The Rich Pay All The Taxes, So Of Course They Huge Tax Cuts

[Jimmy Higgins]

$1043 billion / 69.1 million people = $15,094.07 revenue per person

Oh, I see. You said "income", when you meant "taxes".

Correct, you misunderstood me.

 

[Loren Pechtel]

How many startups have you run, or even invested in? If they are accumulating real property or equities, they are making money and a 1% surcharge isn't going to hurt - especially in the flush environment that taxed holdings would enable.

Wealth taxes cause the wealth to flee the country.

Let it flee - once it's taxed. And good riddance - the absence of the parasitic profits bled out of the system will create vast opportunity for those willing to play by the rules.

Who said anything about making money? Startups are using losing money. You're just making them lose money even faster.

 

[Harry Bosch]

Equity is simply assets - liabilities. There are many many companies with equity that have never generated a dime in profit or cash flow.

Don't you mean the other way around. Engineering companies often have little equity, but generate money.

The general accounting equation is assets = liabilities + owner's equity. Using algebra, OE = assets - liabilities. I think where you guys might be getting confused is retained earnings which is a sub category of equity. Retained earnings is earnings not paid out over time. But there are millions and millions of corporations with positive equity but no net income. If an engineering firm owns 5 computers and no debt, they have equity in the company.

 

[Jimmy Higgins]

Don't you mean the other way around. Engineering companies often have little equity, but generate money.

The general accounting equation is assets = liabilities + owner's equity. Using algebra, OE = assets - liabilities. I think where you guys might be getting confused is retained earnings which is a sub category of equity. Retained earnings is earnings not paid out over time. But there are millions and millions of corporations with positive equity but no net income. If an engineering firm owns 5 computers and no debt, they have equity in the company.

Engineering companies run solely on debt.

 

[Harry Bosch]

The general accounting equation is assets = liabilities + owner's equity. Using algebra, OE = assets - liabilities. I think where you guys might be getting confused is retained earnings which is a sub category of equity. Retained earnings is earnings not paid out over time. But there are millions and millions of corporations with positive equity but no net income. If an engineering firm owns 5 computers and no debt, they have equity in the company.

Engineering companies run solely on debt.

A general rule of thumb is that banks like to see $3 of equity for every $1 of debt or less. Banks aren't going to lend much to a company that doesn't have much equity or skin in the game. In my experience, engineering firms aren't super capital intensive. A larger firm will generally want a line of credit to alleviate their cash flow when their receivables are large. They'll have some software programs. The owners might own the building. But they aren't buying forklifts and CNC machines.

 

[Jimmy Higgins]

Engineering companies run solely on debt.

A general rule of thumb is that banks like to see $3 of equity for every $1 of debt or less. Banks aren't going to lend much to a company that doesn't have much equity or skin in the game. In my experience, engineering firms aren't super capital intensive. A larger firm will generally want a line of credit to alleviate their cash flow when their receivables are large. They'll have some software programs. The owners might own the building. But they aren't buying forklifts and CNC machines.

In the engineering world it is about billings and showing the bank how much money is coming in. And when I say credit I mean more about a line of credit. Our firm is regional, but still we don't have much equity other than a bullshit ESOP.

The bank will lend us enough to keep things going as along as we can show we are going to keep getting paid.

 

[Harry Bosch]

A general rule of thumb is that banks like to see $3 of equity for every $1 of debt or less. Banks aren't going to lend much to a company that doesn't have much equity or skin in the game. In my experience, engineering firms aren't super capital intensive. A larger firm will generally want a line of credit to alleviate their cash flow when their receivables are large. They'll have some software programs. The owners might own the building. But they aren't buying forklifts and CNC machines.

In the engineering world it is about billings and showing the bank how much money is coming in. And when I say credit I mean more about a line of credit. Our firm is regional, but still we don't have much equity other than a bullshit ESOP.

The bank will lend us enough to keep things going as along as we can show we are going to keep getting paid.

Out of all the companies that I've banked over the years, the most leveraged two were both engineering firms that were ESOPs! It's more a feature that they are ESOPs. Most companies are not nearly as leveraged as an ESOP. So, I see where you are coming from. Having said that, I'm an advocate of ESOPs when succession is being discussed.

Generally, most bank LOC are 75% advanced against receivables. So, in this case, a firm could advance their LOC to $75 against a $100 of receivables. In this case, you'd have $100 of assets, $75 of liability, $25 of equity.

 

[Derec]

Correct, you misunderstood me.

Only because you used the wrong word.

 

[Jimmy Higgins]

Correct, you misunderstood me.

Only because you used the wrong word.

So did you have anything of relevance you wanted to add, other than saying 'bullshit'.

 

[Jimmy Higgins]

So the GOP has tossed around the idea of kicking back the 401k income tax deferment and eliminating the State/Local tax itemized deduction.

The GOP taking away your tax reductions to pass them on to people like Donald Trump.

 

[Malintent]

Correct, you misunderstood me.

Only because you used the wrong word.

or, one could say you approached their statement from the wrong direction.

"Taxes" are the government's "income"... so if you switched the two subjects (tax payer and tax collector), that might explain the disconnect.

 

[Elixir]

Startups are using losing money. You're just making them lose money even faster.

Those aren't startups, they're failures.
I'm in my third startup, and none of them have lost money. All have grown with internal financing up to the point where they have borrow-able equity. That point would have come sooner if all "property" were taxed, lowering the requirement for taxing income.

 

[Loren Pechtel]

Startups are using losing money. You're just making them lose money even faster.

Those aren't startups, they're failures.
I'm in my third startup, and none of them have lost money. All have grown with internal financing up to the point where they have borrow-able equity. That point would have come sooner if all "property" were taxed, lowering the requirement for taxing income.

Other than simplest service businesses companies start out losing money. Maybe the time of losing money is short but it's there.

 

[Harry Bosch]

Startups are using losing money. You're just making them lose money even faster.

Those aren't startups, they're failures.
I'm in my third startup, and none of them have lost money. All have grown with internal financing up to the point where they have borrow-able equity. That point would have come sooner if all "property" were taxed, lowering the requirement for taxing income.

Wow, you're pretty lucky. But the majority of startups lose money. Some never become profitable, eventually "failing". Having said that, they are paying wages to workers the whole time. I started two startups. Neither made any money or profit until we sold. There are many many startups that don't return a profit to the owners until they are sold.

 

[Elixir]

Those aren't startups, they're failures.
I'm in my third startup, and none of them have lost money. All have grown with internal financing up to the point where they have borrow-able equity. That point would have come sooner if all "property" were taxed, lowering the requirement for taxing income.

Wow, you're pretty lucky*. But the majority of startups lose money. Some never become profitable, eventually "failing". Having said that, they are paying wages to workers the whole time. I started two startups. Neither made any money or profit until we sold. There are many many startups that don't return a profit to the owners until they are sold.

That's for sure. But if you manage to hold on and sell at a profit, it falls under the "success" model. I just related a really exceptional example of my hairdresser who started with virtually nothing, and it is a stark contrast to another friend who started buying radio stations with a small fortune, which turned into a less than zero "fortune" as all of them lost money over 14 consecutive quarters. He then sold them all, and made a relatively large fortune... there are a lot of paths to profitability!

* Not terribly lucky - probably just overly conservative and unwilling to get highly leveraged. The BIG wins and losses go to the gamblers!

 

[Elixir]

Those aren't startups, they're failures.
I'm in my third startup, and none of them have lost money. All have grown with internal financing up to the point where they have borrow-able equity. That point would have come sooner if all "property" were taxed, lowering the requirement for taxing income.

Other than simplest service businesses companies start out losing money. Maybe the time of losing money is short but it's there.

Not sure what you consider "losing money". My current concern required us to cobble together about 175k to get out of the gate, and we took poverty-level wages for a few years. But that enabled growth to be internally financed... were we "losing money" by your metric?

 

[Loren Pechtel]

Other than simplest service businesses companies start out losing money. Maybe the time of losing money is short but it's there.

Not sure what you consider "losing money". My current concern required us to cobble together about 175k to get out of the gate, and we took poverty-level wages for a few years. But that enabled growth to be internally financed... were we "losing money" by your metric?

You put in $175k and it sounds like it was years before you even got that back. You were losing money at first.

 

[Elixir]

Not sure what you consider "losing money". My current concern required us to cobble together about 175k to get out of the gate, and we took poverty-level wages for a few years. But that enabled growth to be internally financed... were we "losing money" by your metric?

You put in $175k and it sounds like it was years before you even got that back. You were losing money at first.

No, we still had what we spent the 175k on, and day by day, more and more. We actually had offers for the business in its first year... Some of what we initally spent money on was depreciable, but that only enabled us to buy more stuff. I don't call that "losing money". I call it losing money when you make an outlay to establish a business, and don't realize enough gains to attain positive growth of the value of your investment in the business. By your metric, sure - we "lost" money because we all (three of us) "purchased" jobs that pay well, and added zeroes to the value of the initial investment... I would like to lose money every day, if that's your measure.

I can see how you would say that my friend who bought a bunch of money-losing radio station, then sold them as a group at a profit, was "losing money" during his tenure as owner (he'd have been SOL without getting the right buyer on the hook). But we were MUCH more conservative in our startup. And patient.

 

[Harry Bosch]

Other than simplest service businesses companies start out losing money. Maybe the time of losing money is short but it's there.

Not sure what you consider "losing money". My current concern required us to cobble together about 175k to get out of the gate, and we took poverty-level wages for a few years. But that enabled growth to be internally financed... were we "losing money" by your metric?

I define losing money as generating more expenses than sales! This often happens with startup technology type of companies. I started two. Neither made a profit until we sold. When a company is losing money, usually the owners just don't pay themselves. If you don't pay wages to workers, they'll leave the company. If you don't pay your supplier, you won't get your raw materials. If you don't pay your utility, you'll lose your power. And etc. Having said that, we were able to create a market and the grow the company to the point where we were bought out at a nice profit. But it wasn't easy!

 

[Elixir]

Not sure what you consider "losing money". My current concern required us to cobble together about 175k to get out of the gate, and we took poverty-level wages for a few years. But that enabled growth to be internally financed... were we "losing money" by your metric?

I define losing money as generating more expenses than sales! This often happens with startup technology type of companies. I started two. Neither made a profit until we sold. When a company is losing money, usually the owners just don't pay themselves. If you don't pay wages to workers, they'll leave the company. If you don't pay your supplier, you won't get your raw materials. If you don't pay your utility, you'll lose your power. And etc. Having said that, we were able to create a market and the grow the company to the point where we were bought out at a nice profit. But it wasn't easy!

Heh - if you don't start out knowing you'll need some reserves even if you don't yet know why, or if you count the reserves you knew you'd need as "lost" money, then I guess that's how the calculation goes. We took salaries from the start, hired as possible and resisted the urge to take huge salaries for some five years. So, slower growth. We were 100% internaly financed to that point. Now we have a deep LOC, but it is paid all the way down most of the time. In retrospect though, I like your model better (assuming it goes as planned). I'd have sold a while ago for lifestyle concerns...