Just one blogger's comment, but very perceptive . . .

[Michael Tee]

<<That is confuseing.

<<First you tell me that it is totally false , then you elucididate a process that freezes a business at a plateau , one I hadn't even thought of.


<<I was simply thinking that each time the government removes the value of an employees pay from Joes business , that is either one less employee he hires , or that much more he charges for his services.

<<I don't argue that the notch effect doesn't freeze a business from some expantion , but I think that makes my point better than yours.>>
=======================================================
Let's go over it again.  Using my hypothetical example.
Joe's business pays him a personal income of $250K in Year 1 and he pays 10% tax on that ($25K) and his take-home after-tax personal income is $250K-25K = $225K.

In Tax Year 2, Joe's growing business pays him a personal income of $251K, pushing him into an income bracket where the tax rate is now 20%; the tax he should pay is 20% of $251K, which is $50.2K.  If he were actually to pay $50.2K of taxes on $251K of income, he would take home an after-tax personal income of only $200.8K.

Would that be fair?  His personal income is $250K before tax, and he takes home $225K after tax; but by earning an extra $1,000, his income is now $251K but he takes home only $200.8K?  In terms of personal income after tax, he's LOST $24,200 as a consequence of earning $1,000 more in year 2 over year 1.

That's where the notch provision comes in.  Because of it, the IRS says to Joe, "Buddy your tax at the higher rate is $50.2K, but tellya what - - pay us just about the same tax you paid last year, $26K this time, which leaves you with exactly the same after-tax income as you were left with last year, when your personal income was only $250K.

What happened to Joe's net after-tax income in Year 2?  He took in $251K before tax, he paid $26,000 in taxes ($1,000 more than he paid in Year 1, although his tax rate had doubled) and he winds up with the same after-tax personal income as in Year 1.  What was the point in working harder just to get an extra $1,000 if the government took all of it in taxes?  Only that he increased the value and the potential of his own business.  It's positioning him for the next step in the growth process.

In year 3, Joe's business pays him $300,000 personal income before tax.  In a 20% bracket, he pays $60K in taxes and keeps $240K in after-tax income, $15K more than he took home after taxes in Year 1.

As you can see, once Joe's business income gets past the notch point, his after-tax income can continue to grow as his salary grows, just not as fast a rate of growth as if he had not had his taxes raised on him. 

Sure, Joe would prefer not to freeze his after-tax income during the notch period, AND he would like to see his after-tax income grow faster than it does once the notch period is passed, but that is what "tax the rich" means - - he's gonna pay more in taxes and take home less after taxes than he did before.   You can see why the rich do not favour a "tax the rich" program.    But tough shit - - he's rich.  Even in his WORST year, year 1, he still got to take home $225K: more than enough for anyone.  And later, as we can see, through growing his business, despite an absence of immediate gratification in year 2, in Year 3, he has jacked his personal after-tax income up to $240,000.  So it CAN be done - - he CAN keep increasing his personal after-tax income.

Now as for your job-creation problem.  Suppose Joe the plumber says:  "Fuck this.  I work to grow my business, and all through the notch period, despite the successful growth of the business, I don't get to take home a nickel more in after-tax income?  AND, even once I pass the notch period, I gotta make $50K more in before-tax personal income in order to take home only $15K more in after-tax income?  It ain't worth the effort.  It don't make sense.  I ain't botherin' to hire more plumbers and grow this business; I might just as well be satisfied with personal income after tax of $225K and limit my personal before-tax income to $250K for the rest of my working life."

Well, that's just where capitalism, free enterprise, competition and immigration all work their collective magic:  Somewhere some José Rodriguez or Taldeep Singh sees a market, a pool of potential customers that are either underserved by Joe the Plumber or not served at all, and he thinks, "Holy Fuck I could make a ton a shekels offa these folks and I don't give a shit if I gotta work 14 hours a day 24/7 for the resta my life, and I don't give a shit if I "only" take home $225K on personal income of $251K or $240K on personal income before tax of $300K, ya know what, that STILL looks pretty damn good to me." 

So really Joe the Plumber's greed and laziness are not the defining or limiting factor on job creation in the U.S.A. or anywhere else, despite whatever lies and bullshit the McCain campaign are pumping out for you  by the carload.

[Xavier_Onassis]

I don't think that this is the way the IRS works at all. The rates are cumulative, not inclusive.

You pay 10% on the first $250K, or $25K

You pay 20% on everything ABOVE $250K, so $300 K will pay 10%, or $25K on the first $250K, and 20% on the remaining $50K, or another $10K, for a total of $35K.

 $250K pays $25K, and he gets to keep $225K.
 $300K pays $35K, and he gets to keep $265K.

[Michael Tee]

That works too.  We used to have "notch provisions" but your way is also good. 

Either way, my point is the same:  Joe takes home less if the taxes are raised at any point in his income stream than he would if they weren't raised, but he still retains significant ability to raise his take-home by growing his business.  AND, if he decides NOT to grow the business because his raised taxes have disincentivized him, somebody else will service his market, with extra help on board, if the demand is really there.

[R.R.]

Of XO's $60,000 he claims he makes a year, $30,000 of that should go to federal taxes. Since he gives very little to charity, he should have to pay more of his fair share to support these big government programs he loves so much.

[Plane]

So really Joe the Plumber's greed and laziness are not the defining or limiting factor on job creation in the U.S.A. or anywhere else, despite whatever lies and bullshit the McCain campaign are pumping out for you  by the carload.

Joe is lazy now?

If Joe reinvests a lot of his businesses income on the business , advertiseing , equipment and new hires it will have a chance to grow.

Every bite that the Government takes reduces this potential for growth exactly as much as Joe does not pass this cost down to his costomers.

The resultant reduction in hireing is direct and simple and the truth. The increase in cost to consumers of Joes service is also direct.

So for the good of the community , for the children, the government should have a gola of taxing the least it can from every taxpayer.

Taxing a working poor marginal person less might mean he eats better , taxing his boss less might mean he can get a raise. 

[richpo64]

>>The guy just sounds like a plant.<<

Let's see ...

Carl Rove went to Ohio and found out exactly what city and street Barry was going to visit. Then he somehow read future events and determined what house Barry was going to approach, moved the family that was there out, and placed Joe the Plumber there in order to get this question asked in exactly such a way that would elicit the exact response Barry gave.

Get help.

[Xavier_Onassis]

Of XO's $60,000 he claims he makes a year, $30,000 of that should go to federal taxes. Since he gives very little to charity, he should have to pay more of his fair share to support these big government programs he loves so much.

The most expensive cost of the US govt, are wars past and present. The last war was of no benefit to anyone.
I think the fools who voted for Juniorbush should pay for that one.

[Michael Tee]

<<Joe is lazy now?>>

Pay attention, please.  Joe is lazy IF he decides not to grow his business because of higher taxes.  He'll work hard to earn up to 250K, but won't bother to grow beyond that if his after-tax income can't grow as fast as it did up to the point where he was moved into the higher tax bracket.  That WOULD be lazy.  Someone else prepared to work harder for a rate of increase in after-tax profits that Joe didn't want to pursue, is not lazy.

<<If Joe reinvests a lot of his businesses income on the business , advertiseing , equipment and new hires it will have a chance to grow.>>

Of course.  This has nothing to do with taxing Joe's personal income.  The more the business spends on advertising, equipment and new hires, the less there is to pay toward's Joe's salary.  So he could stay under 250K even longer.

<<Every bite that the Government takes reduces this potential for growth exactly as much as Joe does not pass this cost down to his costomers.>>

You could not be more wrong.  If the demand is there, Joe will have to service it or lose it to rivals; his after-tax net personal income will not grow as fast as it would have grown had tax on his personal income not been increased after 250K, but grow it will.  Let's say (again using hypothetical numbers) that before the tax increase, he could have kept $270,000 after-tax income on $300,000 of gross personal income, but once Obama's tax increase goes through, he'll only be able to keep $260,000 after-tax income on the same gross personal income of $300,00.  His choice is to go after the $300K gross personal income knowing that he'll only keep $260,000 of it and not the $270,000 that he COULD have kept before the tax increase.  Tough shit, Joe.  If you DON'T go after that 300K because you don't get to keep enough after-tax, a rival will.  You'll not only lose the extra business you could have had, but you'll be helping a competitor get started who in a few more years may be able to eat into your own customer base.

You don't seem to understand a fundamental principle of business.  A business cannot stand still.  It has to move forward or die.  Even if it's less profitable for Joe to pursue new business once he's hit his 250K max in personal income, he has to keep going forward.  Otherwise his business will start to die as more aggressive rivals move in to capture the trade that he spurned.  If the market is there, IT WILL BE SERVICED.  By Joe or someone else.  If it takes 20 plumbers to service a market of the same size that Joe could have serviced, whether he actually went after it or not, there will be 20 plumbers servicing it.  The only question will be, are all 20 Joe's, or are some of them free-lancers or working for Joe's competitors.

<<The resultant reduction in hireing is direct and simple and the truth. >>

Once again, you are 100% wrong.  There is no "resultant reduction in hiring."  As I said, if the market for the service exists, it will be serviced.  By Joe or by somebody else content to earn less than Joe.  With a floor of $250K in pre-tax income before the tax increase kicks in, there will be a lot of plumbers ready, willing and able to step into the breach, should Joe be short-sighted enough to conclude that it just ain't worth the extra effort.

<<The increase in cost to consumers of Joes service is also direct.>>

That's entirely between Joe and his customers.  With a floor of $250K in pre-tax income, plenty of other plumbers and competitors will be happy to offer Joe's old customers the same service WITHOUT the increase in prices and take home the same after-tax income that Joe didn't think would be worth his while.  Of course, if the customers like good old Joe and are willing to stick with him despite his price hike, that is up to them.  Either way, there is no reduction in the number of plumbers servicing that particular market.

<<So for the good of the community , for the children, the government should have a gola of taxing the least it can from every taxpayer.>>

For the good of the community, the government should at least quintuple the taxes on ass-holes like McCain and Cindy, who own EIGHT HOMES, and spend the money providing decent affordable housing for the millions of poor kids living in rat-infested shit-holes where the only way out is either Obama's way, for the most talented and brainiest, or the drug-dealer's way for the other 99% of them.

<<Taxing a working poor marginal person less might mean he eats better , taxing his boss less might mean he can get a raise. >>

First we make sure the guy has decent, affordable housing, health care and education for himself and his kids, then we can talk about the raise after.  Which he might not need as much once his basic needs are met.  Let the market worry about the raises.  If Joe wants to give his plumber a raise, he'll do it.  If he doesn't want to, the plumber can look elsewhere for a job.  Or join a union and force Joe to cough it up.

[Plane]

  If the market is there, IT WILL BE SERVICED.  By Joe or someone else. 

You couldn't be more wrong.

There has always been a strong demand for free lunches , but few willing to meet the demand, if the government increases the expense of Joe's plumbing service there will be some marginal customers who simply do without it, because they cannot afford it . The greater the tax the more people make do with second rate plumbing.

The taxation is a load on the economy and the greater the load the greater the restriction on the economy's ability to produce , we are taxed enough to support a giant government now , where is there a larger government? Why do we need expansion on government?

[Michael Tee]

<<There has always been a strong demand for free lunches , but few willing to meet the demand>>

Joe's tax load doesn't go into a higher rate till after he hits the 250K mark.  How the hell is a guy giving out free lunches if he's grossing at least 250K, regardless of WHAT tax load it carries?  You call it a free lunch if you like, but if 250K means so little to you that you consider it worthless, suppose I make YOU a nice lunch and you give ME the $250K?

<<if the government increases the expense of Joe's plumbing service there will be some marginal customers who simply do without it, because they cannot afford it.>>

Well, in the first place, that depends on who eats the tax increase, Joe or his customers.  That is definitely Joe's choice.  If he chooses to eat the increase, he won't lose any customers.  If he passes it on, you are correct:  some marginal customers will forgo Joe's services.  That is where Joe's competitors, already established or new to the business, come in.  They have their opportunity:  plumbing at Joe's OLD prices, i.e. without the tax increase being passed on.  Maybe these guys are still earning under 250K and have no tax increase to pass on, or maybe they are already earning 250K or more and don't give a shit if their take-home after-tax earnings are not as great as they would have been before the increase.  Either way, these guys are at the doorstep of Joe's old "marginal" customers, ready, willing and anxious to serve.

<<The greater the tax the more people make do with second rate plumbing.>>

BWAHAHAHAHAHAHAHAH!!  You're killing me, plane.  Cry me a river.  The country is broke, get it?  THAT'S why the taxes are being increased on Joe in the first place.  You'll be relieved to know, it's not out of any personal hatred of Joe.  THE GOVERNMENT NEEDS THE FUCKING MONEY.  So now this country of fucking idiots, who engaged in a needless, pointless war at a cost of three TRILLION dollars, refused to raise taxes, couldn't export more than it imported, etc. etc., etc. is broke, and (the icing on the cake) also has to raise $700 billion to pay for the crooks it allowed to ravage the economy . . .  BUT.  But.  But: they still INSIST on "first-class plumbing."   They gotta have first-class plumbing.  Or else.

OK, plane, first class plumbing may not be in the cards for you and yours.  I'd say, with all the shit you have on your plate, you have bigger things to worry about than whether your plumbing is gonna be first class or not.  Frankly, the way you guys have been conducting yourselves and managing your affairs for the past 8 years, consider yourselves lucky if you have ANY plumbing.  It's a luxury if it's tenth class.

<<The taxation is a load on the economy and the greater the load the greater the restriction on the economy's ability to produce . . . >>

On the contrary, you haven't produced decent medical care for your citizens, you haven't produced decent housing and you haven't produced decent education.  That's all infrastructure.  A population of undereducated morons, poorly housed and in poor health are not gonna produce much of anything.  When the jackasses who are raking in untaxed millions and spending them on such ludicrous items as seven extra luxury homes for one couple, while millions of others are doing without the basics, it is time to tax the rich until they bleed, cut the military budget down to the level of Germany's, and start creating jobs by ordering the construction of new schools, new housing, new neighbourhoods, new hospitals and hiring the people to run them and the people who train the people to run them.

<<we are taxed enough to support a giant government now >>

Yeah but a giant government of crooks, idiots and war-mongers.  THAT is why you need change.  That is where Obama comes in.  And CUTS the taxes for most Americans, for all those who earn LESS than 250K per year.

<< where is there a larger government? >>

Fire the Pentagon.

<<Why do we need expansion on government?>>

We seem to be moving from "tax the rich" to "why big government?"  IMHO, the two issues are not the same.  We could tax the rich, reduce the tax load on everyone else and have smaller government.  Or bigger.  Taxing the rich is not an issue connected to the size of the government.

[sirs]

<<Why do we need expansion on government?>>

We seem to be moving from "tax the rich" to "why big government?"  IMHO, the two issues are not the same.  We could tax the rich, reduce the tax load on everyone else and have smaller government.  Or bigger.  Taxing the rich is not an issue connected to the size of the government.

It is when the excessive taxation leads to more and more unemployment & more and more without health insurance as a result, necessitating the Government "to do more"

Enter BIGGER Government

[Michael Tee]

<<It is when the excessive taxation leads to more and more unemployment & more and more without health insurance as a result, necessitating the Government "to do more">>

While I agree in principle that "excessive" taxation could lead to greater unemployment, the problem that we were discussing did not refer to "excessive" taxation.  What we were discussing was whether an INCREASE in taxation (limited to those making over 250K per year) would or would not increase unemployment.

Actually, you won the argument just by changing the terminology.  (Or, to be more accurate, you would have won the argument if I had accepted the substitution of your terminology.)  By definition, "excessive" taxation is TOO MUCH taxation, i.e., more taxation than is reasonable or warranted in the circumstances.  If it's "excessive," then by definition, it's virtually indefensible.

So I'd like to concede that "excessive" taxation is bad and return to the original argument, dealing with additional (but not excessive) taxation on those earning over $250K in pre-tax income per year.  Does it increase unemployment?  I think in my preceding couple of posts, I've demonstrated pretty conclusively that it doesn't.  That as long as a market exists for the services of the additionally taxed, that market will be served, either by the additionally taxed individual or by his competitors.

[Plane]

Even when not excessive each dollar removed from the economy by the government is a dollar less invested in production , or a dollar less availible for hireing people for jobs.

There is certqainly a minimum requirement for the government to do its job well , this sould be the basis for the amount taxed , every bit more than that is an injury to the effeciency of the economy.

There is a lot of infrastructure that the Government must provide and a lot that the Private sector can do better , where there is overlap sould we err on the side of government ? I don't see why we should , our historical experience is that the welth gets shared rather poorly by agency of the govenment and rather well by agency of employment and entrepenural oppurtunity. When there is a choice about how an need is met it is far better to placed the confidence in the market than the congress to get it done with effeciency.

A lack of effeciency on grand scale can kill people as well as an equivelent value of crime.

[Michael Tee]

<<Even when not excessive each dollar removed from the economy by the government is a dollar less invested in production , or a dollar less availible for hireing people for jobs.>>

How can that be?  It's a buck that goes into hiring federal employees or soldiers, producing anthrax in the nation's chemical warfare labs, paying contractors to produce nuclear subs . . .

The money doesn't disappear into a black hole, it goes SOMEWHERE.

<<There is certqainly a minimum requirement for the government to do its job well , this sould be the basis for the amount taxed , every bit more than that is an injury to the effeciency of the economy.>>

But that's what happens - - they make up budgets, and estimates, and then they try to raise the money they need for the estimates through bonds and taxes.

<<There is a lot of infrastructure that the Government must provide and a lot that the Private sector can do better , where there is overlap sould we err on the side of government ? I don't see why we should , our historical experience is that the welth gets shared rather poorly by agency of the govenment and rather well by agency of employment and entrepenural oppurtunity. >>

I don't know on what you base your belief that the private sector can do better, in many cases it is a myth.  Health care, for example.  Government has only one objective, the welfare of the people, private enterprise also has only one objective, private profit.  Government is responsible to the people and private enterprise is responsible to its owner.  Obviously private enterprise is run by a bunch of irresponsible schmucks whose only objective is to enrich themselves obscenely and bale out just before the crash.  As we have seen.  How in the light of this latest disaster can you possibly maintain that private enterprise is some kind of beneficial force?

<<When there is a choice about how an need is met it is far better to placed the confidence in the market than the congress to get it done with effeciency.>>

The market just fucked up big-time, plane, did you not notice?

[sirs]

The market just fucked up big-time, plane, did you not notice?

Brought about largely by inappropriate micromanagement & acute lack of oversight (thank you Mr Frank, Mr Dodd    ) by the Fed