Bonam Posted August 31, 2011 Report Posted August 31, 2011 (edited) Except that it isn't. Only about 30 - 33% of the Canadian economy is taken up by taxes at all levels. 50% is very inaccurate. He means each extra dollar. Marginal tax rates (federal + provincial together) can certainly be 50% or close to it once you're already in the highest bracket. That being said, for someone starting a small business, there are many ways around just having to pay 50% on any extra income, there are plenty of tax benefits available to small businesses and their owners. Edited August 31, 2011 by Bonam Quote
dre Posted August 31, 2011 Report Posted August 31, 2011 Iv owned and operated businesses all my life and also worked for a number of other peoples businesses, and from what I can tell tax policy has very little effect unless its extreme in either direction. Quote I question things because I am human. And call no one my father who's no closer than a stranger
Bonam Posted August 31, 2011 Report Posted August 31, 2011 Iv owned and operated businesses all my life and also worked for a number of other peoples businesses, and from what I can tell tax policy has very little effect unless its extreme in either direction. Well, the risk argument is valid. Consider this simplified analysis... say you can start a business and expect to invest $1 million in it over the next 10 years. If you succeed, lets say you earn $2 million before tax from the business over that timeframe. If you fail, you lose your $1 million investment. If your tax rate on income from the business is 0%, you need a 50% chance of success for starting the business to be statistically breakeven (50% chance of -1 mil, 50% chance of +1 mil, net: 0). If you think your chance of success is greater than 50%, you'll start the business. Otherwise, it's not worth it. However, if your tax rate is 50%, you need to have a 67% chance of success for it to make sense to bother trying (67% chance of +500k, 33% chance of -1 mil, net: 0). If your tax rate is 90%, you need to be more than 91% confident of succeeding for it to make any financial sense (91% chance of +100k, 9% chance of -1mil, net: 0). As the tax rate rises, you need a progressively higher confidence level in the success of your business venture for it to be worth taking the risk. Quote
Remiel Posted August 31, 2011 Report Posted August 31, 2011 Well, the risk argument is valid. Consider this simplified analysis... say you can start a business and expect to invest $1 million in it over the next 10 years. If you succeed, lets say you earn $2 million before tax from the business over that timeframe. If you fail, you lose your $1 million investment. If your tax rate on income from the business is 0%, you need a 50% chance of success for starting the business to be statistically breakeven (50% chance of -1 mil, 50% chance of +1 mil, net: 0). If you think your chance of success is greater than 50%, you'll start the business. Otherwise, it's not worth it. However, if your tax rate is 50%, you need to have a 67% chance of success for it to make sense to bother trying (67% chance of +500k, 33% chance of -1 mil, net: 0). If your tax rate is 90%, you need to be more than 91% confident of succeeding for it to make any financial sense (91% chance of +100k, 9% chance of -1mil, net: 0). As the tax rate rises, you need a progressively higher confidence level in the success of your business venture for it to be worth taking the risk. Who but the very wealthy start businesses when they believe their chance of at least breaking even is less than 67%? Quote
Hydraboss Posted August 31, 2011 Report Posted August 31, 2011 Who but the very wealthy Not me. I'm certainly not "very wealthy", but the intention was to use the leverage that I do have to create a business and jobs. Because I'm VERY selfish. More jobs = more cash for me. But the risk of losing what I have was simply not worth it. Maybe Warren Buffet can afford to lose on something like this, but I (and my family) can't. The reward would have to be substantial for me to chance it. Quote "racist, intolerant, small-minded bigot" - AND APPARENTLY A SOCIALIST (2010) (2015)Economic Left/Right: 8.38 3.38 Social Libertarian/Authoritarian: 3.13 -1.23
Bonam Posted August 31, 2011 Report Posted August 31, 2011 Who but the very wealthy start businesses when they believe their chance of at least breaking even is less than 67%? You realize that over 50% of people who try to start up a business fail, right? That suggests average chances of success are below 50%, not above 67%. People undertake substantial risk whenever they invest in a start up business. Quote
dre Posted August 31, 2011 Report Posted August 31, 2011 Well, the risk argument is valid. Consider this simplified analysis... say you can start a business and expect to invest $1 million in it over the next 10 years. If you succeed, lets say you earn $2 million before tax from the business over that timeframe. If you fail, you lose your $1 million investment. If your tax rate on income from the business is 0%, you need a 50% chance of success for starting the business to be statistically breakeven (50% chance of -1 mil, 50% chance of +1 mil, net: 0). If you think your chance of success is greater than 50%, you'll start the business. Otherwise, it's not worth it. However, if your tax rate is 50%, you need to have a 67% chance of success for it to make sense to bother trying (67% chance of +500k, 33% chance of -1 mil, net: 0). If your tax rate is 90%, you need to be more than 91% confident of succeeding for it to make any financial sense (91% chance of +100k, 9% chance of -1mil, net: 0). As the tax rate rises, you need a progressively higher confidence level in the success of your business venture for it to be worth taking the risk. Youre only looking at taxes as a liability, and youre ignoring the fact that businesses get a mountain of serivces for the taxes they pay. Lower tax rates = less services, less modern infrastructure, etc. Youre not looking at all the things businesses get for paying those taxes. A literate pool of workers... roads, bridges, highways, shipping, ports, airports. Turns out these things are a boon for businesses, and that businesses tend to do the best in places with tax rates high enough to maintain a modern stable society. If your tax rate on income from the business is 0%, you need a 50% chance of success for starting the business to be statistically breakeven (50% chance of -1 mil, 50% chance of +1 mil, net: 0). If your tax rate is zero you have almost no chance to succeed. You are operating in an undeveloped country with an illiterate population... probably a basic agrarian economy if that. Theres probably widespread poverty and civil unrest and your competition can just kill you for marketshare. Successful businesses startups might include "Marauding Gangs". Like I said. I just really dont think it makes a big diference unless tax rates drift close to zero or close to 100%. Some of the most robust economic growth in history happened in the US between WW2 and 1970, and the top marginal rate was up around 70% for much of the time. People who think entrepreneurs will just take wage jobs if the tax rates are relatively high underestimate the profit motive, and greed. Quote I question things because I am human. And call no one my father who's no closer than a stranger
Bonam Posted August 31, 2011 Report Posted August 31, 2011 (edited) Youre only looking at taxes as a liability, and youre ignoring the fact that businesses get a mountain of serivces for the taxes they pay. Lower tax rates = less services, less modern infrastructure, etc. Youre not looking at all the things businesses get for paying those taxes. A literate pool of workers... roads, bridges, highways, shipping, ports, airports. Turns out these things are a boon for businesses, and that businesses tend to do the best in places with tax rates high enough to maintain a modern stable society. I realize that certain government services can be beneficial to business. But for the individual entrepreneur evaluating his own risk/reward for initiating a given business venture, the reality is that government services will remain unaffected whether or not he starts the business or not. So what matters for his calculation is to what extent taxes will reduce his potential rewards. Edited August 31, 2011 by Bonam Quote
dre Posted August 31, 2011 Report Posted August 31, 2011 (edited) I realize that certain government services can be beneficial to business. But for the individual entrepreneur evaluating his own risk/reward for initiating a given business venture, the reality is that government services will remain unaffected whether or not he starts the business or not. So what matters for his calculation is to what extent taxes will reduce his potential rewards. What matters is if he thinks theres demand for his products or services. Taxes are environmental, and his competitors pay them too. If a person thinks there is healthy demand for his products/services in the marketplace then taxes are basically not relevant because they are built into the price and the customers pay them anyways. Edited August 31, 2011 by dre Quote I question things because I am human. And call no one my father who's no closer than a stranger
MiddleClassCentrist Posted August 31, 2011 Report Posted August 31, 2011 The wealthy make their fortune on the backs of those below them. They disproportionately benefit from the existence of society, military and infrastructure. They should pay more taxes. Quote Ideology does not make good policy. Good policy comes from an analysis of options, comparison of options and selection of one option that works best in the current situation. This option is often a compromise between ideologies.
CPCFTW Posted August 31, 2011 Report Posted August 31, 2011 (edited) The wealthy make their fortune on the backs of those below them. They disproportionately benefit from the existence of society, military and infrastructure. They should pay more taxes. The people below the wealthy get many of their jobs and livelihoods from the wealthy. The poorest are the ones that benefit disproportionately from the existence of society, laws, military, infrastructure, and just enough misguided hippy votes to make sure they can keep milking the system. Please rename yourself middleclasssocialist, you're one of the furthest left on these boards. Oh and by the way, the wealthy would still pay th emost under a flast tax system. So what's your point? Edited August 31, 2011 by CPCFTW Quote
Michael Hardner Posted August 31, 2011 Report Posted August 31, 2011 Oh and by the way, the wealthy would still pay th emost under a flast tax system. So what's your point? They would pay far less than they do now, obviously. That's why we're talking about it. The relationship between the classes is symbiotic - the rich help the poor be poor, and the poor help the rich be rich. Quote Click to learn why Climate Change is caused by HUMANS Michael Hardner
MiddleClassCentrist Posted September 1, 2011 Report Posted September 1, 2011 (edited) The people below the wealthy get many of their jobs and livelihoods from the wealthy. The poorest are the ones that benefit disproportionately from the existence of society, laws, military, infrastructure, and just enough misguided hippy votes to make sure they can keep milking the system. Please rename yourself middleclasssocialist, you're one of the furthest left on these boards. Oh Corporate Party of Canada shill. The political spectrum is more complex than your black and white mind can handle so it would be a waste to go too indepth. If supporting near 0 taxes for small business and grass roots business policies over "trickle overseas" economics is left wing, call me a communist. It is definately not a view of plutocratic fascism like our current corporate society is becoming and it is no where near socialist. Keep believing that the uber wealthy are our saviours. They aren't. We can help ourselves and create our own jobs with responsible policies. Edited September 1, 2011 by MiddleClassCentrist Quote Ideology does not make good policy. Good policy comes from an analysis of options, comparison of options and selection of one option that works best in the current situation. This option is often a compromise between ideologies.
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