Joe the plumber wants his question back.

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When the power of love overcomes the love of power the world will know peace.
Jimi Hendrix

For people who have jobs &/or employ others or who may look for a job or may wish to start their own business, ... taxes at a time like this are an important consideration.

Short answer? They pay more tax, other things being equal.
But being squeezed would mean less income and less taxes, no? But yeah, it's a given isn't it, that when business falls off, employees are shown the door, or hours cut, or something is done to cut costs?

I just put down the pencil on a return of mine whose H/W owner's S corp provided them 300,000 in compensation and another 400,000 in pass thru income. They left for the greener (union free) pastures of the Southland about 10 years ago and have been very successful down there. Their combined fed & state income tax rates are 42% and toss in another, oh, 3 or 4 % for FICA effect, and you're talkin' taxes mate. Total bite for them last year..about 280. ( I don't want to make that call tomorrow )
Their payroll varies with the contracts. Last year, non owner wages were about 800,000 and I suppose that was 25-35 workers, depending...

I remember telling him about 20 years ago not to complain about paying at 28%. He'd never see the top rate that low again during his lifetime. I was right.

One thing S Corp. owned by professionals (docs, lawyers, accountants, etc) may see in the not too distant future is self employment tax on all pass thru income. This has been kicked around for a while, is chronically abused, and may have champions on the hill now. We shall see.

In the meantime, may I interest you in some bedtime reading from a member of the Council of Economic Advisors on the subject of the effect of taxes on small business investment and hiring decisions? (pp8-9)
http://www.treas.gov/offices/economic-policy/round_table_documents/2004/rosen.pdf
Also:
http://www.sba.gov/advo/tax_conf.pdf

Last time I checked profit is income, my most memorable moment with a CPA was after my first year in business I had a hefty income tax bill, his response was that it was a good problem to have...I agree. I got slapped that year because although he is a great accountant he didn't think my tax liability was going to be that significant that year, obviously he didn't know much about Ferrari's.

Chapter 2:

Profit taking

Those figures sound about right. Taxes are usualy your second biggest expenese, after employee's.

Every cost increase affects you, be in fuel, materials, taxes, or a minium wage increase.

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2016 Corvette Stingray 2LT
1969 280SE
2023 Ram 1500
2007 Tiara 3200

They are they biggest single expenses aside from material, its all the little 1%'s that you forget about which eat you alive.

Tell me about it! I'm going to get a better quickbooks program than my uncle uses and watch every cent!

I got a surprise with my first project which was just a little fix up...I wanted to spend $10k, and those little 1%'s pushed it to almost $12k! NFW can that happen with a real project.

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2016 Corvette Stingray 2LT
1969 280SE
2023 Ram 1500
2007 Tiara 3200

If you watch the pennies the dollars will take care of themselves.

and the 1%'s only accounting for $2000 of your equation is optimistic.

Yeah that makes sense, pennies add up to dollars!

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2016 Corvette Stingray 2LT
1969 280SE
2023 Ram 1500
2007 Tiara 3200

We ran into some unexpected things like we had to put in a radon system, so I don't think I did to bad. The radon system cost us like $500 alone.

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2016 Corvette Stingray 2LT
1969 280SE
2023 Ram 1500
2007 Tiara 3200

One thing that I am very good at is estimating, I can get an estimate down to cleaning the last mouse turd in the duct work but the best lesson I've learned is its best to be pessimistic rather than optimistic. In other words guess how much it will cost.......then beat your own guess down start with the lowest corner of the job and work your self up to the chimney cap.



Then add 20%

Thats about right.

I figured about $2k for a new furnace.

The furnace cost a tick over $1,500, plus $700 for labor and about that in parts. So it was a $3k job.

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2016 Corvette Stingray 2LT
1969 280SE
2023 Ram 1500
2007 Tiara 3200

Golly, you mean being self-employed takes WORK!? Why would anybody want to take that risk, given that the government wants to tax the shyte out of small businesses?

Ferrari's don't grow on tree's.

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2016 Corvette Stingray 2LT
1969 280SE
2023 Ram 1500
2007 Tiara 3200