Minimum wage, good or bad?

[Dingoluv4eva]

Re: Minimum wage, good or bad?

Hello,

I'm confused about the BMW. Maybe someone could help. I may not be too bright in this area because I have never owned a business. I thought paying people was a "write off" for taxes too. Am I wrong? Is worker's compensation also a deduction? I would think that an increase in minimum wage might be very popular with larger business, but not so with the small one owner, one store type of business, the kind who employ less than 20 people. I thought if a business wasn't making a profit, it really wasn't making a profit, and if they have to cut expenses they cut people. Am I totally ignorant??? I

yah any kind of business expense is a write off.
but if the business is a sole proprietorship for an example, if the business, has a net loss..

lets say after all the expenses and other write offs, (buying a new car etc) lets say the business is in the red by $40,000 (LOSS).

now lets say on the side the business owner has another job, works somewhere and makes about 40,000 a year..

in a sole proprietorship he takes that $40,000 NET LOSS, and deducts it from his $40,000 salary at his real job..

now ofcourse if he didnt spent $50,000 on a BMW his business would be $10,000 in the profit.

so according to the books, and the IRS he made altogether $0 and is gonna be taxed on that. He is going to pay nothing to uncle sam.

NOW IN CONTRAST.. u go work and make 40,000 and go buy a BMW for $50,000.. u're gonna be in debt $10,000... but the IRS is gonna tax u on the full $40,000. so the IRS will ask u to fork over another $10,000 or so.

so u'll be in the hole $20,000

so in that scenario the business owner saved $20 grand.

[jmjj215]

Re: Minimum wage, good or bad?

yah any kind of business expense is a write off.
but if the business is a sole proprietorship for an example, if the business, has a net loss..

lets say after all the expenses and other write offs, (buying a new car etc) lets say the business is in the red by $40,000 (LOSS).

now lets say on the side the business owner has another job, works somewhere and makes about 40,000 a year..

in a sole proprietorship he takes that $40,000 NET LOSS, and deducts it from his $40,000 salary at his real job..

now ofcourse if he didnt spent $50,000 on a BMW his business would be $10,000 in the profit.

so according to the books, and the IRS he made altogether $0 and is gonna be taxed on that. He is going to pay nothing to uncle sam.

NOW IN CONTRAST.. u go work and make 40,000 and go buy a BMW for $50,000.. u're gonna be in debt $10,000... but the IRS is gonna tax u on the full $40,000. so the IRS will ask u to fork over another $10,000 or so.

so u'll be in the hole $20,000

so in that scenario the business owner saved $20 grand.

You have to depreciate a vehicle for business use. You can't write off the whole thing the first year.

The business owner didn't save 20 grand - you need to look at the whole picture.

Business owner buys 50k bmw. And even using your example, let's say he can write it off all in one year (which he can't). His business now shows a loss of $40k - instead of a profit of 10k. Instead of paying $12500 in taxes (assuming a 25% tax rate on the 10k and 40k salary), he's saved $12,500.

But he spent $50k on a bmw. So actual cash out was RED $37,500.

Wages are also deductible as was mentioned, if you were the corporation - solely looking for profits - what would you choose?

Increased wage expense from 1000 to 2000. Your tax rate is 25%. Because of the extra $1,000 you spent, you save in reduced income, $250. But you spent $1000 to get that $250 savings. Your net is negative $750.

Wage stays the same at 1000. You receive no tax savings. Your net? 0.

I'd take 0 over -750 any day.

***
Remember, a tax deduction is only valuable if the expenses makes good business sense regardless of the tax deduction. You should never take a tax deduction just for the sake of a deduction.

[jmjj215]

Re: Minimum wage, good or bad?

If you study various demographics that teach abstinence and do not, you'll find that they are successful in helping kids realize that they shouldn't be sexually active until married. A lot of the conviction of abstaining comes from religious beliefs more than the actual "talk about sex" conversation.

[Dingoluv4eva]

Re: Minimum wage, good or bad?

jmjj so he still saves alot
versus a non business owner who would not save anything.

Depreciation throws a wrench into it but

that expensive 50,000 BMW is gonna be an asset..
and than as the time goes its gonna be thrown into the expense account.

assets are not revenue though, so that doesnt hurt him..
it will just lets say drop his tax due for the next how ever many years it takes to depreciate it to 0.

so even that first year lets say its worth 50,000 at the end of the year the car is worth 43,000

still thats 7,000 more than an non business owner saved on it
plus the year after that the car is worth 38,000 so that year he saves another 5,000... a non business owner doesnt get these savings.

I'm talking aboout an individual here that is more about Saving money, and getting a nice car, than really seeing his personal business on the side prosper,.. basically maybe someone who uses it, for the business loop holes, and some extra cash on the side.. I do understand that doesnt represent that business owner the previous poster mentioned, but i'm just showing how having a businesses get perks.

[jmjj215]

Re: Minimum wage, good or bad?

you still have to recapture the depreciation by lowering the basis of the vehicle when you sell it. You delay the tax, you don't avoid it all together. Plus, if your marginal tax rate is < 25%, it's an even worse deal for the business owner - even considering the time value of money.

[jmjj215]

Re: Minimum wage, good or bad?

If your personal business on the side continues not to prosper, you're going to get audited and the IRS will call you on it. Plus, you haven't mentioned the disadvantages of being a sole-proprietor type of business, where you have to pay both sides of the FICA, along with your income tax. For every dollar I make on my side business, I pay about 40% in taxes - that's real fun isn't it?

You still didn't address the core notion that he has to spend more money than he saves in taxes - how is that so great?

People talk about business owners just having the grand life being able to deduct extra stuff - as if those deductions are tax credits or something.

[Dingoluv4eva]

Re: Minimum wage, good or bad?

I'll have to get back to you on this subject after this years finance classes lol
you outdueled me on this one.. but it was fun..

thats why i take this as my major, it so gets the heart racing with excitement, nothing better

[VJW]

Re: Minimum wage, good or bad?

You have to depreciate a vehicle for business use. You can't write off the whole thing the first year.

You can if it’s a large expensive luxury SUV. The tax cut package of 2002 included the ability for a business to write-off 100% of the cost of such a vehicle (Hummer, Escalade, etc.) in the first year.

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[VJW]

Re: Minimum wage, good or bad?

(Unsure of why this is in this thread, but....)

If you study various demographics that teach abstinence and do not, you'll find that they are successful in helping kids realize that they shouldn't be sexually active until married.

Actually, it has not been successful (88% failure rate), and in other ways has been MUCH worse, according to a the most comprehensive study ever done over 30 years, as was mentioned here:

TAKING THE PLEDGE

http://www.cbsnews.com/stories/2005/05/20/60minutes/main696975.shtml

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[cercis]

Re: Minimum wage, good or bad?

I have to concur with VJW. I grew up with Catholics. Good Catholics. Can't use a condom because I'll go to hell, etc. They had the highest rate of teen pregnancy in my school (small school, approx 60 people per class).

If you want to help with people not having kids they can't afford, petition the catholic church to lift the ban on contraception. Many of the people you see having "too many kids" are catholic women who have husbands who have left them (I see this a lot in my hispanic town). You see, the women are strong catholics, the men, not so much.

I know way too many people who are trying to make it on minimum wage. And yes, I call bull**** on the CEOs who say they can't afford to pay more. If that was true, then they'd stop taking their huge bonuses, etc. Period.

Minimum wage over most of the US is $5.25/hr. $2.12 if you are a waitress. And if you work selling cars, houses, etc you may not get paid anything but commission.

Most places people rely on minimum wage jobs don't have public transportation. These tend to be people who have to drive to neighboring towns for jobs and who work odd hours making carpooling almost impossible. For example, in my hometown people drove either 20 miles east or 20 miles west to get a job. You took a job at Walmart or fast food. Your schedule changed daily. If you did find someone who worked in the same town, you would need to find about 15 people so that you could reasonably be able to rely on someone for all the different schedules you would be stuck working (and their different schedules).

I left that town. I realized that there was no way I would ever get out of poverty there. But, I was blessed with parents who felt college education was necessary (even if they wouldn't pay for it and refused to help in any way, other than help me apply for loans, not even allowing me to live at home without paying rent). And I met a good guy who was from a large city and kept me from falling back home, even when I was ready to give up.

[Bruce Wayne]

Re: Minimum wage, good or bad?

Gee, you could have fooled me:

You are an advocate of a regressive ‘Flat Tax’, the American RightWing is an advocate of a regressive ‘Flat Tax’.

You are an advocate of cutting tax rates as economic public policy, the American RightWing is an advocate of cutting tax rates as economic public policy.

You are an advocate of privatizing healthcare insurance, the American RightWing is an advocate of privatizing healthcare insurance.

You are an advocate of assuming charities will take care of the poor, the American RightWing is an advocate of assuming charities will take care of the poor.

You are an advocate of eliminating the Minimum Wage, the American RightWing is an advocate of eliminating the Minimum Wage.

Pardon me, but I see a duck.

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Politics is alot more than economics though don't you think? I don't agree with an awful lot of the rubbish spouted by Conservatives/Republicans and from what I hear of GWB I really feel for you having the man as your leader as their policies are far from liberal in any sense of the word.

So in answer to your question, I support freedom, an aim that no political party at present targets.

[Bruce Wayne]

Re: Minimum wage, good or bad?

While that allegory may be true, it is certainly not representative. Both times that the Federal Minimum Wage was increased in the ‘90s, the the total number of people in the national workforce increased as the Unemployment Rate declined. This is due to the fact that like others in those income levels, more than 90% of any increase in wages is spent back into the economy, thereby increasing the overall pie.

#

It's probably worth pointing out how many workers are employed by the government. The total number of public sector jobs in Britain rose by 95,000 in the year to June, to stand at 5.85 million. This means the state now employs nearly one in four workers.

When faced with these figures its hardly surprising that the minimum wage and unemployment figures continue to improve. Whether they represent value for money however is another matter entirely.

[jmjj215]

Re: Minimum wage, good or bad?

You can if it’s a large expensive luxury SUV. The tax cut package of 2002 included the ability for a business to write-off 100% of the cost of such a vehicle (Hummer, Escalade, etc.) in the first year.

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With the whole 6k lb. thing - true. But it's a deduction, not a credit. People get those mixed up I think.

[jmjj215]

Re: Minimum wage, good or bad?

With various demographics, you'll get various success rates of teaching abstinence. I would venture to guess it has much more to do with home life than any class they have while in high school or whatever. Parents can teach abstinence very successfully. My parents did. And I know plenty of others that did/do also. VJW's right though - I derailed the thread a bit in picking this out.

[VJW]

Re: Minimum wage, good or bad?

Jesse,

I wasn’t complaining.

:]