Knowing when it’s time to quit
The cat’s out of the bag now, and it’s clear that the Democrats and Obama are planning on destroying small businesses in America. This is no surprise, of course, given that small business — entrepreneurship, independence and individualism — is the antithesis of a government run marketplace:
In the middle of a recession and with rising unemployment, Democrats have been letting it leak that they want to raise U.S. tax rates higher than they’ve been in nearly 30 years in order to finance government health care.
Every detail isn’t known, but late last week Ways and Means Chairman Charlie Rangel disclosed that his draft bill would impose a “surtax” on individuals with adjusted gross income of more than $280,000 a year. This would hit job creators especially hard because more than six of every 10 who earn that much are small business owners, operators or investors, according to a 2007 Treasury study. That study also found that almost half of the income taxed at this highest rate is small business income from the more than 500,000 sole proprietorships and subchapter S corporations whose owners pay the individual rate.
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Here’s the ugly income-tax math. First, Mr. Obama has promised to let the lower Bush tax rates expire after 2010. This would raise the top personal income tax rate to 39.6% from 35%, and the next rate to 36% from 33%. The Bush expiration would also phase out various tax deductions and exemptions, bringing the top marginal rate to as high as 41%.
Then add the Rangel Surtax of one percentage point, starting at $280,000 ($350,000 for couples), plus another percentage point at $400,000 ($500,000 for couples), rising to three points on more than $800,000 ($1 million) in 2011. But wait, there’s more. The surcharge could rise by two more percentage points in 2013 if health-care costs are larger than advertised — which is a near-certainty. Add all of this up and the top marginal tax rate would climb to 46%, which hasn’t been seen in the U.S. since the Reagan tax reform of 1986 cut the top rate to 28% from 50%.
States have also been raising their income tax rates, so in California and New York City the top rate would be around 58%. The Tax Foundation reports that at least half of all states would have combined state-federal tax rates of more than 50%.
Early retirement is look like a very good option for me right now. It is true that as a self-employed person, if I work, I’ll still have more money if I work than if I don’t work. After all, if I don’t work, I have no income at all, whereas if I do work, after state and federal taxes, I still manage to hold onto about 40% of my income. For me, though, hanging onto a mere 40% of my income (and I charge my clients top dollar in my field, which still isn’t much), may not be worth the personal stresses and the actual costs of carrying on my business.
I have to pay for my own equipment and my online legal library. I also have to sustain the wear and tear on my own system as I deal with deadlines, nervous clients, dumb judges (they’re all liberals here), juggling work and family life, etc. At a certain point, the return on my effort gets too small to justify the hassle.
If I were the sole breadwinner for my family, the math would be different. I’d clean Grand Central Station out with a toothbrush to keep food in their mouths and a roof on their heads. But I’m not in that situation, and I have a hard time justifying killing myself simply so that the government can fund the degradation of my health care system.
Hat tip: Radio Patriot
