Taxing Credibility
Last week I incorporated my business, so I am taking a keener-than-usual interest in the President’s new tax plans. Elimination of taxes on corporate dividends could have an enormous impact on my tax bill, to the tune of several thousand dollars, because instead of paying myself a high salary and the commensurate FICA payroll tax, I could take money out of the business tax free as dividend payments.
While that’s an interesting side-effect, the fact is that I incorporated for the liability protection and for other procedural reasons. I have no problem paying taxes, particularly when I’m making enough money to live comfortably. You couldn’t buy the benefits of clean air, safe streets, good roads, the courts, national defense, and some kind of social insurance system to keep people from abject desperation without a well-funded government, no matter how rich you happen to be. When I’m doing all right financially, I tend to view obscenely large tax cuts the way some conservatives view government handouts (even when they sometimes benefit from them) – bad policy essentially corrosive to public good and public morals. What really helps me out, in both personal and business finance, is strong demand, a decent market to protect and grow my savings, and a tax system that provides targeted incentives that support sound business strategies rather than a blanket giveaway of public money.
I’ve been bandying this point around with my right-wing pal Brian Duffy. A more enthusiastic supporter of the President’s plan you would not find outside the editorial offices of the Wall Street Journal. Duff writes:
The whole supply side term is truly a misnomer. What Bush wants to do is free up capital, via tax cuts, to stimulate demand. I have been thinking about working out some numbers on how this works in reality. Perhaps I'll use a hypothetical individual who is freelance writer/communications specialist. [That would be yours truly – Rob] What would have happened to that individual if he had been living in a world guided by Bush's tax proposal? For someone in the highest tax bracket that would have meant significantly more net income, allowing that person to expand his business, prospect more, hire help if needed, take more time off, donate more money to causes political or charitable, save more, etc., etc. Perhaps the person would have been able to better weather the loss of a key client? I'll be interested to see your thoughts on this. I'll try to come up with something on your site this week before jetting of on Friday.
Brian – please feel free to use the comment area following this post to present your views. While you’re off basking the Caribbean sun, I’ll whip up a nice toasty reply.
9:13:21 AM 
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