Tax Cut Extensions and Extending Unemployment

Those who know my politics might think I would support the Obama administration's advocacy of restricting tax cut extensions to family earnings under $250,000. After all:

• We have an enormous and widening gap between the wealthy and the rest of us.
• Our society has a need for societal income (read: we're over our heads in public debt)
• Those earning under $250,000 are much more likely to spend any tax cut; this would provide the economy a more effective boost in the near term.

My only hesitancy has to do with sole proprietorship; I want to be careful about effectively increasing the taxes on business, especially small businesses. Some people organize their business as a sole proprietorship, and if I understand the tax laws correctly, the profits from sole proprietorship are taxed as if those profits were individual income.

One might first think this doesn't affect the argument: $250,000 in the pocket is $250,000 in the pocket, regardless of where it comes from. Yet a small business may need to re-invest a significant portion of its earnings in new plant and equipment.

Suppose my small business earns $500,000 this year - a fantastic year, especially in this economic downturn. If I have to buy a new machine for $475,000, then perhaps that $500,000 I earned this year is really $25,000 in my pocket, and life becomes a lot more "interesting". And if the the tax rate goes up, say 10%, for the amount between $250,000 and $500,000, then I'd owe the government $25,000, and life would become interesting indeed.

It could be a real concern, too, especially if I had a couple of employees and were considering hiring, giving a raise, or reducing my workforce.

I'm not sure how many people this would affect, and I suspect at $250,000 we're quickly getting in the realm of diminishing returns. Still, I'd be ok with drawing the line at $500,000 rather than $250,000. This has to take into account the vast, vast majority of sole proprietorships - as well as catching a lot of the wealthy-getting-wealthier folks in the same net. Oh well.

The debate on whether to gain the government income from these tax extensions is going in parallel with the consideration of whether to extend unemployment benefits. If I understand the Republican position correctly, Republicans are ok with extending unemployment benefits - which are among the most effective means of helping the economy, according to the Office of Management and Budget - if the money can be found to cover the expense. Meanwhile, Republicans are opposing not extending the tax increase on those making over $250,000. Hmmm....

Setting up Linking Back

Inspired by my daughter Liz's blog - if she can do it, surely even I can - I've finally entered the blogosphere. My idea is to have a place to write reflective thoughts, ones that I used to include in my weekly missives while my mom was alive, and which everyone pretty much skipped.

They were often skipped because many of those thoughts had a political bent to them, and I expect I'll continue the practice here in this blog. I always feel that my political views lack enough understanding of the issues - but I certainly don't see that restraining anyone else! Plus getting them out there gives me an incentive to peel the onion a layer deeper in my understanding.

I also intend to blog other musings here too, taking a step back and reflecting on life in general. Linking Back comes from the etymology of religion, which can also be taken to mean reunite or bind back; the word ligament comes from the same ligare root. The infinitely rich question is always: what are we linking back to?

I hope to shine a small light upon that Vastness, and perhaps in so doing help others to as well.