Breakdown of Possible Business Tax

They wouldn't lay off the employee. they will continue to conduct business as usual while they are making solid profits.

It's just a boogeyman that the republicans create to serve the corporate interests. It should be obvious..

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if the projected earnings can not be met the usual first casualties are employeees.

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This is actually not as true these days. Most companies are trying to make as much money as possible already so if there's an employee that isn't making profits for them then they would be cut regardless. There's some special conditions to where the employee would generate a net return of 10% under one tax plan and 9% under the other and maybe the required return on investment is 10% so that employee is cut, but employees along these margins are not common, they are exceptions. In these events, the smaller business should be able to take up the slack, with it's lower tax margins.. but it's all theoretical. In theory socialism sucks, in practice it's worked well in some cases, but we're not talking about a big change in tax policy, unless FICA changes.

let me tell you how it works in reality. usually no one really earns what they are worth. if that criteria is tightened even one bit, their will be plenty of people who will lose their jobs either justifiably or unjustifiably.

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I keep reading about how businesses will have to fire people or not expand to keep themselves under 250k profit under a potential future business tax plan. So can someone please break this down?

Company X has a profit of 280k a year. Company X lays off one of their employees that they pay 30k annually to, that includes the $150/month BlueSaver plan through Blue Cross of Louisiana.

That employee obviously generates more than 30k a year in revenue for the company, subsequently the layoff puts Company X under the 250k profit mark.

So how did Company X financially benefit from laying off said employee? And what is Company X's incentive to not expand?

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in all actuality most businesses will not give a frick about the 3% increase in taxes, all increased costs will be passed along to the consumer or be partially absorbed by the company. in the event that increased prices will be passed along to the economy , inflationary pressures will be incurred, in the event of cost absorbtion by the company less money will be available for capital expansion or new hiring.

either way an increase in business taxes wil have an adverse affect on the current us economy

also, this response does not even factor in the risk of currently us operating companies to relocate to foreign countries who offer better corporate tax structure.

well 35-39 % increase would be 10k at a 250,000 profit, so at some point the owner would indeed increase the price of his product or cut cost. just because a business is small and doesnt fit the description of a large corporation, the motive is still the same- maximization of profits. until one has been in that position, and understands the day to day bs, the endless taxation of businesses through permits, property taxes, legal issues licenses and day to day headaches, then they really are not in a position to comment on what they can and cannot afford.

You're looking at this the wrong way. A business is not going to try to stay below the $250K threshold and this is not just about marginal tax rates.

There are other Obama plans that will effect business owners such as lifting caps on payroll taxes the majority of which are employer funded, extending unemployment benefits which will raise employer expenses, forcing employers to pay into a single payer health care system, etc.

A business owner has two options when profitability is effected, raise prices or cut expenses. Don't let the people who say "well, they'll just make a little less for the greater good" fool you. Those reduced margins are going to effect that business owners ability to obtain credit to expand, purchase raw materials and capital goods, make payroll, etc. Cash flow is one of the most important factors in running a business. Those things cascade through our economy quickly.

Now IF a business owner is able to raise his prices without effecting his sales volume, then consumers buying power has been diminished. If he cannot raise prices due to market conditions, expense will be cut which will mean people will directly and indirectly lose their jobs as labor is just about any business's largest expense.

Frankly just Obama as president doesn't concern me nearly as much as those two dimwits Pelosi and Reid with huge majorities behind them. That's where the real danger lies.

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That employee obviously generates more than 30k a year in revenue for the company,

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Obviously why? If that person isn't in sales, that person is most likely not generating any revenue...and if they are in sales, there is no guarantee that he/she is generating that much in revenue.

you are leaving out how self employed people will be forced to pay 15% or close to it in SS taxes as Obama wants to remove the cap. So in addition to getting taxed another 4% or so on that extra income, add another 15% on top of it. So your tax has actually increased nearly 20%.

I post this because I think one day Afreaux will figure out economics:

Increasing the tax rate three percent is not going to do to much to an already established business. They have in most instances maximized their market share or have the credit to borrow money if they see potential in a new or existing market.

It actually makes it harder for a growing business due to cash flow issues. If you are a start-up, you borrow money to buy new equipment and/or hire new employees. A company can be netting $250,000, but if all of that is being used to pay off liabilities they do not have it sitting around to be spent on new equipment/employees. Therefore, increasing the tax rate takes cash from the business and hurts their cash flow.

Cash flow is what is used to grow the economy. Thats why they freaked out with the bailout to make sure business still had easy credit.

Increased taxes hurt cash flow!

Cash flow is an important aspect of operating a business that people forget about.