Thursday, November 11, 2010

A Taxing Question

Those arguing to retain the Bush tax cuts for people earning over $250,000 keep saying that raising the rate will keep small business people from hiring. I'm no economist, but I can do simple math, and that argument doesn't add up.

Let's say you're a small business person who makes -- and we're talking about your personal income here, not your company's income -- over a quarter mil a year. The extra 3% tax doesn't kick in until that level, so you only pay it on everything about $250k. If you earn an extra $100k, you'd pay an additional $3,000. That's not enough to hire anyone. If you earn an extra half-million, your additional taxes would be $15,000 that year -- the equivalent of hiring one minimum-wage employee.

So, your business is doing so well that your gross pay is three-quarters of a million dollars, and the loss of fifteen grand is keeping you from hiring another burger-flipper? No way. At that income level, you spend that much on tickets to the Rams games you don't bother to attend.

What's keeping you from hiring more people is that your business isn't making as much as it did pre-recession. But as the economy continues to regroup, more customers will come in and buy your product, so your bottom line will start looking better, and when demand gets high enough, you'll hire more workers.

Right?