Four Freedoms

[Xavier_Onassis]

So some have greatness thrust upon them, he cannot get plumbing work , but he can make a circuit of talkshows.

If I see Obama coming into my yard I will smile and say the Hatch act.

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I somehow don't think you will be endangered by Obama coming into your yard. Or McCain either. Probably not even Bob Barr, Alan Keyes, or even Cynthia McKinney What are the odds?

[Plane]

So some have greatness thrust upon them, he cannot get plumbing work , but he can make a circuit of talkshows.

If I see Obama coming into my yard I will smile and say the Hatch act.

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I somehow don't think you will be endangered by Obama coming into your yard. Or McCain either. Probably not even Bob Barr, Alan Keyes, or even Cynthia McKinney What are the odds?

Odds are pretty steep against , but poor Joe got struck with the lightning.

Did no one tell him how dangerous it is to speak the truth to power?

[hnumpah]

Did no one tell him how dangerous it is to speak the truth to power?

And that truth was what? All I saw was that he asked a question, and got an answer. Just about every analysis I've seen of his situation shows he would come out ahead under Obama.

As for the pitfalls of becoming a public figure, this could serve as an example to everyone of what can happen in this 'information age'.

[Plane]

Did no one tell him how dangerous it is to speak the truth to power?

And that truth was what? All I saw was that he asked a question, and got an answer. Just about every analysis I've seen of his situation shows he would come out ahead under Obama.

NOt if he attempts to fulfill his stated ambition.
He needs to save up a lot and finally borrow even more to buy or produce a business worth a quarter million , I know a guy locally that has built a business about that size , I know it is about that size because he has four large bulldozers and several dump trucks and assorted other gradeing equipment , he isn't especially smart or well educated , he is especially determined .He started modestly and built it for many years.

Obamas plans would put a crimp in his ability to grow his business , slowing the process if not stopping it.

[Michael Tee]

<<He needs to save up a lot and finally borrow even more to buy or produce a business worth a quarter million >>


This has got nothing to do with buying a business "worth a quarter million."  The price of a business is usually based on a multiple of earnings.  Depending on the type of business, the multiplier would be higher or lower, but three to five times annual earnings wouldn't be out of line for a plumbing business like the one Joe might be interested in.  If the annual business earnings before interest and taxes are about $250K, the cost of acquisition, depending on many factors, would be at least twice that, probably more.  I am over-simplifying because the bean-counters have much more refined formulae and there are also industry-specific factors to consider that I am leaving out of the equation for simplicity's sake.

Now even if Joe could scrape up or finance a price of a half-mill to a million, all he'd get in return would be a business earning about $250K annually and paying him a salary of considerably less.  Obama's proposed tax hike for those earning a pre-tax $250K still wouldn't come close to him for at least a few years.

For a guy without a licence and unable to clear a $1600 lien off his property, Joe's "dream" of buying a business that will put his personal income within range of Obama's proposed hike is about on a par with Uncle Junior's dream of fucking Angie Dickinson.  It is pure fantasy.

<<.I know a guy locally that has built a business about that size >>

Don't we all?  The point is, really, HOW MANY guys like that do you know?  And then: how many guys do you know who will bust their ass day in and day out and never come close to owning a business that will generate $250K in annual pre-tax income for them?  What's the ratio?  100::1?  More?

Obama didn't claim that his proposed tax increase won't bite anyone.  His point is that MOST working Americans, an overwhelming majority of them, WILL NOT BE AFFECTED by the increase.  Your example, if anything, tends to confirm that.

[Plane]

<<He needs to save up a lot and finally borrow even more to buy or produce a business worth a quarter million >>


This has got nothing to do with buying a business "worth a quarter million."  The price of a business is usually based on a multiple of earnings.  Depending on the type of business, the multiplier would be higher or lower, but three to five times annual earnings wouldn't be out of line for a plumbing business like the one Joe might be interested in.  If the annual business earnings before interest and taxes are about $250K, the cost of acquisition, depending on many factors, would be at least twice that, probably more.  I am over-simplifying because the bean-counters have much more refined formulae and there are also industry-specific factors to consider that I am leaving out of the equation for simplicity's sake.

Now even if Joe could scrape up or finance a price of a half-mill to a million, all he'd get in return would be a business earning about $250K annually and paying him a salary of considerably less.  Obama's proposed tax hike for those earning a pre-tax $250K still wouldn't come close to him for at least a few years.

For a guy without a licence and unable to clear a $1600 lien off his property, Joe's "dream" of buying a business that will put his personal income within range of Obama's proposed hike is about on a par with Uncle Junior's dream of fucking Angie Dickinson.  It is pure fantasy.

<<.I know a guy locally that has built a business about that size >>

Don't we all?  The point is, really, HOW MANY guys like that do you know?  And then: how many guys do you know who will bust their ass day in and day out and never come close to owning a business that will generate $250K in annual pre-tax income for them?  What's the ratio?  100::1?  More?

Obama didn't claim that his proposed tax increase won't bite anyone.  His point is that MOST working Americans, an overwhelming majority of them, WILL NOT BE AFFECTED by the increase.  Your example, if anything, tends to confirm that.

No kidding?

The value of a business is based on what it can earn in a year?

Also on what equipment it requires and owns.

Joe will have to learn the business thouroughly and make up a business plan , getting a loan of that size will be impossible without haveing a business plan laid out well enough to convince a banker to risk the brass.  If he saves up twenty percent of the cost he is very likely to get that loan. I am not aware of how many people actually start businesses of this size , but most of us in the US do business on a smaller scale and I would not be surprised if you were right at the 1:100 ratio for a success rate , but much more than half of us attempt to found or buy into a business , I have tried it , my brother tried in a bigger way , I know dozens of people busy in the attempt right now.

If Obamas taxes do no more than make it five percent harder to succeed he may find that the marginal are not linear and a five percent increase in the height of the hurdles will produce a doubleing of the runners unable to leap clear of them then your 1:100 rate of success woudl become a 1:200 rate of success and half the people who would have been hired go wanting with no idea of why business has gone sour and hireing is so slow.


Can you really demonstrate that a 5% increase in taxation is a leanear effect and ould only increase the difficulty of starting a business by 5%? I think it is non linear elese we would all be doing it , we need these people , and we need not to hobble them.

[Xavier_Onassis]

The value of a business is based on what it can earn in a year?

Also on what equipment it requires and owns.

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A business is definitely valued by what it can earn.  The liquidation value is secondary.

I hardly think that any bank is going to loan Joe, or anyone 80% of the cost of the business Joe wants to buy. A construction loan to build a house on land the lender owns outright usually does not amount to 80%.
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we need these people , and we need not to hobble them.

I suggest what we need is not a Joe the Plumber that will buy out his boss, Bob the Plumber, but a Joe the Plumber that will start his own business, and while he is at it, find a cheaper, more efficient way to plumb a house or root out a drain or whatever.

Before Joe buys out Bob, we have a plumbing company with Bob in charge.

After he buys out Bob, we still have the same plumbing company with Joe in charge, and Bob retired in Florida or somewhere else far from leaky pipes and sewage. There is no net gain because Joe has bought out Bob.

[Plane]

The value of a business is based on what it can earn in a year?

Also on what equipment it requires and owns.

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A business is definitely valued by what it can earn.  The liquidation value is secondary.

I hardly think that any bank is going to loan Joe, or anyone 80% of the cost of the business Joe wants to buy. A construction loan to build a house on land the lender owns outright usually does not amount to 80%.
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we need these people , and we need not to hobble them.

I suggest what we need is not a Joe the Plumber that will buy out his boss, Bob the Plumber, but a Joe the Plumber that will start his own business, and while he is at it, find a cheaper, more efficient way to plumb a house or root out a drain or whatever.

Before Joe buys out Bob, we have a plumbing company with Bob in charge.

After he buys out Bob, we still have the same plumbing company with Joe in charge, and Bob retired in Florida or somewhere else far from leaky pipes and sewage. There is no net gain because Joe has bought out Bob.

Bob needs Joe , it is a part of his retirement plan.

This is why Bob can operate on a thin profit margin , reinvest a lot on his business and pay his loans off . He wants Joe to save and borrow enough to buy him out .If he could not do that, his retirement would require saveing a lot of cash , investing in a lot other than his business , failing to pay off his loans and getting out from under his business when it was time to retire allowing it to crash with his corporate debt.

A business is not worth more than any interested buyer can pay.

[Michael Tee]

Joe IIRC was talking about his dream of BUYING the business.  That means it has a track record and a purchase price based on past earnings.

The business is worth what it's worth.  What you want me to believe is that if Joe won't buy that business because he's not happy with the after-tax earnings on the salary that he'll get from it, then nobody else will buy it either.  That's crap.  The likeliest outcome would be that Joe offers something less for the business because of the change in his potential after-tax net on salary from it, or that somebody else will buy it either for vendor's price or, like Joe, discounted to allow for the bigger tax bite on the personal salary generated by the business.

The business will continue, under Joe or another buyer.  As I tried to demonstrate before, the business will be driven to expand or if it doesn't, competitors will move into its existing customer base or the base of potential customers that the business foolishly declined to run after.  Either way the potential market will be served, whether the plumbers serving it work for Joe or other plumbing companies or just for themselves.  Employment will be maintained to the extent necessary to serve the total market.  Anyone not formerly taking in pre-tax income of $250K or more will be totally unaffected by the tax increase.  Others will have to decide whether to keep on working for a lesser after-tax take-home, or get out of the market to make way for those who will.

The net effect on employment is nil.

[Xavier_Onassis]

Bob needs Joe , it is a part of his retirement plan.

This is why Bob can operate on a thin profit margin , reinvest a lot on his business and pay his loans off . He wants Joe to save and borrow enough to buy him out .If he could not do that, his retirement would require saveing a lot of cash , investing in a lot other than his business , failing to pay off his loans and getting out from under his business when it was time to retire allowing it to crash with his corporate debt.

A business is not worth more than any interested buyer can pay.

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First off, Bob (assuming there IS a Bob: we have heard nothing from Joe's employer, and probably never will) is not too bright if his strategy for retirement is to depend on just what he can sell his business for. Bob needs a much more diversified portfolio, because he could be sued, his company could be ruined by a building slump, or a dozen other events.

If Joe sees he cannot make it with the current tax rates, then Joe will offer less for the business, and so will all other intelligent buyers. Taxes are a part of doing business, just like the cost of rooter snakes, pipe dope and hard hats.

If I were a gambling man, which I am not, I would lay very good odds that Joe the Plumber is just a blowhard. We are witnessing the last few seconds of his fifteen minutes of fame. Soon he will join Willie Horton and the striving flag factory and the isles of Quemoy and Matsu-- the collective debris of useless campaign issues.

[Plane]

Bob needs Joe , it is a part of his retirement plan.

This is why Bob can operate on a thin profit margin , reinvest a lot on his business and pay his loans off . He wants Joe to save and borrow enough to buy him out .If he could not do that, his retirement would require saveing a lot of cash , investing in a lot other than his business , failing to pay off his loans and getting out from under his business when it was time to retire allowing it to crash with his corporate debt.

A business is not worth more than any interested buyer can pay.

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First off, Bob (assuming there IS a Bob: we have heard nothing from Joe's employer, and probably never will) is not too bright if his strategy for retirement is to depend on just what he can sell his business for. Bob needs a much more diversified portfolio, because he could be sued, his company could be ruined by a building slump, or a dozen other events.

If Joe sees he cannot make it with the current tax rates, then Joe will offer less for the business, and so will all other intelligent buyers. Taxes are a part of doing business, just like the cost of rooter snakes, pipe dope and hard hats.

If I were a gambling man, which I am not, I would lay very good odds that Joe the Plumber is just a blowhard. We are witnessing the last few seconds of his fifteen minutes of fame. Soon he will join Willie Horton and the striving flag factory and the isles of Quemoy and Matsu-- the collective debris of useless campaign issues.

You should talk to MT, he assures me that raiseing the tax rates will bring greater competition into the feild becfause it will allow people to operate on a narrower profit margin.

Yes I am not sure I understood his point.

But a guy that operates on a narrow profit margin will indeed outcompete , but he will not build a lot of saveings, If he cannot sell his business he cannot retire. So he must either save and invest a lot of the profit rather then build the business if he hopes to retire (therefore he cannot stand a narrow profit margin), or perhaps never retire, which is presently my retirement plan.

[Xavier_Onassis]

If he cannot sell his business he cannot retire.

OF COURSE he can retire. He sells the trucks and tools and retires. There is no requirement that anyone sell a business in order to retire.
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or perhaps never retire, which is presently my retirement plan.

You appear to have rather a lot of spare time on your hands. Perhaps you are among the working retired.

Like the walking wounded, but less painful.

I am sure that the government has a nice pension for you, and then there is Social Security. You could be a double dipper.

[Michael Tee]

<<You should talk to MT, he assures me that raiseing the tax rates will bring greater competition into the feild becfause it will allow people to operate on a narrower profit margin.

<<Yes I am not sure I understood his point.>>

My point was simple: there will always be a buyer for a business that can afford to pay its owner a pre-tax income of $250K or more.  There may be fewer buyers and/or a lower price offered if the business, thanks to tax hikes, provides a lower after-tax income than previously to its owner.  $250K is a hefty pre-tax income; I can imagine there are plenty of people who would happily bust their ass in their own business to earn half of that.  So if Joe the Plumber doesn't like the after-Obama after-tax income that this business will provide for him, fuck Joe the Plumber because Manuel the Plumber or Abdul the Plumber will be happy to scoop up whatever wasn't lucrative enough for Joe the Plumber.

The idea that raising the tax on personal incomes of over $250K will reduce employment is pure bullshit.  As long as the need exists, there will be work for those who can service it.

<<But a guy that operates on a narrow profit margin will indeed outcompete , but he will not build a lot of saveings>>

Let's get real, here, plane.  We're only talking about guys whose pre-tax earnings exceed $250K.  You're telling me that a guy who grosses $250K pre-tax WON'T BE ABLE TO SAVE ANYTHING?  Cry me a river, brother.  If he can't save on a gross pre-tax annual income of a quarter-mill or more, he needs his fucking head examined.

<< If he cannot sell his business he cannot retire. >>

A business that earns enough to pay its owner $250K per year in salary or dividends can't be sold?  You are kidding me, right?  This is some kind of joke?

<<So he must either save and invest a lot of the profit rather then build the business if he hopes to retire . . . >>

That's every businessman's dilemma - - plough back in for the future of the biz, or drain out now for the sake of retirement.  Most of them seem to find the right proportions.  If they have kids to leave the business to, it's a little easier. 

<< . . . (therefore he cannot stand a narrow profit margin) . . . >>

Whatever the profit margin, for anyone worried about Obama's tax plan, there's gotta be enough to pay the owner at least $250K a year; I don't know anyone in their right mind who would call that a "narrow profit margin" for a small business.

<< . . .  or perhaps never retire, which is presently my retirement plan.>>

Yeah, welcome to the club. 

[Plane]

"...a business that can afford to pay its owner a pre-tax income of $250K or more. "

And an after tax income of what?

Yes it does make a diffrence , the after tax amount is what the buyer would really get and more tax makes the bargan less appealing and since most such buys are dome with loans , it makes the debt bigger and the loan last longer.

We are starting with the assumption that there is a wide profit margin , but this is not always so , a lot of businesses operate with narrow margins and the most marginal ones would be driven into the red by a tax the same width as their margin.

[Michael Tee]

<<And an after tax income of what?>>

Probably over $125K, because you know the total tax won't go over 50%.

<<Yes it does make a diffrence , the after tax amount is what the buyer would really get and more tax makes the bargan less appealing and since most such buys are dome with loans , it makes the debt bigger and the loan last longer.>>

You're skipping from one point to another.  I was addressing the issue of whether raising the tax on those who earn $250K a year would make any difference to the overall employment situation, and I demonstrated that it would not.  You seem to be dealing with another issue entirely, which is whether Joe's purchase of his employer's business would be as attractive after the increase in tax.  Well of course it would not, and that's because there will be less net after-tax income for Joe.  That's a no-brainer.  It's unattractive to pay tax, period.  And if the owner of the business is gonna have to pay more tax on his personal income, of course it's more unattractive to the owner and to anyone who buys the business from him.

<<We are starting with the assumption that there is a wide profit margin . . . >>

No, we are not.  We are not discussing the business or its profit margin, because Obama's tax increase doesn't target small business.  It targets the personal income of the individual, including all individuals who own businesses and earn income from them.  The tax is on the individual's income from his business, which is usually either salary or dividends.  So we don't have to assume anything, because Obama has already told us where the tax starts - - at over $250K of personal income.  If the business doesn't have enough of a profit to pay the owner $250K or more, then we don't even have to discuss the circumstances, because the tax increase won't affect him.

<< . . .  but this is not always so , a lot of businesses operate with narrow margins and the most marginal ones would be driven into the red by a tax the same width as their margin.>>

You obviously misunderstand the tax proposed.  In the situation you are describing, neither the tax on the business' earnings nor the tax on its owner's earnings would be affected by the tax increase proposed by Obama.