Architecture firms across the countryare facing difficult economic times. The AIA is working relentlessly to make sure that Congress is doing everything to help small businesses, not hurt them.
However, it has come to our attention that the House Ways and Means Committee and the Senate Finance Committee are considering moving forward a proposal that would significantly increase the payroll taxes paid by S corporation shareholders in the services sector. Details of the proposal have not been released, but some provisions under consideration have the potential to have a great impact on the many AIA members whose companies are registered as S corporations.
The AIA has joined with other associations to oppose this harmful provision – but Congress needs to hear from you!
We understand that the proposal may expand the application of payroll taxes to active shareholders of S corporations primarily engaged in services. The tax would apply to capital investments, including human capital activities like skills training.
Not only will such a proposal make the tax code even more complex, it will also blur the line between income from labor and income from capital. And, most importantly, it unfairly targets small business - potentially yours - which are the key to the nation’s economic recovery and revitalization.
The only way members of Congress will know about the damaging impacts of this proposal is if they hear from you. Contact your members of Congress TODAY and urge them to oppose any proposal to increase payroll taxes paid by S corporation shareholders.
Thank you for your action on behalf of the profession.
Regards,
Christine McEntee
Executive Vice President & CEO
The American Institute of Architects
Two issues: 1. The AIA is actively lobbying and asking members - as well as non-members - to do something. Combine that with Dr. Architecture's comment here about the AIA getting members to pledge to go into schools and teach and I see a member organization that is acting across many levels to impact the community.
and
2. I JUST completed the process of becoming an S-Corp. I have several friends in very small businesses who are actually doing pretty dang well in this economy. Now there are proposals to raise taxes on our hard work in being the kind of business that this country is supposedly built upon? I realize I sound a little tea-bagger-ish here, but trust me, I'm not.
It is nice to see however any group that supported the stimulus bill, then complained their wasn't enough pork in it for them, has no right to complain about higher taxes. The AIA cant lobby for a place at the trough and then complain the food tastes bad.
Maybe you should go to a tea party. You never know..
Interesting...
I dont mean any disrespect, i dont have my own business... but increasing taxes is a really easy thing to get anyone riled up about. Props for the AIA being proactive, but also lets be realistic. taxes have to go up, theres no way around it. our deficit, in the short term (covering Iraq, Afghanistan, the stimulus, and the bush prescription plan) require 1,000,000,000,000 ANNUALLY to be stripped from our books. That doesnt even account for long term structural debt like medicare, medicaid, social security and pensions...
I understand that perhaps the small businesses like Donna's are perhaps the wrong people to target, but the bottom line as i see it is the sooner we accept our taxes will increase, the sooner we can talk about appropriately raising them, and the better off our country's long term future looks...
This is no indictment of people who would oppose this particular tax increase... just the prevalent toxicity with which the tax issue is discussed...
llet, i agree but, s-corps are traditionally - if you believe the prevailing opinion - smaller businesses, and those are the ones apparently doing the hiring. they are unlikely to move overseas to take advantage of cheap labor. i say, given the uncertainty in the rest of the world, we should start raising corporate rates.
No taxes can remain the same and the expenditures can be cut. Screw Afghanistan and Iraq. Screw foreign aid to every mole hill. Take care of home first. If they stopped spending money on 120K / year administrators and everything else, than yes, we could lower taxes.
I think we should figure out how BP incorporates, then do likewise. Their execs are in for a big bonus on how NOT to clean up the oil spill, and we should do the same.
Some types of corps have been recently recced by the Supreme Court as having the same rights as citizens, so lets play that game.
All sarcasm aside, I'll contact my reps tonight to see how this can be rectified.
C Corps, which large companies will be, are double taxed (they are taxed as a "Corporation", then each individual pays their personal taxes). Us little guys don't want to do that, we are 'transparent', meaning the our company's taxes are our taxes.
I just made my company a S Corp. I am with MBP.
Small businesses are what is going to lead us out of this recession. Tax cuts should be given to the areas that will most likely be doing the hiring.
ManBearPig... yes of course... we could cut spending by a trillion dollars a year doing those things you suggest. But i dont really see the point in railing against tax increases because theoretical pie in the sky options exist.
We could also keep taxes down if we covered all of arizona in solar power plants and stopped importing energy.
Realistically, too many people rely on the system we have installed. The country you want is not the country you can have. I know you know this, and that youre being rhetorical, but still, i think it helps to be realistic... though reading my last post... i sound fatalistic...
Hell... im as left as most, and am as furious with Iraq and Afghanistan as anyone else, but a part of me begrudgingly accepts that the military industrial complex which is sucking up all of that money also keeps a massive percentage of our population in jobs...
unfortunately, manbearpig, taxes do have to go up, and spending does have to be cut. right now, one party will tell you the latter is not so, the other party will tell you the former is not so. Still, we have to do both, and if Americans can start acting like grownups, there's a small chance that we might be able to move beyond the fact that we have to pay for the services (or wars) that we want, and start the much more fruitful discussion of which taxes should be raised and what spending should be cut. If it were up to me, I'd raise taxes on the wealthiest, who have taken so much, but probably elsewhere too, and I'd cut spending on the military first. Even if we disagreed about what taxes to raise and what spending to cut, if we could all face the reality that we need to do those things, we'd be a lot better off. As such, I'm glad to see the AIA involved, but don't know enough about the matter at hand to tell how I feel about their activity.
I guess what your failing to realize is that raising taxes only leads to more taxes and more spending. There is no other option for our generation but to starve the government. We are already crushed by huge defecits and private debts, we cant take anymore. American productivity is up 44% in a decade. That is staggering, mind-blowing and unprecedented. Yet wages are down. Businesses and citizens have been asked to cut back and now it is time for the Government to do likewise. Simply put, its time to draw a line in the sand and say enough. No more. Not this time. No more taxes. You can pay them, I wont, and I know the wealthy arent. So go ahead and be a sucker, a chump and pay, and when they ask for more again and again, remember this discussion.
Thanks for bringing this to my attention Donna. I intend to talk to my local AIA Chapter about this and how I can get involved.
S-corps are the backbone of the small Architect out there. We need to minimize the regulatory and tax burden on them as much as possible.
You can argue all day long that taxes must go up to pay for our current account deficits, but you could tax every small Arch firm into oblivion and barely make a dent in the federal spending.
Our elected officials need to wake-up to the small businesses in our country before we are all working for AECOM.
Obviously this is a fundamental philosophical disagreement... were not going to hash it out here... but i would just suggest that despite all of our desire for the government to run more effectively and operate more efficiently, at the end of the day its run by human beings... not robots.
I understand the frustration, but ManBearPig, if you intend to not pay taxes, i would hope you also stop driving on public streets, going to hospitals, sending your kids to school, asking police officers to protect your neighborhood or fire fighters to put your house out when it catches fire. I would hope you dont take advantage of any federally subsidized student loans, FHA home buyer loans, social security payments, or medicare benefits. It would be the fair thing.
MBP, I think you make some sense about pork etc., and thanks for providing those links.
To me this is really a matter of the issue hitting home, and others have said the same: small businesses are tending to do better right now AND tend to not take so-called "corporate welfare" as much as large companies. S-corps are a way for smaller shops to keep their tax burden low while doing business on a local level. I don't have employees (yet), but my work gets contractors and their subs employed, all of us being small, local players.
It does remind me of a joke I once heard about church/synagogue members: the only thing two members can agree on is how much a third should be tithing.
I would love - LOVE - to see enormous efficiency gains in our government be able to lead to taxes holding steady rather than going up, similarly, if taxes do have to go up I'd love to see efficiencies be used to make that additional money be well-spent. And again, it relates to small companies: I know where every dollar is, while I see large companies - and for godssake all levels of government - losing a lot due to the inability to manage scale. I don't mind paying my share, but I don't want to pay for someone else's inability to manage money.
I strongly believe small, nimble businesses are the way our profession and to a larger extent our entire economy are headed.
Donna you've hit the nail on the head when you said, "small businesses are tending to do better right now AND tend to not take so-called "corporate welfare" as much as large companies"
I guess what your failing to realize is that raising taxes only leads to more taxes and more spending.
Manbearpig, do you have any knowledge of history? Taxes now are among the lowest they've been in half-a-century, and reducing taxes didn't seem to prevent spending. Taxes are artificially low, because in the 1980s this ridiculous chant of "lower taxes! taxed enough already" began, so we slashed taxes (mostly on the wealthiest, where they dropped from as high as 90%). However, this didn't seem to stop spending, in fact spending increased rather exponentially, because of the magic of spending money we don't have. It was perfect! Low taxes, high spending, recklessness on the part of government, individuals and corporations! Perfect! Until about a year-and-a-half ago, of course. There's no way around raising taxes unless you decide that you don't need that public school down the street, you can put out your own fires, pave your own roads, and don't care about the poor people downtown starving if they are unable to get a living wage. Go on spouting the anti-tax rant at the grave of Saint Reagan; those of us in the reality-based community can grow up and tax you, like the rest of us.
I strongly believe small, nimble businesses are the way our profession and to a larger extent our entire economy are headed.
and I didn't mean to sound like I support raising S-Corp taxes, or any taxes on small business. I know almost nothing about small business taxes, so I didn't mean to comment on that directly, just that broadly this idea of disliking taxes while happily using public services has to end if we actually intend to have efficient government that uses taxes wisely.
ManBearPig, How do you square your opinions with the fact that Americans paid the lowest taxes this year since the Truman administration, sixty years ago:
Shouldn't the anti-tax right wing be applauding this? Please explain. And don't resort to any crazybaiting.
We are a nation of special interests. People no longer seem to think in terms of the big picture, the commons, etc. They only think: how does this affect me? It's a terrible way to run a country, based on selfishness.
The AIA wants us to protest a tax bill that may help Americans generally, but will hurt S corporations. My insurance company sends me a plea to protest some new law that will help Americans, but will hurt their niche interest as a corporation. Corporations and their representatives have narrow interests, based on their own immediate needs. In a capitalist system, these corporations are in competition: they want their competitiors to fail.
However, in a nation, we should want our fellow Americans to succeed. I'm for tax policies that don't leave anyone out in the cold. Progressive taxation is fair. The fact that, under the Bush administration, taxes on the wealthiest Americans went down drastically, is fundamentally unfair. The wealthiest Americans should pay more than some guy (or S corporation) making $40,000 a year.
A hedge fund manager making $10 million a year should pay more than you and me. Who doesn't agree with this? And if not, please explain the principles behind your belief.
It is also possible to tax too little with disastrous consequences for a whole region.
Meanwhile, Denmark and Sweden, with relatively high tax rates, have relatively strong economies when compared to the rest of the EU. Because they can pay for what they buy. The problem with the whole tea party mentality is that these people expect public freeways, roads, parks, trains, infrastructure and services, but don't want to pay for it. A true libertarian system (no taxes, nightwatchman state) has only been tested in a few places, usually on avery small scale and it's usually an abject failure.
Meanwhile, a progressive economy and government has been tried in many places, generally with outstanding results. See also.
farwest, I totally agree with your post re: progressive taxing. And FLM with your post too.
Ugh, it's just very frustrating. Yes, like I said above I'm happy to pay my fair share, and I would pay more if I saw seriously smart, beneficial and efficient programs being paid for with those dollars, not only to my benefit but to people I see who need them.
Sometimes it just seems like small business is besieged from all sides, and I never realized it until becoming a small business. I don't at the moment feel like I'm paying too much in taxes, but I also don't feel like I'm making quite enough in profit - we teeter near the red every single month, and I'm by no definition a big spender.
As to the whole AIA question: I'm glad to see the AIA sending out lobbying alerts, that's a big part of what they are supposed to be doing as our representatives. And it gives us all the chance to talk about how it affects us - awareness, knowledge is power, etc.
I had no idea that AIA was behind this until recently. Of all the issues to raise (that they never did) this one makes them pretty pathetic.
This bill clearly failed (Go AIA go!). It was called "American occupation and closing tax loopholes Act of 2010" a.k.a. "John Edwards law" since he was able to dodge 1/2 million dollars worth of taxes.
The law was meant (at the title implies) to close down a tax loophole that was widely exploited by the rich. How?
An S corporation can pay itself either through a "wage" or a "distribution". The later comes with a bonus of not having to pay either medicare or social security. IRS (which many Americans loathe, but I find to be one of the most logical, efficient organizations within the US government) took a strong objection to this practice.
Thus, the proposed law was meant to close a gap between "haves" and "have nots".
Donna, I value your contribution to this site a lot. This post (that you started) makes me very sad about your opinions. You took a classic tea-party approach to this (as much you claim you have not): Self benefit v. fuck everyone else. By not having to pay either social security or medicare you are much better prepared to lowball your fees and undercut your competition; which leads to everyone else being forced to joint the race to the bottom. Architectural fees have plummeted over the years. The only way to combat this is to make it a level playing field.
Either we all pay taxes on social security and medicare, or none of us do. No exceptions.
I found this thread to be entertaining, yet far removed from an informed discussion at hand. Annoying. Yet again.
If we are talking about irrational and unfair taxes, we should be fighting to let the Bush Tax Cuts expire on the wealthy. That's just insane, imho.
How can anyone justify pushing for those to be extended? Only the rich and those that are funded by the rich will benefit, the rest of us will pay the for their continued cuts.
I still don't understand how the R's argued for this and the population still elected so many (not that I like what the D's are doing, either, and let's not even get into the hypocrisy of the tea baggers!)
For my S-Corp and IRS bitch, the IRS has lost my filing for the S in the first place, which required me spending cash to get my accountant to refile.
Then they send me a request for unemploymet tax for the tax year prior to my switching to an S Corp. Now they've lost my first filing for this year!
By not having to pay either social security or medicare you are much better prepared to lowball your fees and undercut your competition; which leads to everyone else being forced to joint the race to the bottom.
But I DO have to pay SS and Medicare and unemployment - on my employees, and on the portion of my income that I take as salary, which is high in proportion to distributions because otherwise the IRS justifiably comes sniffing to see why I'm paying myself too much. And I'm NOT paying myself too much: I make around $50,000 a year. I'm NOT getting wealthy off screwing with the tax code, because I'm an ethical business person, in other words, the kind of middle class fair player that is getting completely fucked in this now and near future society.
And my general ethical business stance leads me to not lowball fees - I walk away instead, and have done so several times.
UGH OK major rant coming: it's like my little trip to the City County building yesterday, when I ended up throwing my belt in the trash because it wasn't allowed in through security and I didn't have time to take it back to my car two blocks away in a garage. I'm a middle-aged, middle-class business person in a public building on business related to the VOLUNTEER work that I do in my community, and because some other stupid criminal fucks in our society might use a belt as a weapon I have to pay for their idiocy? So because some other firm might use unpaid intern labor and lowball fees and backroom promises to get a job, I should have to pay to keep up the charade that they are honest?
Dishonest people will work the system, no matter what it is. I do believe the vast majority of people in this world will do the RIGHT thing and we, as a society, should be encouraging that behavior on a general level while shutting down illegal/unethical behavior on a specific level. So go ahead and audit me, and if I'm doing something wrong I'll pay what I owe. As I said several times upthread: I am happy to pay my fair share.
Except as lunatic as things are getting, pretty soon I'm going to go ahead and move into a cabin in the woods with my family, my chickens, and no internet.
S-corps don't have either the budget or organizational means to defend themselves against tax increases; they're an easy, voiceless target. Exxon, et al? I'd like to know what the ratio between what they pay in taxes annually to what they pay their lobbyists annually is.
We need to all become a wholly owned subsidiary of the Ram-Jac Corporation.
I had no intention of singling you out about this topic, but you seemed very enthusiastic about saying no to taxes. It's important to keep perspective on the topic. This tax law change would have impacted you minimally (as you admit that distribution is tiny portion of how you shuffle moneys around). I wager most s-corp architects would see a tax hike in the range of hundreds of dollars.
The tax loophole closing would have collected 11 billion (as in B) dollars mostly from the ultra-rich who set up dummy s-corps in order to minimize their tax burdens.
It's always sad to see poor folk like us (with limited belt budgets) unintentionally stand up for the 'rights' of those who are hell bent on keeping us poor in the first place. See tea-party's take on healthcare as prime example.
Justin, I disagree that S-corps are not represented. This bill was introduced together with the unemployment extension bill back in summer. The whole bill stalled for almost two months until the s-corp part was taken out. AIA petition worked? If you believe that, I have a bridge to sell you...
trace, I agree with you on Bush tax cuts, but you can't ignore the skunk in the room even if there is an elephant there as well.
I've had nothing but clean interactions with the IRS. Always speedy. Everything they do is well documented. It's the states tax agencies that operate as a burning tire (I'm looking at you NY state).
trace, problem with temporarily suspending any taxes is that once the time comes for them to be reintroduced, the pundits will spin it as a tax hike. People will easily buy it. Witness the rage against Obama for "raising taxes". He did no such thing, and the country is (rightfully) going bankrupt.
I do have a beef with the concept of payroll taxes. On average an employee costs up to 20% more than what the employee thinks they are being paid. People are bad with numbers, and this practice is downright deceitful. The person you hired at $75K will cost you around $100K.
My favorite part of 'Obamacare' is the requirement to show the total cost of coverage on each employee's paycheck. Brilliant! Same should be done with payroll taxes.
Before we can have an informed discussion, we need to have access to the actual information.
There is a level of financial secrecy that persists in the US. Asking anyone to disclose their financials is a big no-no here. I have no idea what most of my close friends make. When someone voluntarily tells you how much they make (see Donna's last post) it is often seen as a downright vulgar thing to do.
America has a very unhealthy relationship with money. It's no wonder the situation is being exploited by whoever's able to.
I'm so vulgar I not only tell people without either shame or pride what I make, I also wear my AIA pin in my nose piercing!*
studs as I said above the only thing two people can agree on is how much a third party should be tithing/paying in taxes. I have no knowledge of sham S-corps that are set up solely to dodge taxes because I'm both too honest and too simple-minded to understand such actions.
Raising everyone's taxes is fine with me, and seems inevitable, but I'll never agree that someone "rich" should pay more than someone "middle class". Where those two definitions actually fall in dollar amounts is a very tough call, I know.
Also, the main point of this post was to show people who always ask "Just what the hell does the AIA do, anyway?" an example. Like their position or not, the AIA has a PAC that does (ineffectual, possibly) stuff.
*I don't actually have a nose piercing, I just like to imagine doing this with my AIA "lapel" pin.
Donna, you are too hard on yourself, and too nice to others. That's how I've perceived you for a long time.
"Raising everyone's taxes is fine with me, and seems inevitable"
That's a defeatist attitude. Taxes reflect our common interests that we are willing to invest in jointly. Corruption is the only enemy. Maybe misinformation squeezes in...
"but I'll never agree that someone "rich" should pay more than someone "middle class". Where those two definitions actually fall in dollar amounts is a very tough call, I know."
Strong start, then self defeat. Again. How much taxes do you expect someone making $50k to pay? How about minimum wage worker? How about someone who just made a million in stock trade? It's not rocket science. I promise.
rstuds - I agree, there is very little transparency here (can't speak for anywhere else, but I'll take your word for it). It is 'bad' to think, talk or want money, at least while you are young.
Talking about one's compensation is a touchy subject. I'll be honest, if someone really wants to know, but no one but my accountant and bookkeeper really know.
As for Donna's salary, keep in mind that, as an S-Corp (and indeed largely why most of us switch from a basic llc to S) we can decide what our 'salary' is and leave the rest in the company, taking disbursements when we want.
;-)
Temporary taxes breaks are obviously not ideal and could be a problem later on (including adding to the deficit), but it would directly help with the business world without unevenly distributing the relief.
You could say that for almost any stimulus or gov't help, right? But the economy still needs help.
Donna - you don't think that people making more, ie "rich", should pay more in taxes? Technically they do, but factually they don't.
We need more clarification out there, imho. Someone making 250k a year is not in the same league as someone making 10mill a year and, imho again, should be taxed as such.
Oh, and I haven't heard of these shame S-Corps either.
Wait, did I write that? Hell, I hadn't even had a bourbon yet at that point (Now I've had two.). I meant a rich person should pay MORE, obviously. Jeez, what a typo - OBVIOUSLY a rich person should pay more, yikes.
Sorry, jeepers, big typo. The question is, am I rich because I make a lot more than minimum wage? Or middle class because I make less than $10mil?
And of my $50K, which I'll file as S-corp earnings for the first time next year, I'll break it down how my accountant tells me to: probably 60-70% salary, 30% disbursements.
Here is a decent breakdown of IRS's attempts of trying to plug tax shelters. No significant improvement since 1986. All the incentives since have failed in either congress or house. S-corp is covered as one of the sources as tax shelter abuse.
Sam Zell turned the Tribune into an S-Corp and avoided a great deal of taxes. Perhaps that was what the legislation was aimed at? Most people do about a 70/30 split between salary and profits or disbursements. We don't make a ton of money to begin with...
I am glad that they didn't screw with the S-Corp either. It's tough out there and many of us S Corp folks need every dollar we can get just to pay for the basics. I am not getting rich being an Architect.
rusty - your two links don't make any sense relative to donna's comments. the first is about the irs trying to prevent people who were trying to divert money that should be taxed (as an s-corp) into non-profit entities. don't think that's what she (or i, or trace for that matter) are doing. second article does not, in fact, describe an s-corp as a tax shelter - it describes taking money that should legally be taxed as income and trying to defer/omit any tax by shuttling it into a single payer esop. again, not what any of us are doing.
also, i'm not sure you have the best grasp on what an s-corp is, tax wise. yes, it allows certain portions to be taken as a distribution, vs. a formal salary, and yes, if you have huge distributions (vs what you would take in salary), you'll avoid payroll and ss tax on them, but that comes with trade-offs vs. other business structures as well. if you're a small business, though, that generates a ton of profit each year, it's a really good thing. you're also still going to be paying personal income tax on that money. guess what, though? llc's and c-corps have a similar issue. llc's just pass everything through as personal income (you have to, at the federal level, decide if you want to be taxed as a partnership or s-corp). c-corps have salaries and bonuses (distributions).
like donna, i'm all for everyone paying 'their fair share' and i've certainly paid mine. if we're bent to turn this into a 'you don't love the country enough to contribute' type discussion, it's going to largely fall on deaf ears.
Nov 20, 10 9:00 am ·
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Who says the AIA never takes action?
The following was in my inbox this afternoon:
Dear Donna R. Sink, AIA:
Architecture firms across the countryare facing difficult economic times. The AIA is working relentlessly to make sure that Congress is doing everything to help small businesses, not hurt them.
However, it has come to our attention that the House Ways and Means Committee and the Senate Finance Committee are considering moving forward a proposal that would significantly increase the payroll taxes paid by S corporation shareholders in the services sector. Details of the proposal have not been released, but some provisions under consideration have the potential to have a great impact on the many AIA members whose companies are registered as S corporations.
The AIA has joined with other associations to oppose this harmful provision – but Congress needs to hear from you!
We understand that the proposal may expand the application of payroll taxes to active shareholders of S corporations primarily engaged in services. The tax would apply to capital investments, including human capital activities like skills training.
Not only will such a proposal make the tax code even more complex, it will also blur the line between income from labor and income from capital. And, most importantly, it unfairly targets small business - potentially yours - which are the key to the nation’s economic recovery and revitalization.
The only way members of Congress will know about the damaging impacts of this proposal is if they hear from you. Contact your members of Congress TODAY and urge them to oppose any proposal to increase payroll taxes paid by S corporation shareholders.
Thank you for your action on behalf of the profession.
Regards,
Christine McEntee
Executive Vice President & CEO
The American Institute of Architects
Two issues: 1. The AIA is actively lobbying and asking members - as well as non-members - to do something. Combine that with Dr. Architecture's comment here about the AIA getting members to pledge to go into schools and teach and I see a member organization that is acting across many levels to impact the community.
and
2. I JUST completed the process of becoming an S-Corp. I have several friends in very small businesses who are actually doing pretty dang well in this economy. Now there are proposals to raise taxes on our hard work in being the kind of business that this country is supposedly built upon? I realize I sound a little tea-bagger-ish here, but trust me, I'm not.
Go ahead, get involved.
It is nice to see however any group that supported the stimulus bill, then complained their wasn't enough pork in it for them, has no right to complain about higher taxes. The AIA cant lobby for a place at the trough and then complain the food tastes bad.
Maybe you should go to a tea party. You never know..
Sources, please, manbearpig, for what you're saying?
so, not enough pork, means we should be taxed more for money we never got? how does that work, pig?
Interesting...
I dont mean any disrespect, i dont have my own business... but increasing taxes is a really easy thing to get anyone riled up about. Props for the AIA being proactive, but also lets be realistic. taxes have to go up, theres no way around it. our deficit, in the short term (covering Iraq, Afghanistan, the stimulus, and the bush prescription plan) require 1,000,000,000,000 ANNUALLY to be stripped from our books. That doesnt even account for long term structural debt like medicare, medicaid, social security and pensions...
I understand that perhaps the small businesses like Donna's are perhaps the wrong people to target, but the bottom line as i see it is the sooner we accept our taxes will increase, the sooner we can talk about appropriately raising them, and the better off our country's long term future looks...
This is no indictment of people who would oppose this particular tax increase... just the prevalent toxicity with which the tax issue is discussed...
llet, i agree but, s-corps are traditionally - if you believe the prevailing opinion - smaller businesses, and those are the ones apparently doing the hiring. they are unlikely to move overseas to take advantage of cheap labor. i say, given the uncertainty in the rest of the world, we should start raising corporate rates.
http://www.healthcaredesignmagazine.com/ME2/dirmod.asp?sid=&nm=&type=news&mod=News&mid=9A02E3B96F2A415ABC72CB5F516B4C10&tier=3&nid=51FE8750311B46CDBEE404F53A9AF78C
"taxes have to go up, theres no way around it."
No taxes can remain the same and the expenditures can be cut. Screw Afghanistan and Iraq. Screw foreign aid to every mole hill. Take care of home first. If they stopped spending money on 120K / year administrators and everything else, than yes, we could lower taxes.
Big D,
I think we should figure out how BP incorporates, then do likewise. Their execs are in for a big bonus on how NOT to clean up the oil spill, and we should do the same.
Some types of corps have been recently recced by the Supreme Court as having the same rights as citizens, so lets play that game.
All sarcasm aside, I'll contact my reps tonight to see how this can be rectified.
C Corps, which large companies will be, are double taxed (they are taxed as a "Corporation", then each individual pays their personal taxes). Us little guys don't want to do that, we are 'transparent', meaning the our company's taxes are our taxes.
I just made my company a S Corp. I am with MBP.
Small businesses are what is going to lead us out of this recession. Tax cuts should be given to the areas that will most likely be doing the hiring.
ManBearPig... yes of course... we could cut spending by a trillion dollars a year doing those things you suggest. But i dont really see the point in railing against tax increases because theoretical pie in the sky options exist.
We could also keep taxes down if we covered all of arizona in solar power plants and stopped importing energy.
Realistically, too many people rely on the system we have installed. The country you want is not the country you can have. I know you know this, and that youre being rhetorical, but still, i think it helps to be realistic... though reading my last post... i sound fatalistic...
Hell... im as left as most, and am as furious with Iraq and Afghanistan as anyone else, but a part of me begrudgingly accepts that the military industrial complex which is sucking up all of that money also keeps a massive percentage of our population in jobs...
unfortunately, manbearpig, taxes do have to go up, and spending does have to be cut. right now, one party will tell you the latter is not so, the other party will tell you the former is not so. Still, we have to do both, and if Americans can start acting like grownups, there's a small chance that we might be able to move beyond the fact that we have to pay for the services (or wars) that we want, and start the much more fruitful discussion of which taxes should be raised and what spending should be cut. If it were up to me, I'd raise taxes on the wealthiest, who have taken so much, but probably elsewhere too, and I'd cut spending on the military first. Even if we disagreed about what taxes to raise and what spending to cut, if we could all face the reality that we need to do those things, we'd be a lot better off. As such, I'm glad to see the AIA involved, but don't know enough about the matter at hand to tell how I feel about their activity.
I guess what your failing to realize is that raising taxes only leads to more taxes and more spending. There is no other option for our generation but to starve the government. We are already crushed by huge defecits and private debts, we cant take anymore. American productivity is up 44% in a decade. That is staggering, mind-blowing and unprecedented. Yet wages are down. Businesses and citizens have been asked to cut back and now it is time for the Government to do likewise. Simply put, its time to draw a line in the sand and say enough. No more. Not this time. No more taxes. You can pay them, I wont, and I know the wealthy arent. So go ahead and be a sucker, a chump and pay, and when they ask for more again and again, remember this discussion.
Thanks for bringing this to my attention Donna. I intend to talk to my local AIA Chapter about this and how I can get involved.
S-corps are the backbone of the small Architect out there. We need to minimize the regulatory and tax burden on them as much as possible.
You can argue all day long that taxes must go up to pay for our current account deficits, but you could tax every small Arch firm into oblivion and barely make a dent in the federal spending.
Our elected officials need to wake-up to the small businesses in our country before we are all working for AECOM.
Obviously this is a fundamental philosophical disagreement... were not going to hash it out here... but i would just suggest that despite all of our desire for the government to run more effectively and operate more efficiently, at the end of the day its run by human beings... not robots.
I understand the frustration, but ManBearPig, if you intend to not pay taxes, i would hope you also stop driving on public streets, going to hospitals, sending your kids to school, asking police officers to protect your neighborhood or fire fighters to put your house out when it catches fire. I would hope you dont take advantage of any federally subsidized student loans, FHA home buyer loans, social security payments, or medicare benefits. It would be the fair thing.
Considering most of what you listed letdown are locally paid for by local property taxes, I agree. I have no FHA, SBA or Student Loans either.
MBP, I think you make some sense about pork etc., and thanks for providing those links.
To me this is really a matter of the issue hitting home, and others have said the same: small businesses are tending to do better right now AND tend to not take so-called "corporate welfare" as much as large companies. S-corps are a way for smaller shops to keep their tax burden low while doing business on a local level. I don't have employees (yet), but my work gets contractors and their subs employed, all of us being small, local players.
It does remind me of a joke I once heard about church/synagogue members: the only thing two members can agree on is how much a third should be tithing.
I would love - LOVE - to see enormous efficiency gains in our government be able to lead to taxes holding steady rather than going up, similarly, if taxes do have to go up I'd love to see efficiencies be used to make that additional money be well-spent. And again, it relates to small companies: I know where every dollar is, while I see large companies - and for godssake all levels of government - losing a lot due to the inability to manage scale. I don't mind paying my share, but I don't want to pay for someone else's inability to manage money.
I strongly believe small, nimble businesses are the way our profession and to a larger extent our entire economy are headed.
Donna you've hit the nail on the head when you said, "small businesses are tending to do better right now AND tend to not take so-called "corporate welfare" as much as large companies"
Thats why they want to tax you.
s-corp here....
just watch it though since the feds are looking to put fees on s-corps if you don't file on time....
Manbearpig, do you have any knowledge of history? Taxes now are among the lowest they've been in half-a-century, and reducing taxes didn't seem to prevent spending. Taxes are artificially low, because in the 1980s this ridiculous chant of "lower taxes! taxed enough already" began, so we slashed taxes (mostly on the wealthiest, where they dropped from as high as 90%). However, this didn't seem to stop spending, in fact spending increased rather exponentially, because of the magic of spending money we don't have. It was perfect! Low taxes, high spending, recklessness on the part of government, individuals and corporations! Perfect! Until about a year-and-a-half ago, of course. There's no way around raising taxes unless you decide that you don't need that public school down the street, you can put out your own fires, pave your own roads, and don't care about the poor people downtown starving if they are unable to get a living wage. Go on spouting the anti-tax rant at the grave of Saint Reagan; those of us in the reality-based community can grow up and tax you, like the rest of us.
I agree with Donna here:
I strongly believe small, nimble businesses are the way our profession and to a larger extent our entire economy are headed.
and I didn't mean to sound like I support raising S-Corp taxes, or any taxes on small business. I know almost nothing about small business taxes, so I didn't mean to comment on that directly, just that broadly this idea of disliking taxes while happily using public services has to end if we actually intend to have efficient government that uses taxes wisely.
ManBearPig, How do you square your opinions with the fact that Americans paid the lowest taxes this year since the Truman administration, sixty years ago:
Low Taxes
Shouldn't the anti-tax right wing be applauding this? Please explain. And don't resort to any crazybaiting.
We are a nation of special interests. People no longer seem to think in terms of the big picture, the commons, etc. They only think: how does this affect me? It's a terrible way to run a country, based on selfishness.
The AIA wants us to protest a tax bill that may help Americans generally, but will hurt S corporations. My insurance company sends me a plea to protest some new law that will help Americans, but will hurt their niche interest as a corporation. Corporations and their representatives have narrow interests, based on their own immediate needs. In a capitalist system, these corporations are in competition: they want their competitiors to fail.
However, in a nation, we should want our fellow Americans to succeed. I'm for tax policies that don't leave anyone out in the cold. Progressive taxation is fair. The fact that, under the Bush administration, taxes on the wealthiest Americans went down drastically, is fundamentally unfair. The wealthiest Americans should pay more than some guy (or S corporation) making $40,000 a year.
A hedge fund manager making $10 million a year should pay more than you and me. Who doesn't agree with this? And if not, please explain the principles behind your belief.
It is also possible to tax too little with disastrous consequences for a whole region.
Meanwhile, Denmark and Sweden, with relatively high tax rates, have relatively strong economies when compared to the rest of the EU. Because they can pay for what they buy. The problem with the whole tea party mentality is that these people expect public freeways, roads, parks, trains, infrastructure and services, but don't want to pay for it. A true libertarian system (no taxes, nightwatchman state) has only been tested in a few places, usually on avery small scale and it's usually an abject failure.
Meanwhile, a progressive economy and government has been tried in many places, generally with outstanding results. See also.
farwest, I totally agree with your post re: progressive taxing. And FLM with your post too.
Ugh, it's just very frustrating. Yes, like I said above I'm happy to pay my fair share, and I would pay more if I saw seriously smart, beneficial and efficient programs being paid for with those dollars, not only to my benefit but to people I see who need them.
Sometimes it just seems like small business is besieged from all sides, and I never realized it until becoming a small business. I don't at the moment feel like I'm paying too much in taxes, but I also don't feel like I'm making quite enough in profit - we teeter near the red every single month, and I'm by no definition a big spender.
As to the whole AIA question: I'm glad to see the AIA sending out lobbying alerts, that's a big part of what they are supposed to be doing as our representatives. And it gives us all the chance to talk about how it affects us - awareness, knowledge is power, etc.
*bump*
I had no idea that AIA was behind this until recently. Of all the issues to raise (that they never did) this one makes them pretty pathetic.
This bill clearly failed (Go AIA go!). It was called "American occupation and closing tax loopholes Act of 2010" a.k.a. "John Edwards law" since he was able to dodge 1/2 million dollars worth of taxes.
The law was meant (at the title implies) to close down a tax loophole that was widely exploited by the rich. How?
An S corporation can pay itself either through a "wage" or a "distribution". The later comes with a bonus of not having to pay either medicare or social security. IRS (which many Americans loathe, but I find to be one of the most logical, efficient organizations within the US government) took a strong objection to this practice.
Thus, the proposed law was meant to close a gap between "haves" and "have nots".
Donna, I value your contribution to this site a lot. This post (that you started) makes me very sad about your opinions. You took a classic tea-party approach to this (as much you claim you have not): Self benefit v. fuck everyone else. By not having to pay either social security or medicare you are much better prepared to lowball your fees and undercut your competition; which leads to everyone else being forced to joint the race to the bottom. Architectural fees have plummeted over the years. The only way to combat this is to make it a level playing field.
Either we all pay taxes on social security and medicare, or none of us do. No exceptions.
I found this thread to be entertaining, yet far removed from an informed discussion at hand. Annoying. Yet again.
If we are talking about irrational and unfair taxes, we should be fighting to let the Bush Tax Cuts expire on the wealthy. That's just insane, imho.
How can anyone justify pushing for those to be extended? Only the rich and those that are funded by the rich will benefit, the rest of us will pay the for their continued cuts.
I still don't understand how the R's argued for this and the population still elected so many (not that I like what the D's are doing, either, and let's not even get into the hypocrisy of the tea baggers!)
For my S-Corp and IRS bitch, the IRS has lost my filing for the S in the first place, which required me spending cash to get my accountant to refile.
Then they send me a request for unemploymet tax for the tax year prior to my switching to an S Corp.
Now they've lost my first filing for this year!
Woohoo for gov't efficiency!
But I DO have to pay SS and Medicare and unemployment - on my employees, and on the portion of my income that I take as salary, which is high in proportion to distributions because otherwise the IRS justifiably comes sniffing to see why I'm paying myself too much. And I'm NOT paying myself too much: I make around $50,000 a year. I'm NOT getting wealthy off screwing with the tax code, because I'm an ethical business person, in other words, the kind of middle class fair player that is getting completely fucked in this now and near future society.
And my general ethical business stance leads me to not lowball fees - I walk away instead, and have done so several times.
UGH OK major rant coming: it's like my little trip to the City County building yesterday, when I ended up throwing my belt in the trash because it wasn't allowed in through security and I didn't have time to take it back to my car two blocks away in a garage. I'm a middle-aged, middle-class business person in a public building on business related to the VOLUNTEER work that I do in my community, and because some other stupid criminal fucks in our society might use a belt as a weapon I have to pay for their idiocy? So because some other firm might use unpaid intern labor and lowball fees and backroom promises to get a job, I should have to pay to keep up the charade that they are honest?
Dishonest people will work the system, no matter what it is. I do believe the vast majority of people in this world will do the RIGHT thing and we, as a society, should be encouraging that behavior on a general level while shutting down illegal/unethical behavior on a specific level. So go ahead and audit me, and if I'm doing something wrong I'll pay what I owe. As I said several times upthread: I am happy to pay my fair share.
Except as lunatic as things are getting, pretty soon I'm going to go ahead and move into a cabin in the woods with my family, my chickens, and no internet.
S-corps don't have either the budget or organizational means to defend themselves against tax increases; they're an easy, voiceless target. Exxon, et al? I'd like to know what the ratio between what they pay in taxes annually to what they pay their lobbyists annually is.
We need to all become a wholly owned subsidiary of the Ram-Jac Corporation.
Donna, sorry to hear about the belt-gate.
I had no intention of singling you out about this topic, but you seemed very enthusiastic about saying no to taxes. It's important to keep perspective on the topic. This tax law change would have impacted you minimally (as you admit that distribution is tiny portion of how you shuffle moneys around). I wager most s-corp architects would see a tax hike in the range of hundreds of dollars.
The tax loophole closing would have collected 11 billion (as in B) dollars mostly from the ultra-rich who set up dummy s-corps in order to minimize their tax burdens.
It's always sad to see poor folk like us (with limited belt budgets) unintentionally stand up for the 'rights' of those who are hell bent on keeping us poor in the first place. See tea-party's take on healthcare as prime example.
Justin, I disagree that S-corps are not represented. This bill was introduced together with the unemployment extension bill back in summer. The whole bill stalled for almost two months until the s-corp part was taken out. AIA petition worked? If you believe that, I have a bridge to sell you...
trace, I agree with you on Bush tax cuts, but you can't ignore the skunk in the room even if there is an elephant there as well.
I've had nothing but clean interactions with the IRS. Always speedy. Everything they do is well documented. It's the states tax agencies that operate as a burning tire (I'm looking at you NY state).
LB
They hook you up with a sweet lapel pin?
So what do you think about a temporary (one year) pause on payroll taxes? That seems nice to me (as an S-Corp)
trace, problem with temporarily suspending any taxes is that once the time comes for them to be reintroduced, the pundits will spin it as a tax hike. People will easily buy it. Witness the rage against Obama for "raising taxes". He did no such thing, and the country is (rightfully) going bankrupt.
I do have a beef with the concept of payroll taxes. On average an employee costs up to 20% more than what the employee thinks they are being paid. People are bad with numbers, and this practice is downright deceitful. The person you hired at $75K will cost you around $100K.
My favorite part of 'Obamacare' is the requirement to show the total cost of coverage on each employee's paycheck. Brilliant! Same should be done with payroll taxes.
Before we can have an informed discussion, we need to have access to the actual information.
There is a level of financial secrecy that persists in the US. Asking anyone to disclose their financials is a big no-no here. I have no idea what most of my close friends make. When someone voluntarily tells you how much they make (see Donna's last post) it is often seen as a downright vulgar thing to do.
America has a very unhealthy relationship with money. It's no wonder the situation is being exploited by whoever's able to.
I'm so vulgar I not only tell people without either shame or pride what I make, I also wear my AIA pin in my nose piercing!*
studs as I said above the only thing two people can agree on is how much a third party should be tithing/paying in taxes. I have no knowledge of sham S-corps that are set up solely to dodge taxes because I'm both too honest and too simple-minded to understand such actions.
Raising everyone's taxes is fine with me, and seems inevitable, but I'll never agree that someone "rich" should pay more than someone "middle class". Where those two definitions actually fall in dollar amounts is a very tough call, I know.
Also, the main point of this post was to show people who always ask "Just what the hell does the AIA do, anyway?" an example. Like their position or not, the AIA has a PAC that does (ineffectual, possibly) stuff.
*I don't actually have a nose piercing, I just like to imagine doing this with my AIA "lapel" pin.
Donna, you are too hard on yourself, and too nice to others. That's how I've perceived you for a long time.
"Raising everyone's taxes is fine with me, and seems inevitable"
That's a defeatist attitude. Taxes reflect our common interests that we are willing to invest in jointly. Corruption is the only enemy. Maybe misinformation squeezes in...
"but I'll never agree that someone "rich" should pay more than someone "middle class". Where those two definitions actually fall in dollar amounts is a very tough call, I know."
Strong start, then self defeat. Again. How much taxes do you expect someone making $50k to pay? How about minimum wage worker? How about someone who just made a million in stock trade? It's not rocket science. I promise.
rstuds - I agree, there is very little transparency here (can't speak for anywhere else, but I'll take your word for it). It is 'bad' to think, talk or want money, at least while you are young.
Talking about one's compensation is a touchy subject. I'll be honest, if someone really wants to know, but no one but my accountant and bookkeeper really know.
As for Donna's salary, keep in mind that, as an S-Corp (and indeed largely why most of us switch from a basic llc to S) we can decide what our 'salary' is and leave the rest in the company, taking disbursements when we want.
;-)
Temporary taxes breaks are obviously not ideal and could be a problem later on (including adding to the deficit), but it would directly help with the business world without unevenly distributing the relief.
You could say that for almost any stimulus or gov't help, right? But the economy still needs help.
Donna - you don't think that people making more, ie "rich", should pay more in taxes? Technically they do, but factually they don't.
We need more clarification out there, imho. Someone making 250k a year is not in the same league as someone making 10mill a year and, imho again, should be taxed as such.
Oh, and I haven't heard of these shame S-Corps either.
Wait, did I write that? Hell, I hadn't even had a bourbon yet at that point (Now I've had two.). I meant a rich person should pay MORE, obviously. Jeez, what a typo - OBVIOUSLY a rich person should pay more, yikes.
Sorry, jeepers, big typo. The question is, am I rich because I make a lot more than minimum wage? Or middle class because I make less than $10mil?
And of my $50K, which I'll file as S-corp earnings for the first time next year, I'll break it down how my accountant tells me to: probably 60-70% salary, 30% disbursements.
Way to state the opposite Donna. This will go on your permanent record.
Can't respond it more detail right now, but for everyone saying they've never heard of s-corp abuse, here is a link to an IRS press release talking about the topic back in 2004 .
Here is a decent breakdown of IRS's attempts of trying to plug tax shelters. No significant improvement since 1986. All the incentives since have failed in either congress or house. S-corp is covered as one of the sources as tax shelter abuse.
I think they take a lot of action. I also think that most of the action they take is old, and irrelevant and inconsequential.
Sam Zell turned the Tribune into an S-Corp and avoided a great deal of taxes. Perhaps that was what the legislation was aimed at? Most people do about a 70/30 split between salary and profits or disbursements. We don't make a ton of money to begin with...
I am glad that they didn't screw with the S-Corp either. It's tough out there and many of us S Corp folks need every dollar we can get just to pay for the basics. I am not getting rich being an Architect.
why not.
not that money in and of itself is at all interesting. but respect is interesting.
rusty - your two links don't make any sense relative to donna's comments. the first is about the irs trying to prevent people who were trying to divert money that should be taxed (as an s-corp) into non-profit entities. don't think that's what she (or i, or trace for that matter) are doing. second article does not, in fact, describe an s-corp as a tax shelter - it describes taking money that should legally be taxed as income and trying to defer/omit any tax by shuttling it into a single payer esop. again, not what any of us are doing.
also, i'm not sure you have the best grasp on what an s-corp is, tax wise. yes, it allows certain portions to be taken as a distribution, vs. a formal salary, and yes, if you have huge distributions (vs what you would take in salary), you'll avoid payroll and ss tax on them, but that comes with trade-offs vs. other business structures as well. if you're a small business, though, that generates a ton of profit each year, it's a really good thing. you're also still going to be paying personal income tax on that money. guess what, though? llc's and c-corps have a similar issue. llc's just pass everything through as personal income (you have to, at the federal level, decide if you want to be taxed as a partnership or s-corp). c-corps have salaries and bonuses (distributions).
like donna, i'm all for everyone paying 'their fair share' and i've certainly paid mine. if we're bent to turn this into a 'you don't love the country enough to contribute' type discussion, it's going to largely fall on deaf ears.
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