Republican congressman bemoans making $600k per year

[trysail]

Wealth — Any income that is at least $100 more a year than the income of one's wife's sister's husband.

- H.L. Mencken​

 

[mercury14]

I understand where you are coming from - but why should he take home less? In all probability he'd lay off some employees to make up for the shortfall so that there continues to be enough money to reinvest, open up the next store, modernize etc etc.

The salary as a congressman really does not have anything to do with it. I mean you can make it part of the conversation a apersonal attack on the guy to try and make the case that 'enough is enough' or something, if you want, but it does not have anything to do with the impact of taxes on small businesses.

No, taxes have little to do with how many people businesses employ. Employers hire when consumer demand rises and they want to meet that demand.

You can set this guy's business tax rate to 0% if you want. He still wont hire anyone because he's got UPS Stores which are impacted by consumers not shipping as much in a sluggish economy.

Or set his tax rate to 0% and then give him a $250,000 credit. He'll just pocket the money and not hire anyone since he's already meeting customer need with his current staffing.

 

[BoyNextDoor]

No, taxes have little to do with how many people businesses employ. Employers hire when consumer demand rises and they want to meet that demand.

Honestly that is not the case. I can tell you for a fact that my company will lay off people, there will be a RIF (reduction in force - a layoff), if taxes go up. It is not some more evidence of corporate greed either. It is simple fact of accounting and the GAAP. Most businesses are leveraged to some degree. To manage debt, a business has to enter into a covenant with the banks that dictates the the operating expenses that can be carried against a debt ratio. it is the same principal as a home loan and your debt to income ratio.

If taxes go up and the business is at risk of breaking the covenant w/ the bank then the business has to adjust. The biggest line on the balance sheet for virtually any business is labor cost - and so jobs are lost. The alternative is to break the covenant and the bank has the right to call the loan in full, and the business goes bankrupt.

 

[mercury14]

Honestly that is not the case. I can tell you for a fact that my company will lay off people, there will be a RIF (reduction in force - a layoff), if taxes go up. It is not some more evidence of corporate greed either. It is simple fact of accounting and the GAAP. Most businesses are leveraged to some degree. To manage debt, a business has to enter into a covenant with the banks that dictates the the operating expenses that can be carried against a debt ratio. it is the same principal as a home loan and your debt to income ratio.

If taxes go up and the business is at risk of breaking the covenant w/ the bank then the business has to adjust. The biggest line on the balance sheet for virtually any business is labor cost - and so jobs are lost. The alternative is to break the covenant and the bank has the right to call the loan in full, and the business goes bankrupt.

Wait a minute. I thought the line from the right was that businesses don't pay taxes, they pass it all on in the form of price increases.

Now the story I'm hearing is that this is not the case? Which is it?

 

[Powertone]

I'd never want to be rich...who needs the bullshit from the Left that comes with it.

 

[BoyNextDoor]

Wait a minute. I thought the line from the right was that businesses don't pay taxes, they pass it all on in the form of price increases.

Now the story I'm hearing is that this is not the case? Which is it?

I can't speak for all the "right". I am a Democrat, admittedly a conservative Democrat (Socially liberal/fiscally conservative). I am just trying to tell you how it works in the world in which I live and the balancing act we have to do to manage cash flow, make payroll and try and grow the business.

Prices are relatively inelastic. Costs for the most part just cannot be "passed on". Growth is mostly from acquiring more market share in the form of new customers, and for the most part that means providing more value to the customer. That in and of itself puts a lot of downward pressure on prices.

 

[BoyNextDoor]

Anyway - Just trying to let you know that they guy who owns a few small businesses that employs a bunch of people is not all bad because he is successful. It is important to hear his point of view because it is valid and is part of what needs to be factored into the policy decisions that are made, because there are consequences - good and bad - on both sides of the equation.

I liked that he was candid and truthful, even if a lot of people do not like the truth of it, for whatever reason.

 

[mercury14]

I can't speak for all the "right". I am a Democrat, admittedly a conservative Democrat (Socially liberal/fiscally conservative). I am just trying to tell you how it works in the world in which I live and the balancing act we have to do to manage cash flow, make payroll and try and grow the business.

If you're saying tax increases will lead a company to lay off employees and consequently diminish their capacity to meet demand for their product, no they will not do that. That would lead to further decrease in profits and a further decrease in the company's ability to meet it's debt responsibility.

If you're saying that the company will lay off employees and still be able to meet demand with remaining staff then your point doesn't mean much since the company was overstaffed to begin with. In that case they should have laid off unnecessary staff even without a tax increase.

Prices are relatively inelastic. Costs for the most part just cannot be "passed on". Growth is mostly from acquiring more market share in the form of new customers, and for the most part that means providing more value to the customer. That in and of itself puts a lot of downward pressure on prices.

Pretty much agree.

 

[unregistered]

 

[mercury14]

Anyway - Just trying to let you know that they guy who owns a few small businesses that employs a bunch of people is not all bad because he is successful. It is important to hear his point of view because it is valid and is part of what needs to be factored into the policy decisions that are made, because there are consequences - good and bad - on both sides of the equation.

I liked that he was candid and truthful, even if a lot of people do not like the truth of it, for whatever reason.

Nobody is saying this guy is bad. Or evil.

We're saying that if his take-home tax rate goes from 35% to 39% that he'll be pretty okay living on $550 million per year instead of $575 million.

Compared to a working-poor family carrying debt and sweating every penny of its mortgage payment each month, saving almost nothing despite working 40 hours per week... this guy is more suited to a tax hike.

Would you agree?

 

[mercury14]

This is what they want. They want to kill your incentive to be the best you can be, They want us all to be equally miserable, and dependent on them.

Name one person in the entire history of America who stopped working because of tax rates.

If you can't then admit you're lying again.

 

[BoyNextDoor]

If you're saying tax increases will lead a company to lay off employees and consequently diminish their capacity to meet demand for their product, no they will not do that.

Ok - so then faced with breaking a covenant and risking a called load due to an increase in taxes tipping the balance sheet .... What will a company do if not look to the labor line to reduce operating expenses?

 

[BoyNextDoor]

Nobody is saying this guy is bad. Or evil.

We're saying that if his take-home tax rate goes from 35% to 39% that he'll be pretty okay living on $550 million per year instead of $575 million.

Compared to a working-poor family carrying debt and sweating every penny of its mortgage payment each month, saving almost nothing despite working 40 hours per week... this guy is more suited to a tax hike.

Would you agree?

Sure, agreed. Now take your line of reasoning to the next step. What does the guys do faced with a tax increase? How does he react? Does he necessarily take a loss to his standard of living?

 

[mercury14]

Ok - so then faced with breaking a covenant and risking a called load due to an increase in taxes tipping the balance sheet .... What will a company do if not look to the labor line to reduce operating expenses?

Well let's put it out there that we're not talking about a common situation. Few companies would be looking at default/bankruptcy if their marginal rate increased a very small percentage.

What we're talking about are companies that are looking at loan default while being profitable at the same time. That's a REALLY odd scenario. Do you have any examples of this actually happening? (Other than companies with enormous, self-consuming debt).

As far as reducing labor or not, I stand by my previous post. Assuming reducing labor reduces capacity to meet market demand, thus reducing profits and ability to meet loan obligations, no company would choose to do that.

 

[mercury14]

Sure, agreed. Now take your line of reasoning to the next step. What does the guys do faced with a tax increase? How does he react? Does he necessarily take a loss to his standard of living?

He has three options:

1) Drop his standard of living from $574k to $500k per year.

2) Invest $5.676 million into his businesses instead of $5.7 million. Note that assuming business is going to be profitable, reducing his reinvestment may cause #1 to partly happen anyway.

3) A combination of the above.



But if we're assuming his business will be profitable then doing #2 means less money for the guy. Therefore #1 is likely going to be the most profitable avenue in the long run, no?

 

[unregistered]

 

[BoyNextDoor]

He has three options:

1) Drop his standard of living from $574k to $500k per year.

2) Invest $5.676 million into his businesses instead of $5.7 million. Note that assuming business is going to be profitable, reducing his reinvestment may cause #1 to partly happen anyway.

3) A combination of the above.



But if we're assuming his business will be profitable then doing #2 means less money for the guy. Therefore #1 is likely going to be the most profitable avenue in the long run, no?

It is just not that simple

The $5.676M in your example is operating expenses, not investment. It is the payroll, leases on stores, employer contribution to healthcare, 7.5% contribution to social security, inventory ... all the basics to provide the service - ie. "overhead". The people that will get RIF'd out are the mid level managers, accountants, etc. and those that remain just have to work harder to take up the slack. That is why American workers are the most productive in the world.

#1 is the whole point and that is the line that will get cut last!

 

[mercury14]

We've never had a President committed to the destruction of the American way in history until now, so history is still unfolding, naive enabler.

So you can't name one person, liar?

 

[busybody..]

He has three options:

1) Drop his standard of living from $574k to $500k per year.

2) Invest $5.676 million into his businesses instead of $5.7 million. Note that assuming business is going to be profitable, reducing his reinvestment may cause #1 to partly happen anyway.

3) A combination of the above.



But if we're assuming his business will be profitable then doing #2 means less money for the guy. Therefore #1 is likely going to be the most profitable avenue in the long run, no?

here you have all that is wrong with our current "thinking"

instead of encouraging GROWTH

the CRAZIES encourage contraction

 

[mercury14]

#1 is the whole point and that is the line that will get cut last!

Why?

How did he come to a $574k per year personal income in the first place? Why he never change that amount? Especially if not changing it means a reduction in his business capital?

 

[RobDownSouth]

So you can't name one person, liar?

He hasn't finished googling for an editorial to support his position yet.

 

[unregistered]

 

[JAMESBJOHNSON]

Lincoiln said it clearly long ago, ITS THE OLDEST FORM OF TYRANNY KNOWN TO MAN, THE PROPOSITION THAT YOU SWEAT AND TOIL FOR YOUR DAILY BREAD, AND I GET TO EAT IT.

When you examine the details closely what you see is how our government is designed and organized to devour the daily bread of its common people, and liberals and sundry cripples are its slop carriers.

 

[JohnnySavage]

Catching up on the thread, let me offer some facts that might get this back on track.

1) We are (were) talking about personal income, not corporate income.
2) If you want to talk about corporate income, the taxes are assessed on profits not gross receipts. His corporation could eliminate all taxes by reinvesting all the "left over" money back into the business
3) If we are talking about his personal income, he could reduce his salary to the point the proposed "extra" taxes won't hit him. If he owns the company, the money is still his, it's just left in the business instead of being given to him in the form of a salary.


It's also relevant to note, that an LLC is a pass-through entity for tax purposes. Most of the expenses "normal" people pay from their salary are paid by the LLC for the owners, which also reduces the personal income taxes. Johnny's life is organized as an LLC and almost nothing is in his name.

 

[Very_Bad_Man]

No, it doesn't. You just think it does. I wasn't talking about taxes or politics, I was talking about a nearly universal attitude towards the rich that has recently become stronger due to a variety of factors.
You on the other hand think it's new and only about taxes.

I ignored him because I felt he was being intentionally dense for the sake of argument