at all, so I don't want to do the same to to others-no matter their income level.

[quietguy]

Quote

Plus, why should the state single out ONE form of income for taxation? 

That is the issue that I have with the Hall tax.  

Edited May 22, 2016 by quietguy

[Spiffy]

9 hours ago, macville said:

Do most employees understand that a business pays an extra 7.6% on all their wages? That they also pay another % in unemployement on all their wages? Or that many businesses pay a % for workers comp on all their wages? Or that a business pays tax on every single piece of equipment used in their business each year? Every machine, desk, computer, chair, etc. owned by the business. Roughly on every dollar a business pays an employee, the business spends at least another $.15-20 in taxes. People have no clue about any of this stuff.

But hey, lazy people and those who keep making bad choices because they are not forced to make good choices need free stuff ya know?!

They do if they are smart. Benefits are sometimes more important than take home wages.

[Mindless-Focus]

I got as far as "you don't create jobs, demand does" and on a scale of 1 to 10, I can't even. Most manufacturing jobs fill both roles. There are others. I'm mean, what?