The Fiscal Cliff

[FMCoug]

As a side comment to you comment in your post above mentioning consultants and the tax rate affecting your plans. Warren Buffet made one of the most idiotic statements a person of his financial knowledge has ever made.

He said investors and business people don't make decisions based on taxes. He has been out of the real world too long.

Exactly my point. In my case right now, I can spend money on marketing to get new clients, hire more employees, take on the associated risks (bad hires, clients that don't pay) and headaches (managing more people, payroll takes, etc.) and if it all works out, I will then be "rich" and the government will take my "excess".

Or I can stay where I'm at and make a very comfortable income that is well below the magic number.

It doesn't take a rocket scientest to make that decision. I am incentivized to stay where I'm at. And not hire people. Last I heard unemployment was a problem in this country.

[creekster]

My wife has a small consulting business. She was thiking of expanding by taking on a new contract but, after penciling it out and allowing for the uncertainty in the tex environment she decided against it for now.

Likewise, I have a large client who has been sitting on a multi-billion dollar pile of cash. They have just decided to spend it overseas. This will not technically count as shipping jobs there, of course, but that is exatcly what is happening, and in a more direct way than anything Romney ever did.

[Clark Addison]

Defining wealth based on income is ridiculous. It was mentioned above but if they really want this to be "fair", they should index it based on location. 250K in NYC vs. 250K in UT or TX are entirely different things.

Also for what it's worth anecdotally, I have talked to several other owners of small consulting firms like mine and it seems to be universally accepted that growing our businesses is kind of pointless right now if the gov't is just going to commandeer any profits over 250K. Why take the risk?

I am a fan of low taxes, myself. Having said that, from 1993 to 2000 the top marginal rate was 39.6%. I don't remember a lot of folks during that time shutting things down and not trying to start and grow businesses. In fact, to the contrary, it was one of the largest periods of new business growth we have had (for better or worse). Am I missing something? What would be different about this time that people would decide they don't want more money anymore?

[All-American]

I am a fan of low taxes, myself. Having said that, from 1993 to 2000 the top marginal rate was 39.6%. I don't remember a lot of folks during that time shutting things down and not trying to start and grow businesses. In fact, to the contrary, it was one of the largest periods of new business growth we have had (for better or worse). Am I missing something? What would be different about this time that people would decide they don't want more money anymore?

In fact, why not raise ALL the rates to Clinton-era levels? At least that would actually make a dent in revenue.

[FMCoug]

I am a fan of low taxes, myself. Having said that, from 1993 to 2000 the top marginal rate was 39.6%. I don't remember a lot of folks during that time shutting things down and not trying to start and grow businesses. In fact, to the contrary, it was one of the largest periods of new business growth we have had (for better or worse). Am I missing something? What would be different about this time that people would decide they don't want more money anymore?

In fact, why not raise ALL the rates to Clinton-era levels? At least that would actually make a dent in revenue.

This. My problem with this is the concept of redistribution of wealth from the "rich" who make 250K or more. With S-Corps and other pass-through entities, that includes an awful lot of small businesses who don't have deep pockets and where investing in growth has extremely high risk.

[Uncle Ted]

My wife has a small consulting business. She was thiking of expanding by taking on a new contract but, after penciling it out and allowing for the uncertainty in the tex environment she decided against it for now.

I was thinking hiring a new employee for my business. For the same reasons I have decided against it.

[byu71]

I am a fan of low taxes, myself. Having said that, from 1993 to 2000 the top marginal rate was 39.6%. I don't remember a lot of folks during that time shutting things down and not trying to start and grow businesses. In fact, to the contrary, it was one of the largest periods of new business growth we have had (for better or worse). Am I missing something? What would be different about this time that people would decide they don't want more money anymore?

It is a decent argument. The only thing I can think of was the economy and environment were different. We weren't just coming off of a very scary time. A lot less hesitency in thinking about risk. Major companies going under wasn't thought about much. Easy money at the end was being made (on paper) with internet start up companies that really didn't have much substance. We weren't looking at massive debt.

If someone has what they think is a can't miss idea, yea I think the tax rate hike won't stop em. However, in this environment a lot less people believe such opportunities exist. In my career I have never seen people with a lot of wealth so cautious.

That being said, the folks who will be affected by the hikes would feel a lot better if they saw the other side of the equation, spending, being seriously addressed.

I have heard over and over again from clients, I would be OK with paying more taxes if I knew the governement wasn't just going to spend it and also continue to borrow to spend even more.

[Goatnapper'96]

That being said, the folks who will be affected by the hikes would feel a lot better if they saw the other side of the equation, spending, being seriously addressed.

I have heard over and over again from clients, I would be OK with paying more taxes if I knew the governement wasn't just going to spend it and also continue to borrow to spend even more.

This is the issue. I would think that what you heard from Romney concerning the "47%" is a perspective within the investor class that reflects more of a legitimacy crisis. I hope it isn't true and I am not yet ready to concede that it is, but the have's seem more and more inclined to take their balls and go home.

I don't think that the investor class is unreasonable about paying taxes, but I think many had underlying reservations about President Obama. I hope he is posturing for negotiation purposes because if his plans, as the public presentations indicate they to be, are really his serious ideas then it is not a good thing for economic growth. I don't think taxes independently have a negative impact on growth as much as losing faith in either the competency of government or the direction the government wants to go. Because if what has been presented is a true reflection of where Obama wants to go then the investors feel that their underlying reservations are being proven correct.

[Uncle Ted]

Who said the following?

What we’ve said was give us $1.2 trillion in additional revenues, which could be accomplished without hiking tax rates, but could simply be accomplished by eliminating loopholes, eliminating some deductions, and engaging in a tax reform process that could have lowered rates generally while broadening the base.

The Republicans and Rmoney?
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Wrong!


[YOUTUBE]8Pp2HaiGh_U[/YOUTUBE]

I guess the math does work but only when the dems say it does.

[FMCoug]

I was thinking hiring a new employee for my business. For the same reasons I have decided against it.

I find it very interesting juxtoposing these very real anecdotes against the hypotheticals posited by the other side.

Our industry (small/solo IT consultants) is the perfect example of what is going on. I have talked to a bunch of others in my shoes and the consensus seems to be to wait and see.

[Portland Ute]

Poorly worded is my trademark. Either because I am not good at word construction or for some reason I do it on purpose. I haven't figured out which it is.

I define a person as wealthy based on his Net Worth which is Assets less liabilities (I know you know that, but someone might not). I don't define it on their income.

Certainly someone who earns $250,000 has a better shot at becoming wealthy than someone who earns $50,000, but there is no guarantee because of their spending habits.

The wealthiest people, the billionaires and millionaires, won't be the ones that get taxed. They might. But they could quit working, live comfortably and show no income.

OTOH, someone with little to no net worth but making 275K will get killed.

Makes perfect sense.

To me, it seems as if maybe the millionaires and billionaires are trying to keep those most likely to break into their "club" down. They see the hermit crab climbing the side of the sand pail and this is their way of flicking the claws from the side of the pail to send the aspiring crab plunging back into the bottom of the bucket.

[Portland Ute]

This. My problem with this is the concept of redistribution of wealth from the "rich" who make 250K or more. With S-Corps and other pass-through entities, that includes an awful lot of small businesses who don't have deep pockets and where investing in growth has extremely high risk.

[byu71]

The wealthiest people, the billionaires and millionaires, won't be the ones that get taxed. They might. But they could quit working, live comfortably and show no income.

OTOH, someone with little to no net worth but making 275K will get killed.

Makes perfect sense.

To me, it seems as if maybe the millionaires and billionaires are trying to keep those most likely to break into their "club" down. They see the hermit crab climbing the side of the sand pail and this is their way of flicking the claws from the side of the pail to send the aspiring crab plunging back into the bottom of the bucket.

Perhaps you are being sarcastic. The nature of my business has me associating with these people of whom you speak, well not billionaire's. Not one of them shows an inkling of what you suggest. As a matter of fact 4 of them started small businesses from scratch in the 80's. Along with them they treated people fair enough that a number of their associates also became millionaire's.

There definitely are some SOB rich people. Most aren't though, IMHO.

[Portland Ute]

Perhaps you are being sarcastic. The nature of my business has me associating with these people of whom you speak, well not billionaire's. Not one of them shows an inkling of what you suggest. As a matter of fact 4 of them started small businesses from scratch in the 80's. Along with them they treated people fair enough that a number of their associates also became millionaire's.

There definitely are some SOB rich people. Most aren't though, IMHO.

I'm not talking about your clients.

I'm talking about the super SOBs like Soros, Buffet, etc. The ones that seem to be pushing for this tax on the "wealthy."

[Portland Ute]

Perhaps you are being sarcastic. The nature of my business has me associating with these people of whom you speak, well not billionaire's. Not one of them shows an inkling of what you suggest. As a matter of fact 4 of them started small businesses from scratch in the 80's. Along with them they treated people fair enough that a number of their associates also became millionaire's.

There definitely are some SOB rich people. Most aren't though, IMHO.

BTW, do you disagree with me about who will be hurt the most?

It seems to me that the "working rich" will be the ones that are castrated and not the "wealthy".

IMO, rich is about income. Wealth is accumulation of assets.

The "working rich" are going to be cut off at the knees and the hope of "wealth" will become a much more difficult thing to attain.