Dealer Outlook

Trade Only Dealer Outlook Blog

Caught between a rock and who knows what!

Are you as confused as I am? I’m honestly not sure if I’m for or against the idea Congress is kicking around – the idea of continuing the temporary reduction in payroll taxes that expires at the end of the year.

Oh, it seems like a no brainer that the continuation is desirable, thus avoiding a tax increase in bad times. More money in consumer pockets — well, most pockets anyway – is good for the economy. Consumer spending is considered the key to keeping us from falling into a second recession. But, it’s the way this thing may come down that’s got me scratching my head.

You’ll recall last year, Congress reduced the employee-paid Social Security tax rate from the normal 6.2 to 4.2 percent to put more money in consumers’ wallets and boost the economy. However, that rate will go back up to 6.2 percent in January unless Congress passes some form of continuation. And, keep in mind we’re talking about Congress here, a body capable of anything except finding a reasonable, non-political solution.

For example, Democrats are pushing for a vote on a proposal to actually increase the size of that tax break for workers by another 1 percent (3 percent total). That’s very attractive – it would be good for all our employees. Even better, they also want to include small businesses in the tax cut for the first time. Employers would pay 3.1 percent (a 50 percent reduction) on the first $5 million of their payroll. Now that’s really desirable as most boat dealers don’t have $5 million-plus payrolls these days. It could mean a sizable tax benefit for dealers, marina operators and many other segments of our industry.

But, this question keeps swirling in my head: Shouldn’t we find a way to pay for this? After all, we’re already up to our gunwales in debt, yesterday we put our money printing presses in overdrive to buy time for Europe to deal with its insolvency, and our economy is still treading water to say the least?

The Dems want to fund the tax cut by imposing a 3.25 percent tax surcharge on earnings exceeding $1 million per year. (A person making $1.1 million a year would pay the additional 3.25 percent on $100,000 in earnings.) But the GOP has labeled the proposal a “job-killing tax hike on small businesses” because most small business income is reported on individual rather than corporate tax returns. So, that’s not good because it’s successful small businesses that are the likely ones to create badly needed jobs in the future. Taxing them, or their owners, doesn’t encourage job investment and creation.

But wait: according to the non-partisan Tax Policy Center – a joint project by the Brookings Institute and the Urban Institute — only 1 percent of those reporting business income via individual returns in 2011 would be subject to the proposed surcharge. So its impact would be quite limited. So, that makes it more attractive again.

See how confusing it is to decide what to tell my Congressman and Senator (No.No. I can’t tell them that!). I think continuing the tax holiday is very important, but I don’t like the payment proposal. Still, I think it should be paid for. And, since allowing taxes to increase in these economic times is likely political suicide, we can expect some action on all this soon.

Clearly, Congress should decide the nation’s economic problems are a higher priority than electoral considerations (hey, miracles can happen.) Of course, we shouldn’t get our expectations too high. They’ll probably pass something without paying for it and appoint a super committee to deal with it – and we all know how well that works for us!

Comments

7 comments on “Caught between a rock and who knows what!

  1. LARRY

    THE OLD INDIAN “”WHITE MAN SPEAKS WITH A FORKED TONGUE”” HAS NEVER BEEN MORE TRUE WHEN IT COMES TO OUR POLITICIANS IN WASHINGTON………..
    WHAT ELSE IS NEW? HOWEVER MUST ADMIT LATELY IT HAS BEEN GETTING OUT OF HAND, MORE THAN A BIT CRAZY. IT WOULD BE INTERESTING TO KNOW OF YOUR READERS, HOW MANY ARE THERE THAT CLAIM MAKING MORE THAN A 1.1 MILLION ON THEIR 1040???? AT LEAST THOSE THAT END UP WITH THAT FIGURE AFTER ALL DEDUCTIONS, WRITE OFFS, ETC… ON LINE 45 OR WHAT EVER IT IS.
    THE INSANITY IN WASHINGTON CONTINUES, BE IT DEMS OR REPS, IT IS ALL THE SAME, HARD TO DISTINGUISH WHO IS WHO?, (although I did hear who,is on first, or is it second?).
    I DON’T KNOW ABOUT THE REST, BUT IT SEEMS TO ME THE BIGGEST THIEVE WHO HAS BOTH THEIR HANDS IN MY POCKET IS THE STATE GOVERNMENT, THEY NICKEL AND DIME EACH BUSINESS TO DEATH, SO LITTLE OF WHAT IS DONE IN WASHINGTON UP TO A CERTAIN DEGREE IS MEANINGLESS, CAUSE THE STATES CONTINUE TO NAIL EACH COFFIN…… YET FEW TALK ABOUT THE STATES….. OR CAN DO ANYTHING ABOUT THEM…..
    ANYONE WHO COMES FROM TEXAS WILL TELL YOU PERRY HAS UNDRESSED BUSINESSES THERE, CAIN TALKED ABOUT HIS 999 PLAN, WHICH WOULD ADD TO THE ALREADY STATE SALES TAX, (Am I the only one who can do the math here??), SOUNDS MORE LIKE A 9-11 ATTACK TO ME……….. ANYWAY IT IS A DIZZY STATE OF MIND, AND I AGREE…………WHERE IS THE BEEF? (or the money coming from?)

  2. Jim

    In your example of someone earning $1.1 million, that person would pay an additional 3% on anything above $1million, or 3% on the $100,000 which is $3,000. Whoop Dee Doo! Some in Congress want to gum up the works on someone making $1.1 million paying an additional $3K that they could barely feel when most consumers are experiencin a depression. I have seen little evidence of small businesses and especially larger business being “job creators” in the last decade. Cut the taxes on the lower income groups that need the extra $1K (a noticable increase for them) and have the millionaires pay the extra piddeling $3K, which they will hardly notice and certainly won’t creat extra jobs with.

  3. C Moore

    Jim,
    The lower income folks you mention are not paying income tax.
    42% plus of the population is on already on the government dole… But you know that.
    From your statement I assume you believe only government can create jobs?
    But government jobs are in decline, so I understand your frustration as you think that if Washington could just gets more money then they can create more “good” green jobs like at Solyndra.
    I just don’t understand what part of this industry you are in & what you think is going to happen when the millionares you are so focused on stop producing that income in the USA & produce it & keep it in another country? Just like GE
    I notice Warren Buffett – a liberal Billionare still his fighting paying his far share, so Billionares must be OK as they are also to big to fail- I mean fight…

  4. zyxw

    It’s a no brainer–if your customers have more money in their pockets they will spend more. Consumer spending will boost the overall economy, which will eventually in turn mean more employment and income for everyone. Our short term economic problems have nothing to do with the deficit, which we can currently pay off at interest rates near 0. The long term deficit problem will only grow worse if we don’t climb out of our short term economic slump first. Economics 101.

  5. Jim

    C Moore,

    No one escapes paying FICA, but you knew that. No one escapes paying gas tax or sales tax either…ditto. Solyndra was under cut by the Chinese artificially lowering their prices on solar panels with the additional help of not having to pay for health ins. for their employees or caring about their environment. At least it was an attempt at job creation, something the Republicans will not act on. Millionaires, as I said, have done little to create jobs. The average person having money to spend for products is what creates jobs. The average person spends their money for necessities and products. Excess money of the millionaires typically gets invested and (inexplicably) gets taxed at a lower rate than income for real work??? Millionaires take more than their fair share of services and un-demotracatically influence the laws that protect them.

  6. Jim

    It would be nice if those who commented could get a notification when there were subsequent comments. This way there could be a more interactive conversation, we could resolve questions, add to the information etc.

    Jim

Leave a Reply

Your email address will not be published. Required fields are marked *

Comments are moderated and generally will be posted if they are on-topic and not abusive. For more information, please see our Comments Policy.