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> What Is a Small Business?, Defining a slippery term
AuthorMusician
post Sep 26 2010, 08:59 AM
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Within the argument for keeping all the GWB tax cuts and making them permanent, the term small business gets thrown around quite a lot without clearly defining what constitutes a small business.

Here's how the SBA defines it:

SBA Definition of Small Business

One glance at that page, and it becomes clear how complex the definition problem is. Contributing to this complexity is the fact that very rich individuals incorporate for tax advantages. Another is that large corporations can be considered small businesses under certain definitions. This op-ed challenges the Republican definition of small business.

Fine and dandy.

Q4D:

How do you define the term small business?

Why is this definition important in the current debates about the GWB tax cuts?
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scubatim
post Sep 26 2010, 08:16 PM
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QUOTE(AuthorMusician @ Sep 26 2010, 03:59 AM) *
Within the argument for keeping all the GWB tax cuts and making them permanent, the term small business gets thrown around quite a lot without clearly defining what constitutes a small business.

Here's how the SBA defines it:

SBA Definition of Small Business

One glance at that page, and it becomes clear how complex the definition problem is. Contributing to this complexity is the fact that very rich individuals incorporate for tax advantages. Another is that large corporations can be considered small businesses under certain definitions. This op-ed challenges the Republican definition of small business.

Fine and dandy.

Q4D:

How do you define the term small business?

Why is this definition important in the current debates about the GWB tax cuts?

I have to say that these numbers are larger than I would have thought, but if that is the legal definition, than at least we now have a common definition to debate with.

Through your link, I found a .pdf here. I think it is important because the current debate that I have witnessed is whether we need to extend the tax cuts to only those making less than $250,000 or to all. Given the fact that those businesses that are considered small business by a measurement of average receipts are all over $250K, I think it is very important to take this segment into consideration. It is well known that small businesses employ many Americans. It is important to find out how exactly increasing the tax burden on those businesses that make more than $250K, which isn't hard to do, will affect that businesses ability to further employ tax payers. If the increase of tax burden on the employer causes the bottom line to force either a closure or cutbacks, that will only have an ill affect on the economy. There is no logic in forcing a business to pay higher taxes if it will only force the unemployment rate to increase. The more people we employ, the more tax revenue we will have. The fewer people employed, the less the tax revenue. Tax revenue comes from people spending money and working. People that are unemployed don't spend money or pay income taxes. I think this is the most important factor to consider. Since I have never enjoyed econ classes, I am happy to pass that evaluation off to the experts.
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AuthorMusician
post Sep 27 2010, 11:04 AM
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QUOTE(scubatim @ Sep 26 2010, 04:16 PM) *
QUOTE(AuthorMusician @ Sep 26 2010, 03:59 AM) *
Within the argument for keeping all the GWB tax cuts and making them permanent, the term small business gets thrown around quite a lot without clearly defining what constitutes a small business.

Here's how the SBA defines it:

SBA Definition of Small Business

One glance at that page, and it becomes clear how complex the definition problem is. Contributing to this complexity is the fact that very rich individuals incorporate for tax advantages. Another is that large corporations can be considered small businesses under certain definitions. This op-ed challenges the Republican definition of small business.

Fine and dandy.

Q4D:

How do you define the term small business?

Why is this definition important in the current debates about the GWB tax cuts?

I have to say that these numbers are larger than I would have thought, but if that is the legal definition, than at least we now have a common definition to debate with.

Through your link, I found a .pdf here. I think it is important because the current debate that I have witnessed is whether we need to extend the tax cuts to only those making less than $250,000 or to all. Given the fact that those businesses that are considered small business by a measurement of average receipts are all over $250K, I think it is very important to take this segment into consideration. It is well known that small businesses employ many Americans. It is important to find out how exactly increasing the tax burden on those businesses that make more than $250K, which isn't hard to do, will affect that businesses ability to further employ tax payers. If the increase of tax burden on the employer causes the bottom line to force either a closure or cutbacks, that will only have an ill affect on the economy. There is no logic in forcing a business to pay higher taxes if it will only force the unemployment rate to increase. The more people we employ, the more tax revenue we will have. The fewer people employed, the less the tax revenue. Tax revenue comes from people spending money and working. People that are unemployed don't spend money or pay income taxes. I think this is the most important factor to consider. Since I have never enjoyed econ classes, I am happy to pass that evaluation off to the experts.


The current debate about the GWB tax cuts involves two proposals, one by the Democrats and the other by the Republicans:

The Famous Comparison Chart

The big difference comes in on adjusted gross incomes above $1,000,000. Keep that in mind when defining small businesses. There is very little difference between the two proposals at the incomes between $250,000 and $999,999.

The $250,000 idea was floated during the 2008 campaigns and was socialized by Joe D. Plummer. That was then; this is now. There is no significant difference between the Democratic and Republican plans at the $250,000 level.

Another wrinkle to be aware of is the S-Corporation. Rich people organize themselves as S-Corps to save on taxes. They do not hire anybody except maybe butlers, maids, groundskeepers, pilots for their private jets and so forth. No matter what happens to taxes, the hiring at this level will remain the same.

Speaking of federal corporate taxes, here's a rundown of them.

So when the debate about personal income taxes goes to small businesses, the assumption must be that these small businesses are not incorporated.

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Paladin Elspeth
post Sep 27 2010, 09:09 PM
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I do not define the term "small business" in the same way that the government does. If Bechtel is really a small business, I'm a svelte, 19-year-old fashion model! w00t.gif

As you have said, the "S Corp" designation makes organizations that make billions of dollars "small businesses". The "Mom and Pop" corner grocery store is what most people like me think about when we hear the term small business.

In a climate where downsizing and outsourcing are the order of the day, I do not see where extending the Bush tax cuts (and it must be remembered that it was Bush who proposed that these tax cuts expire) beyond their expiration date would appreciably result in the creation of more jobs for Americans. The wealthy would just squirrel away the money or spend it speculating.

"Trickle down" is not an economic theory; it's urinary incontinence.

This post has been edited by Paladin Elspeth: Sep 27 2010, 09:14 PM
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London2LA
post Sep 27 2010, 10:36 PM
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Building onto PE's observations about trickle-down economics, I'd add that the America in which trickle-down could conceivably work no longer exists. It imagines a pre-WW II industrial America where the super rich were largely industrialists who, when in possession of extra wealth would invest it in factories, infrastructure, railroads etc. Stuff that required employees to run and produced tangible products or the means to produce them. Now, the money just gets handed to Wall St. brokers who turn it into incomprehensible pieces of paper that they trade back and forth with other brokers producing nothing in the process other than book value. There is no trickle-down effect at all, except occasionally to the Gulfstream corp. or a Ferrari dealer.
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scubatim
post Sep 28 2010, 02:26 AM
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QUOTE(Paladin Elspeth @ Sep 27 2010, 04:09 PM) *
I do not define the term "small business" in the same way that the government does. If Bechtel is really a small business, I'm a svelte, 19-year-old fashion model! w00t.gif

As you have said, the "S Corp" designation makes organizations that make billions of dollars "small businesses". The "Mom and Pop" corner grocery store is what most people like me think about when we hear the term small business.

In a climate where downsizing and outsourcing are the order of the day, I do not see where extending the Bush tax cuts (and it must be remembered that it was Bush who proposed that these tax cuts expire) beyond their expiration date would appreciably result in the creation of more jobs for Americans. The wealthy would just squirrel away the money or spend it speculating.

"Trickle down" is not an economic theory; it's urinary incontinence.

So your argument, but logical continuation is that the economy would improve if the $1million+ paid more taxes. How do you illustrate that?
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AuthorMusician
post Sep 28 2010, 05:21 AM
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QUOTE(scubatim @ Sep 27 2010, 10:26 PM) *
QUOTE(Paladin Elspeth @ Sep 27 2010, 04:09 PM) *
I do not define the term "small business" in the same way that the government does. If Bechtel is really a small business, I'm a svelte, 19-year-old fashion model! w00t.gif

As you have said, the "S Corp" designation makes organizations that make billions of dollars "small businesses". The "Mom and Pop" corner grocery store is what most people like me think about when we hear the term small business.

In a climate where downsizing and outsourcing are the order of the day, I do not see where extending the Bush tax cuts (and it must be remembered that it was Bush who proposed that these tax cuts expire) beyond their expiration date would appreciably result in the creation of more jobs for Americans. The wealthy would just squirrel away the money or spend it speculating.

"Trickle down" is not an economic theory; it's urinary incontinence.

So your argument, but logical continuation is that the economy would improve if the $1million+ paid more taxes. How do you illustrate that?


Less deficit.

That is the burden of proof on those who promote not taxing the millionaire types at the rate of the pre-GWB tax cuts. Their argument hinges on small businesses creating the most jobs in our economy. That is an old argument, and it did not turn out to be true with the GWB tax cuts for the rich. We still slipped into 10%+ unemployment.

So the solution to the recession early on in the 21st century proved itself to be wrong. Now it is proposed again after the meltdown of 2008. The point is that the solution of 2001\2003 isn't any better in 2010. It is an old and failed idea.

Meanwhile, the notion of small business has morphed into what most people would consider mid to large business. Some of it is actually quite large. Not huge mind you. Large business.

The significance to the current debate about taxes is that the argument doesn't hold any water. It doesn't make sense. The definition of terms has shifted way over there. In effect, if you need a job, this is not the way to go. If you care about the deficit, this is not the way to go. If you are truly a mom&pop restaurant depending upon the middle class to stay alive, this is not the way to go. The rich will never eat at your place.

This leaves an obvious question that isn't begging, but demanding: So why go there?

This also raises other questions: Wasn't the pre-GWB economy doing a whole lot better? That is obvious. Why was that?

Ah. And there you go. Why indeed? Was it that money was easy to obtain and invest in the new dot-com whiz bang holy crap stuff that nobody really understood? Yes, I see that. Unemployment was very low. If you could breath and say Windows, you had a job. There was the Y2K scare as well. Money flowed into that easily. Then 2000 came and went, we elected the village idiot (well, the SCOTUS did), and the economy depended on real estate deals of all things.

It was sure to be a disaster, and it was.

This post has been edited by AuthorMusician: Sep 28 2010, 05:49 AM
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Gray Seal
post Sep 28 2010, 12:36 PM
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I agree with AuthorMusician that balancing the budget is preferable to deficit spending. With deficit spending everyone is being taxed to the benefit of bankers and the government. There is a transfer of wealth to bankers and the government sector. It is a shadow tax where people can not respond to the tax until it hits later. Deficit spending is the monster in the closet which has contributed highly to the recent economic problems and which will contribute highly to the further downward trend of the economy.

Balancing the budget should be required. With a balanced budget the economy knows upfront how high the tax is. The economy can respond immediately. There is no monster in the closet to spring out later. Banks and government does not get to benefit secretly. The tax is known to everyone. The high tax suppression upon the market will occur but it will be out in the open where the economy can respond in a fair and open manner. Deficit spending leads to wild economy fluctuations at some point. We are headed for another dramatic downturn because of the recent incredible deficit spending. Such downturns are painful and inevitable while being unpredictable as far as timing and degree of severity.

It is better to downturn an economy with high taxes than to do it via deficit spending. That does not mean high taxes are a good thing but they are preferable over deficit spending.

------

The definition of a small business should not be important. A definition will always be arbitrary in regards to tax schemes.
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AuthorMusician
post Sep 28 2010, 04:41 PM
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QUOTE(Gray Seal @ Sep 28 2010, 08:36 AM) *
I agree with AuthorMusician that balancing the budget is preferable to deficit spending. With deficit spending everyone is being taxed to the benefit of bankers and the government. There is a transfer of wealth to bankers and the government sector. It is a shadow tax where people can not respond to the tax until it hits later. Deficit spending is the monster in the closet which has contributed highly to the recent economic problems and which will contribute highly to the further downward trend of the economy.

Balancing the budget should be required. With a balanced budget the economy knows upfront how high the tax is. The economy can respond immediately. There is no monster in the closet to spring out later. Banks and government does not get to benefit secretly. The tax is known to everyone. The high tax suppression upon the market will occur but it will be out in the open where the economy can respond in a fair and open manner. Deficit spending leads to wild economy fluctuations at some point. We are headed for another dramatic downturn because of the recent incredible deficit spending. Such downturns are painful and inevitable while being unpredictable as far as timing and degree of severity.

It is better to downturn an economy with high taxes than to do it via deficit spending. That does not mean high taxes are a good thing but they are preferable over deficit spending.

------

The definition of a small business should not be important. A definition will always be arbitrary in regards to tax schemes.


Actually, the definition of small business is very important within this context. By knowing what Republicans are thinking while using the term, it becomes clear that their argument for continuing the GWB tax cuts for the $1,000,000 and up crowd doesn't stand up to scrutiny.

It also should be mentioned that the argument has to do with personal income tax rates. There's another little wrinkle that folds in on itself. Are we talking small business income or individual income? Maybe both if the individual is a small business (S-corp or sole proprietor).
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