The Real Mitt Romney

[BigV]

Originally Posted by Flint

The way I understood him to be explaining it in the debate:

1. Reduce ‘individual’ tax rate
...a. Individuals in households pay less
...b. Individuals who own small businesses pay less
2. Tax revenues decreased at this point
3. Small businesses stimulated at this point
...a. Resulting in tax revenues going back up
4. Also, deductions eliminated for households
...a. Households end up paying the same amount

Originally Posted by Flint

BigV, post #211, did you see? A few pages back...

Originally Posted by Flint

Did a little digging... wow this was buried quite deeply.



For reference, here are the points 2 and 3:



Firstly did this all make sense to you, with the exception of points 2 and 3; and to be clear, was it a point '2, a.' that you needed--or a new point '3, a.' moving the current point '3, a.' to '3, b.' ??? I don't see a gap, but if you can point it out I will try to do a better job.

Flint, thanks for your patience. Here's what I see in your first description.

1. Reduce ‘individual’ tax rate

check. for the purposes of this thought exercise, let's start here.

...a. Individuals in households pay less

and this logically follows

...b. Individuals who own small businesses pay less

and this logically follows.

2. Tax revenues decreased at this point

paying less taxes logically produces this result, fine.

3. Small businesses stimulated at this point

this is where I get stuck.

I think you're saying this small business owned by someone who gets their income from that business will have more money since less money is being paid in taxes. Ok. BUT. What is this stimulation? There aren't more sales (no logical argument being made for this proposition). More money isn't *coming in*, they're just not paying as much in taxes. What's the business going to do with this marginal amount of additional money? How is this stimulation? There's no way the amount would be enough to justify hiring someone. I have read that the cost of an employee ranges from 1.25 to 1.4 times the base salary.

What is SBA's definition of a small business concern?

SBA defines a small business concern as one that is independently owned and operated, is organized for profit, and is not dominant in its field. Depending on the industry, size standard eligibility is based on the average number of employees for the preceding twelve months or on sales volume averaged over a three-year period. Examples of SBA general size standards include the following:

Manufacturing: Maximum number of employees may range from 500 to 1500, depending on the type of product manufactured;
Wholesaling: Maximum number of employees may range from 100 to 500 depending on the particular product being provided;
Services: Annual receipts may not exceed $2.5 to $21.5 million, depending on the particular service being provided;
Retailing: Annual receipts may not exceed $5.0 to $21.0 million, depending on the particular product being provided;
General and Heavy Construction: General construction annual receipts may not exceed $13.5 to $17 million, depending on the type of construction;
Special Trade Construction: Annual receipts may not exceed $7 million; and
Agriculture: Annual receipts may not exceed $0.5 to $9.0 million, depending on the agricultural product.

hm... well, sidetracking myself, perhaps a "small business" could have a tax burden that 20% of which would represent enough savings to pay for a new employee... maybe. However! I find it *counterintuitive* to say the least that the first thing a business would want to do with newfound cash is to hire new people. Business are built to increase profit, not to expand employment opportunities. Their reason for existence is to increase profits and they take the path or least resistance to do so.

But I digress.

All this is moot, since Romney's plan is to make the changes to the tax code REVENUE NEUTRAL. This is service to his pledge to avoid increasing the deficit, which would be a logical result of lower tax revenues as we have previously established. So, respectfully, your point Romney's point that businesses would be stimulated by the increased unchanged revenue/tax burden is supported by wishful thinking only. This is my primary complaint.

...a. Resulting in tax revenues going back up

by "broadening the base", meaning more money is subject to taxation by the result of fewer deductions. No one telling this story has provided any understandable, reasonable justification for the growth that is required to fulfill these promises. It's like 1 + 1 + 1 = 5. It just doesn't add up, when you look at each point. It's fine to just assert "5", but it's not rational.

4. Also, deductions eliminated for households

Ok, this is the base broadening part I mentioned a moment ago...

...a. Households end up paying the same amount

But this doesn't follow logically in my mind. How can households pay the same amount of tax if they have fewer deductions, meaning their taxable income is greater? Or are you saying broader base, fewer deductions, lower rates, same tax amount?