Email
Too many people are jumping on the “let’s go after the rich people” bandwagon with no thought as to what the end result would be.
Let’s try this hypothetical: Let’s say there is a Widget Company owned by Mr. Big. The company grosses $1 million a year.
The company employs 10 people who each make $50,000 a year. Overhead, raw materials, manufacturing costs, insurance, employment taxes, etc. cost Mr. Big $250,000 a year.
This leaves a net income to Mr. Big of $250,000 a year.
For argument’s sake, let’s assume Mr. Big pays no personal income tax and each of his employees pay 20 percent ($10,000 per year each for a total of $100,000 per year).
So far, everyone is happy.
Now the government comes along and mandates that it isn’t fair for Mr. Big to get away with paying no taxes so they demand an additional 20 percent from Mr. Big, too. He already pays health insurance, payroll taxes, workers comp, unemployment taxes, taxes on overhead, raw material taxes, etc. But Big Brother wants another $50,000.
Mr. Big worked too hard to build his business to go down without a fight. So he has to find $50,000 somewhere, and the obvious answer is to lay off an employee.
Now he’s saved $50,000 and can pay the taxes the government demands.
Problem is, with only nine employees, his production goes down 10 percent. Now the Widget Company grosses only $900,000 per year.
With payroll at $450,000, overhead stays pretty much the same at $250,000 per year (his rent doesn’t go down, nor does his electricity or other operating costs), and Mr. Big nets only $200,000 per year. He needs another $50,000 to break even and an additional $50,000 to pay his taxes.
What to do? Lay off two more employees, of course.
Now with only seven employees, production goes down to 70 percent, the Widget Company is grossing only $700,000 a year.
With payroll at $350,000, overhead at $250,000, Mr. Big is now making $100,000 a year. So he lays off everyone and goes out of business.
Now Big Brother is happy. Mr. Big was sure taught a lesson, wasn’t he?
But Big Brother has 10 more people on unemployment and/or other federal assistance (11 if you count Mr. Big) and loses the $100,000 a year previously collected in income tax.
So who wins? It has always been a fact of life that the very poor and the very rich pay little or no taxes. It’s the middle class who support this country.
But as more and more of the middle class find themselves out of work and therefore also paying no taxes, how can we hope to exist?
I think this “bash the rich” mentality is a case of cutting off your nose to spite your face.
