I’ve always been in favor of tax cuts… Probably anyone who’s seen the Carter years up close, and felt relief when the Californian took over, knows what I mean… Filling out tax forms used to be insane. The IRS reimbursing mileage costs up to 38 cents per mile when gas was under a dollar a gallon… People were buying houses for tax shelters, opening businesses to squash the amount of profit on their books, lavish meals and entertainment costs were allowed for the “cost of doing business..” All you had to do was save all your receipts for a year and even though you were slated to pay taxes out the gazoo, the allowances and deductions let you slide with hardly a paper cut of financial pain. And stories circulated that giant, multinational corporations like Dupont, got away with paying NO TAX on the millions they were making….

Those times were good… On the average middle class wage, a person could pay a car off in 3 years, pay off his house in 20, and have enough money to spend on living, without having to borrow a penny…..

To do that today, with expenses as high as they are, my calculations show the average wage would need to be around $85,000 a year… Of course a lot of families do that now… but with two people working….

So, how do we get corporate America, who by now is used to pinching out $45,000 a year, to suddenly pay ones true worth, $85,000 a year? Simple. We do it by doing just what we did before…. when that was the norm…

Let’s assume my name is Charlie Copeland. I own a print shop that prints things… I have five assistants, randomly named Donviti, Jason, Pandora, Cassandra, and Nancy. (Just came up on a random generator; no inference to reality is intended)

I the great and honorable Charlie Copeland pay each of them, (since I’m fair) $50,000 a year…. They do great work, and I respond with kindness. That wage is currently the average wage of Dover which is in the middle of the state, so therefore it is representative of wages from top to bottom…

That makes my payroll $250,000 a year….. Of course I pay a cut of Social Security and Medicare… amounting to an additional $3100 and $720 per each employee, so combined, my total payroll will be: $269,100…….

This was a soft year.. My sales were only $1,764,000… (despite my awards!) … My percentage outlayed to payroll is thereby $269,100 divided by $1,764,000 or close to…. 15%… … pretty darn good… 🙂

My other costs were roughly $540,000 allowing me to clear before taxes, $809,000….. And that’s because I do a good job. Most other printers are behind the curve of technology, and have a lot higher costs, associated with lower sales…

Now.. Taxes…

On a profit of $809,000 by the books, as a personal owner (not a corporation), I “should” pay the amount...$260,464….. in Federal Taxes and $55,000 in state of Delaware taxes… and since I’m located in Wilmington I also pay the 1.5% City Wage Tax of … $10,112….

My taxes before deductions would therefore come to a total of $325,576… if you extend this to what I made, … it comes out to $809,000 minus my taxes of $325,576…. and poof: I’m walking with $483,424 … Sheesh… That’s all? How’s a guy supposed to make a living?… So you see, it really pisses me off when Tom Sharpe hires a flunky at $120,000 to do nothing important except use up some of my money, which I’m otherwise gladly willing to pay, if it is going to something decent and important…

And you want to WHAT? RAISE MY TAXES?

Yes, Sir! We want to RAISE YOUR TAXES…..

And so my taxes get raised…. but you allow me to write off physical capital costs associated with expansion, if they justifiably create new jobs… If I expand my business, I can write off the costs of building…

The new tax rates are 40% for Federal, 7.5%for state, and Wilmington stays the same ate 1.5%… My Federal taxes become..$281,956 state taxes $59,118.and the city wage tax of $10,112…giving me a burden of….. $ 351,186 and leaving me with an after-tax amount prior to deductions of….$ 457.814…. I lost $25,610 to tax increases… Woe is me…

So in preparation for next year I pull out my calculator and start figuring…
What happens if I hire one more person? or maybe two? I won’t bore you with the details but if I did hire someone at $50,000…. with my income being depleted by their salary and payroll taxes, my income used for the tax tables would now be $755,180 for one employee, and .$701,380 for a 2nd additional employee of the two who I will name Al Mascitti and Rick Jensen, again names just randomly generated…

$755,180 minus the Fed’s $252,986, the state’s $55,082, and Wilmington’s $11,327, …..I pay $319,395 and walk with. .$435,785.

$702,380 minus the Fed’s $239,308, the state’s $51,112, and Wilmington’s $10,535…. I pay $300,955 and walk with..$401,425….

$457814, $435785, $401425…. That is the breakdown of how much each employee actually costs me when the Fed tax rate jumps 5%, the state tax rate climbs 0.55%, and the Wilmington tax is flat… As you can see, hiring one employee after diffusing through the complicated procedure, will only cost $22,029, and hiring an additional employee, costs me $34,360…. yet those two employees will each receive a salary of $50,000 as well as my paying the payroll taxes of $3820-…..

But it is still a loss… Boo, hoo, hoo, I’m calling Boehner and McDonnell… Before the tax cuts expired I was walking with $483,424… Now, thanks to Democrats and that astutely clever kavips guy bursting the Republican bubble, I’m walking with only $401, 425… a loss of $82,000…

But wait a minute… I just hired two people…. And I know that if person number one takes on a certain project, I could land a contract for $900,000 and that with person number 2, I could persuade one of Delaware’s largest business to hire me for another $900,000 contract… Of course I would get roughly 50% of that increase because of the taxes, but it is still much more than I would have made if taxes hadn’t been raised…

I hired because it was better to keep that money in my business, instead of giving it out to the Fed, the state, and Mayor Baker’s kingdom…

What was I going to do with that additional income before the tax cuts kicked in and threatened to take it away? Probably I would have Invested it in colored pieces of paper called stocks, where it would do not one bit of good to anyone but my broker…..

So you see, raising taxes will bring jobs… It will make the wealthier even wealthier… How do I know? Because that’s what the nineties were all about…. ..

Raising taxes makes good economic sense.