Reply #30: I agree that was a foolish comment but is a canard. [View All]

[Statistical]

Anything he spends on expanding his business is a cost and thus isn't taxed.

Say he made $300,000 this year but before end of year he buys a new warehouse. The cost of that warehouse is "tax free" because it is an expense thus it reduces his profit and the amount he is taxed on.

Back to your original point:

"Why should my friend who is struggling to keep his small paint store alive be lumped in with all the high earners? He employs 4 people from the income you want to tax."

Two fallacies here.

1) he isn't facing higher taxes if struggling. If anything there are new tax credits for small businesses who expand hiring.

2) the money he is being taxed on is the profit AFTER paying wages. "He employs 4 people from the income you want to tax." - False. He pays wages. They are an expense. His cold hard cash in profit at end of year is what is taxed.

No profit = no taxes.
Little profit = little taxes.
Lot of profit = lots of taxes.

Your friend will hire people if there is demand.
He will hire people if there is demand for more sales even if his tax rate was 90%.
He won't hire people if there isn't demand for more sales even if his tax rate was 1%.

Businesses (all businesses) hire people because they NEED (not want) more labor in order to maximize profits.