Confusing Obama

I just want to get one thing clear:

Romney pays a buttload of taxes!

He does.

That 15% or whatever? That’s on money that has already been taxed. He’s getting taxed twice or maybe even three times.

When you get your paycheck, you get taxes taken out. This is done mainly so that you don’t have to come up with lots of money on April 15th and it keeps a stream of money coming in to the government.

With Romney, he doesn’t work. He really has no job. He’s rich, right? He doesn’t have to work. He has money invested in places and basically lives off the money that he makes on the money – kind of like having a savings account that makes interest… except his savings account is huge.

Mitt Romney takes some of that money out so that he has money to live on and buy things with. When he takes the money that he’s made (with his investments), he has to pay taxes on it… again. Just like you have to pay taxes in the interest in your savings account.

Capital gains are the profits from an investment, whether in stocks, bonds, mutual funds, real estate, or collectibles. Find tax rules for calculating your capital gain, tax rates, and tips for minimizing your capital gains tax. (about.com)

And then the money that he got might also be have corporate taxes on it. Those are 30% or more. So Mitt Romney might actually be taxed three times on that money.

There’s no way you can say that he doesn’t pay enough taxes. No way at all. He over pays. That’s how our tax system works. Look it up and do more research if you want.

Should Rich People Get Taxed a Lot?

Well, think about it. Rich people generally invest their money because then they can make more. Those investments fuel our economy.

If you’re starting a new business for yourself, you’re going to need money, right? You’ll need a space to rent. Maybe some business cards, computers, desks, signs, a lawyer to set you up, someone to help you with accounting, advertising, a website, phone service, Internet service, maybe some vehicles, and so on. And then if you’re going to hire some employees, you’re going to need some money in the bank to pay them because you might not be profitable for a while.

Starting a business is taking huge risks (I know). You invest time and lots of money. It might not work out. It could fail. Many small businesses do.

So you either need some seed money or a loan. Some people take on a second mortgage or else they get a loan. Either way, you’re going to a bank. This is called “access to capital” (capital = “money”). If banks don’t have money to lend, then you can’t do anything. You can buy things from other companies that you need or have money to hire people.

If rich people are investing less, then there’s less money for banks to lend. Get it?

If rich people are being taxed more, then they cannot let other people use their money. Also, they have less incentive to take risks and invest that money.

Let me give an example of that on a small scale.

Lemonade Stand Example

Let’s say you have a lemonade stand. For each cup, you make $0.25. You start out slow but then keep investing what you make and pretty soon, you have 25 stands. Each stand makes $10 per day (after you pay for employees, lemons, sugar, cups and advertising), so that’s $250 per day. You invest that money again and create more locations. You now have 50 stands that make $15 per day. That’s $750 per day.

For taxes, let’s say that when you were making $250 per day, you were only taxed at 15% of what you made, which is $37.50 because you were not considered to be making much money by the government. You are left with a profit of $212.50. Life is good.

Now that you’re making $750 per day, you are considered to be rich by the government because you moved into a different tax bracket (level). Your $750 per day is going to be taxed at 60%. You are now paying $450 in taxes and ending up with a real profit of $300.

So by doubling your business, you went from $212,50 per day to $300. That’s only $87.50 for all that work that you did.

Where, then, is the incentive (motivation) to keep working hard to grow your business if the government is going to take more and more?

There is none. It’s not worth it at all if that is what the government is going to do to you.

Because of this, you’re not going to buy more stands, hire more people (jobs) or buy more lemons, cups or sugar. The company (people) that make the stands for you will have less work. The people that grow and bring you lemons, cups and sugar will get less business from you, too. Their businesses won’t be as strong. You won’t be able to provide more jobs to people either because you won’t be opening more stands.

This is basically what Obama is saying when he wants to tax the rich or make the rich pay their fair share.

Got it?

-T