Profit Is Good - With Real Numbers

[dlamberth]

. But profit in general is not bad, and is vitally necessary for businesses to remain in business, which in turn is vitally necessary to have an economy not based on trading sea shells.

I know of no one who is saying that profits are bad.

.

 

[Viren]

Consumer demand is contingent upon those consumers having a steady income. The same uncertainty that now grips the corporate world is creating a paralysis among consumers - those who still have jobs. The unemployed don't have an income to spend.

True, but it's also contingent upon wages which have been flat or decreasing for the bottom 50% of Americans for over a decade.

There isn't a glut of products, there's a shortage of confidence. Right now, I need a new leaf blower very badly, (bad back, can't rake) but I won't buy one until I'm certain that I will be able to buy groceries. As long as I don't have a steady income, I won't spend anything that isn't absolutely necessary. I want to buy things, but I can't. I have talked to many local business owners. They're in the same situation. They don't have a reasonable expectation that they can make enough to cover expenses, especially taxes and energy costs, and therefore won't spend the money to hire anyone. They're cutting costs wherever they can. These are my neighbors, small business owners who are losing their homes and doing without just like the rest of the nation.

Companies don't hire because they have more profit. They hire when demand increases and more products need to be made. The increase in profits mainly get passed on to CEOs and shareholders.

A permanent, or at least long term, tax cut along with policies that would keep the price of energy from "necessarily skyrocketing" would give employers enough confidence to hire a few people and start the ball rolling.

Once again, higher profits don't lead to more hiring.

Or we can do it your way and take what little they're making and discourage further economic growth as small employers throw up their hands, take their profits and retire to Mexico. The big corporations will simply continue to move operations offshore in search of a more genial economic climate like China (where they don't care about workers, the environment or ethics very much).

Little money? The banks right now have $2 trillion in cash and corporations have another $2 trillion just sitting there. China manipulates it's currency which is largely the cause of outsourcing. If we pegged our currency too, it would help with outsourcing. There are many other measures we could do besides lowering taxes.

 

[kermit]

This is very, very simple. Profit is the reason someone, ANYONE, opens a business. Take away profit, and you have no economy. That's true of every business transaction from selling your neighbor a few eggs to a multinational corporation selling a hundred million tons of goods to Walmart. If I can't get something (even if it's nothing more than storage space) for my effort, I won't even bother to have a rummage sale. How many of you would like to live in a nation where nobody wants to produce anything?

You have to understand the difference between profit and potential profit. Many companies choose to show a profit. While others choose to reinvest money that otherwise would have been profit. The later historically is a better recipe for success as no money is being cashed out but instead the money is being used to increase the value of the company. These companies attract different kinds of investors the first attracts investors looking to make a quick buck. The second kind attracts investors who are in for the long haul as the value of their investment will increase as the value of the company increases even if they don't get any cash during that time. Stock brokers and day traders like profitable companies, but for your 401k you are better off with a company that take a wealth increase approach.

The first kind is going to be your start-ups as they seek to attract investors with a short ROI. The second is going to be your blue-chip type established industry leaders that can attract investor with an established history of growth.

Historically, profit was a dirty word in business. Profit meant taxes and that's money that is neither used for reinvestment or payment to investors.

 

[kermit]

There is a point where decreasing profits and increasing risk have the same effect as no profits, when business owners say "Why bother?"

With Obama's constant "raise taxes on the evil rich" speeches, it's quite logical for companies to hold onto what they have. They have no certainty, no assurance that if they invest (risk) that money, they'll even be able to break even, much less see a profit. There will be no hiring, no recovery until investors and CEOs can reasonably expect to see something from their efforts.

But looking at history shows this to be false. Some of the highest times of economic growth have been times when personal corporate taxes were much higher than today. Taxes don't have much affect on corporate reinvestment...in fact high taxes encourage reinvestment to avoid high tax rates. Corporate taxes do affect the ROI in private investment if the company pays back the investment out of profits, but if the investment is through stocks then taxes have little to due with investment as taxes are paid in gains.

 

[kermit]

I often find it funny those who obviously have no business training nor experience believing the claims of rich guys who are trying to keep their taxes low. Remember next time you hear Cain or Perry or some other millionaire saying we have to keep taxes low to "protect the job creators" that they are really saying is "I want to keep my taxes low".

 

[chaz345]

Those who are in the highest income brackets aren't exactly shaking in their boots, since they pay lower taxes than most bus drivers (~17%), since most of their income comes from capital gains which is taxed at a paltry 15%. It's a better time to be rich now than it has in the last 80 years. What is lacking isn't personal profits for individuals, but consumer demand. There simply isn't any reason to invest when the economy is so anemic.

Those small business owners would be making much more money off sales if you did have money to buy the products you want, and if you did have a steady income. Statistically, those who most less income spend a higher percentage of their money earned. Those in the bottom third spend nearly everything they earn (often they spend more than they earn, in fact). If you give tax breaks to the bottom earners, or even just flat-out give them money, that money will be immediately used to purchase goods and services which will raise demand which will give those with lots of money a good reason to invest and create more jobs.

Capital gains taxes were lowered to that level for a couple of reasons though. One was to increase investment and the other was so that the little guy with modest investments could better afford things like their kids college education and saving for retirement. What would you think of making the capital gains tax progressive, based not on the person's total income but based on the percentage of their total income that comes from capital gains? So that someone who had say all of their income in the form of capital gains would pay pretty much the same rate as if it were regular income and someone who was only getting a small percentage of their income from capital gains would be taxed at the current rate?

 

[kermit]

What would you think of making the capital gains tax progressive, based not on the person's total income but based on the percentage of their total income that comes from capital gains?

I want to say I like the idea, but then losses get confusing. I would rather see a progressive tax based the sum total of all gains separate from other income. Say your gains were $1000 for year, then 10%- would be reasonable. But if you are a hedge fund manager who had $5M in gains I see no problem with a 30%+ tax rate.

 

[acropolis]

Capital gains taxes were lowered to that level for a couple of reasons though. One was to increase investment and the other was so that the little guy with modest investments could better afford things like their kids college education and saving for retirement. What would you think of making the capital gains tax progressive, based not on the person's total income but based on the percentage of their total income that comes from capital gains? So that someone who had say all of their income in the form of capital gains would pay pretty much the same rate as if it were regular income and someone who was only getting a small percentage of their income from capital gains would be taxed at the current rate?

Ideally all individually realized profits would be taxed progressively, so that those who earn very little by whatever means are taxed lightly and those who personally earn a lot would pay taxes at a higher rate.

It's worth mentioning that there is a common misunderstanding about how progressive tax structures work. In the late 1950s, when the marginal income tax rate was 90%, that did not mean that someone grossing $10 million would only take home $1 million. Rather, the first $10k (or wherever the first tax bracket ends) would be taxed at a low rate, then the next however many thousands of dollars would be taxed at a greater rate, and so on, so that as someone increases their income, their net income always increases, just as gradually reducing rates. So there is always something to be gained from earning more, but once you're in the top 0.5% and already pulling in millions, the percentage gained becomes smaller. This would do wonders for revenue as well as significantly reducing the income disparity, while still providing incentives to work and earn more. Combine that with property and estate taxes and there isn't any need for highly regressive taxes like sales tax.

 

[Verticordious]

I know of no one who is saying that profits are bad.

Sure they do, that's what this is all about. Liberals see someone who has more then them and they covet it. They view themselves as superior to everyone else, and thus anyone who has more than them must have cheated to get it. It never enters into their mind that they simply need to work and study harder.

 

[Wayte]

Sure they do, that's what this is all about. Liberals see someone who has more then them and they covet it. They view themselves as superior to everyone else, and thus anyone who has more than them must have cheated to get it. It never enters into their mind that they simply need to work and study harder.

That's not at all what it's about. Hell, I'm working harder than I ever have (matter of fact, I'd hazard a guess harder than alot of those claiming the left are averted to work by nature) for that exact reason; to better myself. This isn't about some jealousy complex. The financial top is getting everything handed to them on a silver platter at the cost of the everyman, anyone who's heard the word "stimulus" in the last year can tell you that. This isn't about socialism or even equality, least in my case. It's about ensuring that we, the working citizen, are not treated as resources by those with the monetary and legal power to do so. And as long as people continue to hide behind claims of "covetousness" or whatever drivel the politicians are using to justify their little "friendships" with the corporate big wigs, we will continue down that path to corporate sharecropping.

 

[kermit]

Sure they do, that's what this is all about. Liberals see someone who has more then them and they covet it. They view themselves as superior to everyone else, and thus anyone who has more than them must have cheated to get it. It never enters into their mind that they simply need to work and study harder.

Wrong. This is about ending a system that not only doesn't hold those responsible accountable but actually rewards their failure. This is about ending a system that is gamed to give one group an ever increasing part of the pie.

I don't covet anyone's wealth, I do pretty well for myself. I have a nice house, 2 cars and money in the bank. Being rich is a real posibilty for me. But I also know that there's single moms with little support systems that are struggling and mentally unstable people living in the streets. While we can never end these problems trying to help them when the 99% shares an every decreasing piece of the pie will get harder not easier.

There was a letter from the 53% percenters where a young guy is proud of himself that he works 60-70 hours a week to get by. I guess it never occurs to him that when people have to work that hard to "just get by" that there's something wrong. There used to be a time when a janitor could support a family; that day is long gone.

Warren Buffet put it well. If this is a class war, we're winning.

 

[chaz345]

There used to be a time when a janitor could support a family; that day is long gone.

But only some of the problem there is wages. The definition of "get by" has changed a lot too. Back then it was common to have a family of 4 in a 1200 square foot house with one(or no) car and maybe but usually not a single TV.

Now getting by usually includes a lot more stuff as "necessities".

 

[Umaro]

Sure they do, that's what this is all about. Liberals see someone who has more then them and they covet it. They view themselves as superior to everyone else, and thus anyone who has more than them must have cheated to get it. It never enters into their mind that they simply need to work and study harder.

I still don't follow the whole "jealous" line of reasoning. There's a limit to how far jealousy can go, and I think we're far past that. If I make $40k and my boss makes $100k, wanting to take that is jealousy. If my neighbor has a jet-ski and I don't, wanting to take that is jealousy.

But when you start talking I make 18k pushing boxes and my boss makes $10,000,000 telling us the best way to push boxes around, then I don't consider it jealousy. Especially when during the bad times I'd either get fired or my wages cut, but he'd still see his income go up. To me that's not jealousy, that's wanting the profits that everyone helped make to be shared among everyone.

 

[SentWest]

It's about ensuring that we, the working citizen, are not treated as resources by those with the monetary and legal power to do so.

But you ARE a resource.

Your time and energy is a commodity.

 

[Umaro]

 

[Wayte]

But you ARE a resource.

Your time and energy is a commodity.

A resource and a person; that second bit is very important, and it's the removal of that second bit I fear. And as it is, nobody really bothers questioning it, they can't question it. People have families to feed, livelihoods to maintain. And if one person make a ruckus, they can just replace them, especially with the job market being what it is right now.

 

[kermit]

But only some of the problem there is wages. The definition of "get by" has changed a lot too. Back then it was common to have a family of 4 in a 1200 square foot house with one(or no) car and maybe but usually not a single TV.

Now getting by usually includes a lot more stuff as "necessities".

The problem with this line of reasoning is that a family can't afford a 1200 sq. ft. home and live at the "get by" level of the past on just a janitor salary.