I Don't Understand

[scandal 951]

This has been making the viral email rounds in hedge fund/trading circles of late.

I received it with a subject line of "Fwd: Fwd: FW: Obama seeks the advice of a businessman.....if u r a democrat, u won't like this".

I'm a Democrat and I actually found it quite funny and well made, despite being woefully wrong and off the mark about policy

[spookyturtle 9,465]

Well, I'm not dumb but I can't understand

Why she walks like a woman and talks like a man

Oh my Lola, lo lo lo Lola, lo lo lo Lola

[Obama 2012 1,714]

"I don't understand....revenue? profits?"

^^^

that not only sounds like Obama, it sounds like every liberal idiot around here!

[lostinblue 1,989]

This has been making the viral email rounds in hedge fund/trading circles of late.

I received it with a subject line of "Fwd: Fwd: FW: Obama seeks the advice of a businessman.....if u r a democrat, u won't like this".

I'm a Democrat and I actually found it quite funny and well made, despite being woefully wrong and off the mark about policy

Tell the business people on this board what exactly is wrong about this. Have you ever owned and run a business?Why is this business person confused about policy.

[luckytxn 2,264]

This has become so obvious to most that Obama the Socialist has no clue. It is true he hired who he thought were experts to get him through but they were the wrong breed. He should have gone to the business community but he made them into the enemy to get elected. I think he is actually a guy that has the right intentions but was a noob and naive and had no business being elected president yet. The sheep bought him because when he has teleprompter's in front of him he is a decent speaker. The media backed him so we had only a choice they wanted us to elect.

He may have been a good choice when the economy is going good and no wars are happening. In times like we are in we need genuine leaders and Obama the Socialist is no leader.

[scandal 951]

Tell the business people on this board what exactly is wrong about this. Have you ever owned and run a business?Why is this business person confused about policy.

Sure, I'll play along.

Here are some of the glaring flaws in the arguments our cowboy-hatted business protagonist makes.

He identifies himself as a "small businessman who makes $200,000 per year". Very nice. However....

He also identifies the top federal tax bracket as 35% - correct, except that applies only to income over $373K, all his income is in the 33% bracket or lower.

Our hero also misses the very obvious and key fact that it is a PROGRESSIVE and GRADUATED tax scale. He doesn't pay 33% on all his $200K, he pays it only on the portion over $171K. In fact, his actual federal income tax burden BEFORE DEDUCTIONS is 24.6% if he files single, or 20.5% if he files married/joint. Ah... deductions did I say? Some Exemptions, perhaps? His tax deductible IRA or 401K contributions? Mr. Businessman no doubt has expenses to write off, mortgage interest to deduct, a Schedule A and Sched C to file? I can assure you he pays nowhere near 25% in tax, it's likely to be about 17% for your typical self employed person with $200K AGI who owns his own home and can write off his car, office, etc.

Let's continue shall we? He then goes on to count 10% in state and local taxes. In some states, CA, yes (again subject to limitations and exclusions). But not most states, and not any cowboy redneck yeehaw states. Same about his claim regarding sales taxes. The total local/state/property tax burden is going to be typically < 10% combined, though much of that too is federally deductible.

What about SS/Medicare? As he notes, SS only applies to his first $106K in earnings, so that does not add up anywhere near 15% of his total 200K salary. Rather it's 15.3% of 106K, and 2.9% Medicare tax on the last $94K, coming to 9.5% total payroll taxes (SS+Medicare) on his 200K.

Oh, here's the really good one.. "When I die, the government will take half of my estate.". Um, no, I don't think so Mr $200K per year. This year 2010 we had no Estate Tax at all, just ask the very grateful Steinbrenner family. Even when the Estate Tax is scheduled to reappear in 2011, the first $1million is not subject to the tax, and that amount is almost certainly going to be legislated higher (it was $2million during 2006-08). So it's not the case that "half his estate" will be taxed, in all likelihood none of it will be unless he has millions to leave.

In short, the entire rationale of his "70% my income goes to taxes" is utter bunk. His total tax burden, inclusive of all federal, state income taxes, sales taxes, payroll taxes is going to be about 17+10+9.5= ~ 37%. That's not insignificant, but it's a far far far cry from the laughable figure of 70%.

Let's leave his taxes, on to actual economic policy, yes?

He claims that small businessmen in America don't want to grow their businesses or create jobs because it all gets eaten by taxes, and "wasted" by ####### like Obama's "date in NY city". Well, we already saw that the tax burden isn't the impediment. It's quite manageable by historical standards, low, even, due to the Bush tax cuts.

So why AREN'T businesses hiring? The answer is there's no confidence out there. There's no consumer confidence - the consumer is tapped out and just hanging on. So why would a businessperson invest and grow plant and equipment, or hire? Where's the ROI? Even if funds are dirt cheap due to FOMC policy, no one is going to take even a 0% loan if there's no reasonable expectation of a return on the capital. In short, we don't have a credit crisis at this point so much as a confidence crisis. We certainly did have a credit and liquidity crisis 2 years ago, and it's an awfully good thing we stabilized it then. The trouble now is a classic recession: consumers won't buy fearing job losses, businesses won't grow fearing lack of consumers. Cheap capital doesn't alter this situation. The only thing that can act is government, as an exogenous force, to kickstart demand and stimulate growth. Of course, stimulus now is a filthy word in this country.

Let me ask our protagonist cowboy, or you, or all the cheapshot RWNs around here, or the "Party of No" up on Capitol Hill -- what's YOUR prescription? Sure, the private sector is the engine of job growth - everyone agrees to that. But if they're not hiring due to the vicious circle of confidence, then what do you do? DO you have a recipe? Or do you just like to natter about your "too high" taxes and "wasteful" government?

It's also packed with cheap shots (some funny, some not so much) about Geithner, Larry Summers, etc.

All of the smarmy attributions to the Obama character of things like "hire people so I could get reelected" is just silly. The real Obama obviously has never said any such thing. It's cute to create a cartoon where you can put whatever words you want into a character's mouth. Cute, but not very meaningful.

Oh, and finally, the gag about "Confusing revenues with profits"?

Oh Puhleez. I dare say that the real Obama has read a good many more company income statements, 10-Q and 8-K filings than you ever have. Go ahead - ask him to define EBITDA or fully diluted EPS. I have no doubt that he can, as can I. Can you? I've been an investor for decades, and make a living that involves being able to analyze company earning statements. You?

[luckytxn 2,264]

Please. This business will have more taxes to incur and that is not including the taxes that will be passed on down to him in higher charges for goods he will have to purchase. Just last year when I started a new business there were more fees and a continuing fees that I will have to incur. The state and local entities is talking about raising those fees too When he was talking I noticed many taxes and fees he did not mention at all that he will incur just to run a business and have employees. This businessman has no idea of the total effects of the coming taxes that will be raised that the Socialists are talking about in their robin hood plan. He also has no idea of the increase in his new medical plans that he will incurring. All this is in addition to the effect of the consumer lack of confidence in our economy. The consumer also has no idea what the coming effects that are coming their way next year. The middle class pretty much expects to be hit by higher taxes somehow and now the middle class who are the ones that had medical insurance are being hit to pay for the slouches that didn't want it and pay for the astronomical care that the Feds just mandated that all insurers now have to cover. The insurers will in no way eat that cost and lose revenue and go out of business but pass that one to us workers. (As I just found out recently)

No, small businesses actually hire most of the people in this country. They are also now going to have a higher burden to pay for Socialism. The majority of small businesses are hard working and try to do right by their employees that they do have. If they are not sure what is coming they are going to hold off on hiring any new employees or put more capital in their businesses. Businesses at this time are doing more with less for a reason. When stability comes and they feel that it will be an ongoing field then they will be able to hire a few more and plow a tad more into their businesses. The small businesses always has and probably always will be the major employers in this country. It is easy to see the huge companies in any town or city but the small businesses are the ones that collectively hire the majority and they are the ones least able to absorb losses. On top of all that there are competitors that the small businesses have to try to compete with.

Go ahead and try to figure out what the man in the hat was talking about. He left some things out but all business operate on about 5 percent profit. If any business gets to the 10 percent level they are considered golden. It is slim margins we are talking about here. Take out a even small portion of revenue and it can prove costly and shut down business and throw more employees on the unemployment roll.

Anyone remember during the Carter administration (as an example) when the socialists started charging a special "luxury tax"? They figured the rich could afford it so why not. Guess what? The rich could but balked at paying it and decided to not buy the expensive boats or other luxuries. It destroyed whole industries that went under and threw out a bunch of craftsmen unto the unemployment rolls. It didn't hurt the rich folks the Socialists were after one bit but it sure hurt a lot of workers and on top of that the local economies suffered that relied on those industries for revenue. Once those businesses went under it hurt their suppliers also and so on in a domino effect. Of course within a couple of years the Socialists were shown the door and that "special" tax was withdrawn eventually.

Now when we think of the rich we think of Trump and so on and know he can suffer more easily having his taxes raised but most of the so called rich are these small business owners. They don't think they are rich because they work a lot of hours and have constant stress. They do make more than the 250,000 limit that the Socialists have castigated and are after to pay more. They already pay most of all the taxes now. They will always do so. Is it the right thing to bite the hand that feeds you?