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ibx

California Governor, Without Republicans To Obstruct Him, Creates Budget Surplus

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BIGUN

Sorry, but you're mistaken in this case and the Counselor is correct.



No, the counselor is wrong. President Bush successfully championed for a tax rebate, which is literally a reduction in tax. He also successfully championed other tax cuts, i.e., the Bush tax cuts. Do you dispute that?

Further, under the Bush administration there was little to no job growth. Considering how low tax rates were, if supply side economics actually worked as advertised, job growth would have been much higher than during the previous administration, but it was actually much, much lower, nearly zero.
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jcd11235


Further, under the Bush administration there was little to no job growth. Considering how low tax rates were, if supply side economics actually worked as advertised, job growth would have been much higher than during the previous administration, but it was actually much, much lower, nearly zero.



There was a full economic cycle during his 8 years. Started in the dotbomb and 9/11, then saw considerable growth for years, and then a spectacular crash coupled with an incredible liquidity failure, which destroyed jobs across two major segments (housing and financials).

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ibx


so how many of you read past the first few paragraphs of the article?

"The director of external affairs for the California Department of Finance, H. D. Palmer believes that a good deal of the surge in revenues are from a one time realization of capital games by wealthy individuals at the end of 2012 that is unlikely to reoccur. The Governor and many Democrats thus do not support significant increases in spending."

Really fucks with the argument the author was trying to make in the first half. This Texas writer wanted to slam Perry, and the GOP in general, but showed his ignorance of CA politics of the past decade. No understanding of Davis, his eviction that brought us Arnold, or the troubles thereafter.

Brown's quality is that he is a man who understands governance, particularly at the California level. Davis was awful and Arnold unable to work both parties to any results. But let's not overstate what has been accomplished so far.

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jcd11235

***Sorry, but you're mistaken in this case and the Counselor is correct.



No, the counselor is wrong. President Bush successfully championed for a tax rebate, which is literally a reduction in tax. He also successfully championed other tax cuts, i.e., the Bush tax cuts. Do you dispute that?

Further, under the Bush administration there was little to no job growth. Considering how low tax rates were, if supply side economics actually worked as advertised, job growth would have been much higher than during the previous administration, but it was actually much, much lower, nearly zero.

First, Bush was an idiot that tried reducing taxes while increasing the expenditures for war... In effect, no tightening of the belt by Americans as was done in previous wars. Now, that was a single instance in time and should not be factored against the previous five Presidents who were successful in stimulating the economy by applying surplus to tax cuts. True tax cuts... not that stupid rebate shit.

And, yes, the counselor IS correct and your mathematical equation borders on the silly. I've run four multimillion dollar businesses with as many as 300 employees and a couple with as little as five. I can guarantee you that the tax burden on business WILL be a factor in either hiring additional personnel OR adding capital equipment (jobs of suppliers) into the business forecast model.
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kelpdiver

There was a full economic cycle during his 8 years. Started in the dotbomb and 9/11, then saw considerable growth for years, and then a spectacular crash coupled with an incredible liquidity failure, which destroyed jobs across two major segments (housing and financials).



Yes, I remember the jobless recovery under President Bush's administration.
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BIGUN

First, Bush was an idiot that tried reducing taxes while increasing the expenditures for war... In effect, no tightening of the belt by Americans as was done in previous wars. Now, that was a single instance in time and should not be factored against the previous five Presidents who were successful in stimulating the economy by applying surplus to tax cuts. True tax cuts... not that stupid rebate shit.



Borrow and spend has been the Republican SOP for at least the last three Republican administrations.

And, yes, the counselor IS correct …



No, he isn't.

Quote

I can guarantee you that the tax burden on business WILL be a factor in either hiring additional personnel … into the business forecast model.



I see the counselor taught you the red herring trick.

Hiring a new employee is either a profitable decision or it isn't. If it will increase profit, it will increase profit no matter the income tax rate. If it won't increase profit, no income tax rate reduction will make it profitable.
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jcd11235

***First, Bush was an idiot that tried reducing taxes while increasing the expenditures for war... In effect, no tightening of the belt by Americans as was done in previous wars. Now, that was a single instance in time and should not be factored against the previous five Presidents who were successful in stimulating the economy by applying surplus to tax cuts. True tax cuts... not that stupid rebate shit.



***Borrow and spend has been the Republican SOP for at least the last three Republican administrations.

Quote

You are mistaken, those last three republican administrations that did not - all had a democrat congress. Whereas, when Clinton balanced the budget; you're aware that he had a republican congress?

Having said that; we're not talking a balanced budget in this thread. We're discussing those who have used the surplus to lower taxes to stimulate the economy.




BIGUN

I can guarantee you that the tax burden on business WILL be a factor in either hiring additional personnel … into the business forecast model.



jcd11235

Hiring a new employee is either a profitable decision or it isn't. If it will increase profit, it will increase profit no matter the income tax rate. If it won't increase profit, no income tax rate reduction will make it profitable.



Ya know, I'm not even really sure how to address this, but I'll try... Let's use the example of - You need a job. Now, let's say you're not in sales (cause the further you are away from the revenue stream; the harder it is to justify the new hire). on top of what you & I negotiate in the way of wages; I have to pay a "burden" to the government. That's what it's called - burden. Burden is defined as the costs associated with the burden rate which are hidden costs that are not readily apparent. Since total labor costs, including the burden rate, may be as much as 50% higher than payroll costs alone.. that's just for payroll taxes, worker's compensation, health insurance, etc (Statutory Taxes). Then, add in "Voluntary" which you need to attract and retain good employees...

Statutory Payroll Tax Deductions
- Payroll taxes must be withheld from an employee's paycheck. This is required by law. Employers must hand these withholdings over to various tax agencies. Payroll tax deductions include the following:

Federal income tax withholding (based on withholding tables in Publication 15)
Social Security tax withholding (6.2% up to the annual maximum)
Medicare tax withholding (1.45%)
State income tax withholding
Various local tax withholdings (such as city, county, or school district taxes, state disability or unemployment insurance).

Voluntary Payroll Deductions - Voluntary payroll deductions are withheld from an employee's paycheck only if the employee has agreed to the deduction. Voluntary deductions pay for various benefits which the employee has chosen to participate in. Voluntary payroll deductions include the following:

Health insurance premiums (medical, dental, and eyecare)
Life insurance premiums
Retirement plan contributions (such as a 401k plan)
Employee stock purchase plans (ESPP and ESOP plans)

Chances are real good that if I'm facing static, additional or higher taxes in my forecast model; you're not going to get hired. However, if there is a surplus, which results in tax cuts, which results in more spending on my organization's goods & services; then you've got a shot.

Unfortunately, you failed the interview, so we must part ways. Sorry, we wish you the best of luck in your future endeavors. [:/]
Nobody has time to listen; because they're desperately chasing the need of being heard.

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You miss the point. If I have $75k per year to hire somebody, I make $90k per year with that person, and the person now becomes an $85k per year cost but I only have $70k to pay the person, that person becomes a liability. Period. End of story.

Either the person takes a $25-$30k pay cut, or the person get terminated. That's how it goes.

The costs either get passed to consumers OR get taken out on employees. Or, companies go out of business if they do neither.

Re: tax deductability - I could doante $150k this year and have it tax deductible. Problem: I don't HAVE $150k to donate. So deductibility is a bullshit argument for a benefit of INCREASING your red column. And if I have to pay an extra $10k in taxes, that's $10k less that can go to wages. Who gives a shit about "deductibility." If the pay pot is smaller, it is smaller.

Here's a job creation policy: make it easier to hire people. I know, I know. We'd rather punish business owners than hire employees.


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BIGUN

Ya know, I'm not even really sure how to address this, but I'll try...



You do realize that all of that goes into calculating P1 and P2, right? Sorry I didn't go into the details regarding how those are calculated, but that process isn't relevant to the conversation.
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jcd11235

***Ya know, I'm not even really sure how to address this, but I'll try...



You do realize that all of that goes into calculating P1 and P2, right? Sorry I didn't go into the details regarding how those are calculated, but that process isn't relevant to the conversation.

Except that your calculation was incorrect and began with... "In general, if it is profitable to hire someone at 1% tax rate, it is also profitable to hire that person at a 99% tax rate." :S
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lawrocket

You miss the point. If I have $75k per year to hire somebody, I make $90k per year with that person, and the person now becomes an $85k per year cost but I only have $70k to pay the person, that person becomes a liability.



Either your descriptors or your arithmetic is incorrect. Or both. If you have $75k per year to pay wages and associated costs of a new employee, and that employee adds an extra $90k per year to your revenue, then you're adding $15k per year to your pre-tax bottom line. As long as your effective income tax rate is less than 1, hiring that employee (at $75k per year, all in) is a profitable decision.

lawrocket

Re: tax deductability - I could doante $150k this year and have it tax deductible.



Nice red herring. Labor expense is not a donation. Businesses hire employees because those employees increase revenue by an amount greater than the expense associated with those employees.

lawrocket

So deductibility is a bullshit argument for a benefit of INCREASING your red column.



Agreed, but I didn't claim otherwise.
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BIGUN

Except that your calculation was incorrect and began with... "In general, if it is profitable to hire someone at 1% tax rate, it is also profitable to hire that person at a 99% tax rate."



That's still true.

Let P be your pretax profit or loss. If r is your effective income tax rate, then your profit after taxes is P - r*P. If (P - 0.01*P) > 0, then (P - 0.99*P) > 0.
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kelpdiver


There was a full economic cycle during his 8 years. Started in the dotbomb and 9/11, then saw considerable growth for years, and then a spectacular crash coupled with an incredible liquidity failure, which destroyed jobs across two major segments (housing and financials).



The graphical version.

Blues,
Dave
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Iago

.....blah blah blah..... you know you have to let a guy go on Friday for no reason other than business economics you have no business being in this conversation.

Peace, out.



Errr, well yes. If Money in < Money out, then you need to change something. Tax is just one piece of a giant puzzle.
If you can't make the hard decisions when running a business, you probably shouldn't be doing it. No-one LIKES firing people, but that's how it has to be.
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jcd11235


Either your descriptors or your arithmetic is incorrect. Or both. If you have $75k per year to pay wages and associated costs of a new employee, and that employee adds an extra $90k per year to your revenue, then you're adding $15k per year to your pre-tax bottom line. As long as your effective income tax rate is less than 1, hiring that employee (at $75k per year, all in) is a profitable decision.



Sounds like a nice ivory tower argument. In reality, that 90k figure is an estimate. And the cost of an incremental employee hire isn't fixed.

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Just to get back on track.. if there is a surplus and resulting tax cuts to the middle class; they will have more disposable income and therefore buy more goods & services. When people buy more goods & services, it will result in more taxes; rather than high taxes being paid and thus; stimulate the economy even more. It's about moving money around and getting the government to live on a balanced budget. Period.
Nobody has time to listen; because they're desperately chasing the need of being heard.

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Kennedy

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Funny how those who equate taxes with robbery get so upset when the IRS scrutinizes their organizations.



Not funny to me.

Would you be ok if the IRS had targeted politically left organizations and refused to decide tax status, effectively denying them benefits?



They did, but the GOP keeps remarkably quiet about that.
...

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BIGUN

Just to get back on track.. if there is a surplus and resulting tax cuts to the middle class; they will have more disposable income and therefore buy more goods & services. When people buy more goods & services, it will result in more taxes; rather than high taxes being paid and thus; stimulate the economy even more. It's about moving money around and getting the government to live on a balanced budget. Period.



A balanced budget from one year to the next is overrated. While it would certainly be nice to have a balanced budget, on average, over longer periods, such as over a decade, over shorter periods, small surpluses or deficits aren't a big deal, and allow the opportunity for more stable tax rates. If there's a surplus for 2-3 years, that's money that can help cover increased expenditures (or decreased revenues) in other years.
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jcd11235

***Just to get back on track.. if there is a surplus and resulting tax cuts to the middle class; they will have more disposable income and therefore buy more goods & services. When people buy more goods & services, it will result in more taxes; rather than high taxes being paid and thus; stimulate the economy even more. It's about moving money around and getting the government to live on a balanced budget. Period.



A balanced budget from one year to the next is overrated. While it would certainly be nice to have a balanced budget, on average, over longer periods, such as over a decade, over shorter periods, small surpluses or deficits aren't a big deal, and allow the opportunity for more stable tax rates. If there's a surplus for 2-3 years, that's money that can help cover increased expenditures (or decreased revenues) in other years.

Very good in theory, but in practice no government has been able to resist the temptation to blow a surplus on, for example, unnecessary wars,.
...

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Iago

And over-educated-grad-student-with-no-real-life-experience above can create all the 'equations' he wants with p1 and p2 and r and whatever else. None of it matters because it IS NOT a simple equation.



Yes, it actually is that simple. Calculating P is far more complex, and that process will vary from business to business. The important property of P is that it is not a function of r.
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kallend

Very good in theory, but in practice no government has been able to resist the temptation to blow a surplus on, for example, unnecessary wars,.



Yes. Good fiscal policy is a small, but important, aspect of good governance. Responsible policy in other aspects of government is also necessary.
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The national debt is pushing $17 trillion. It's a number that is so large that people cannot comprehend it. But that debt has to be repaid. And if every product and service produced and provided in one year in the US went to pay off the debt, there'd still be a few trillion left to pay off. That's how big it is.

I think about $11 trillion of the debt is actually money owed to Medicare and Social Security. The decades-long Congressional spending spree has been paid for, in large part, with money "borrowed" from Medicare and Social Security. It's gotta be paid back.

It's been the quintessential worst of both worlds. No reserves left for Medicare and Social Security (their "trust funds" are not really trust funds) mean that those moneys must be replenished while more money must be paid to it. That money must come from the general fund, meaning that giving two or three trillion per year to SS and Medicare means that all other spending must be slashed in the future and taxes must be raised significantly (we're talking more than doubled).

It is the inevitable result of the qualities that make governmental practices unsustainable: (1) the offering of market-level services at below-market prices (cost shifting); (2) a pay-as-you-go system funded by those not using the service; (3) funds intended for programs diverted (borrowed) for use in other programs (taking money from Medicare and Social Security has even been used to create "balanced budgets."

Think we've had problems balancing the budget? Let's see what happens in ten years...


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ibx


California only has a surplus because of insanely high taxes and a state legislature which has yet to increase spending to match the revenue returned by the tax increases and recovery from the recession.

1. Brown's 30% increase on the highest marginal state income tax rate in the country raised it to 13.3%. Even people poor enough to qualify for government moderate income housing assistance are paying 9.3% plus the separate 1.0% State Disability Insurance surcharge for a 10.3% total.

http://en.wikipedia.org/wiki/State_income_tax

2. California has the highest minimum state sales tax in the country of 7.5% (6.5% + the 1% uniform local tax, with some cities and counties adding another 2.5% for a 10% total).

http://en.wikipedia.org/wiki/Sales_and_use_taxes_in_California

3. California has extremely high property values (6 of the top 10 most expensive cities in the country are in SIlicon Valley) which means at the base 1% rate a modest 1500 square foot 3/2 ranch built in 1950 can land a $15,000 annual tax bill for people whose tax basis hasn't been limited by Proposition 13.

http://www.huffingtonpost.com/2012/12/02/the-most-expensive-cities_n_2220188.html#slide=1825107

4. California has high corporate taxes. One-man S-corps (like skydiving instructors) pay 2.5% with an $800/year minimum . C-corps pay at least 8.84%.

https://www.ftb.ca.gov/businesses/faq/717.shtml
https://www.ftb.ca.gov/businesses/faq/704.shtml

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