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August 12, 2010 at 5:13 pm #700874
DPMemberThis is the right way to prosecute an argument, folks——with a minimum of personal attacks and a maximum of questions, evidence, analysis, and thoughtful opinions.
It’s a beautiful thing.
August 14, 2010 at 6:44 pm #700875
JulieMemberSightline has a graph comparing income tax rates on $300,000 (for single earners) under 1098 with rates in CA, OR, ID, and MT. If you follow the “certain claims” link under the graph, the assumptions are explained.
August 15, 2010 at 7:19 am #700876
JoBParticipanti think the picture changes a bit if you figure in the sales tax… but california and Idaho both have sales tax as well as income tax..
August 18, 2010 at 7:21 pm #700877
JulieMemberAugust 19, 2010 at 12:01 am #700878
JoBParticipantJulie…
LOL.. thanks for the link..
regardless of the reasons it would seem that an income tax doesn’t chase the wealthy away…
unfortunately.. facts and reason don’t chase the rhetoric away either:(
August 19, 2010 at 12:55 am #700879
JulieMemberAh, but JoB–I think it’s important to TRY facts and reason, anyway.
Otherwise, there’s little hope of a more rational world.
August 30, 2010 at 6:05 pm #700880
JulieMemberEconomic Opportunity Institute has a calculator to help people see how their tax would change under 1098. It takes into account AGI, filing status, personal property ownership and county, business status, receipts, county and business property:
Initiative 1098 Tax Calculator
I would be interested in what results are shown for owners of businesses. Would any of you be willing to share your results?
Note: My browser occasionally gives an error on this link. Reloading, sometimes a couple of times, seems to work; maybe their server is overloaded?
August 30, 2010 at 6:23 pm #700881
CarsonParticipantJulie,
Do you think a business owner that nets over 200K a year would ever want to admit it? Not a chance. I don’t think there are many in the first place.
August 30, 2010 at 6:33 pm #700882
CarsonParticipant….but, I am sure lots of “business owners” that won’t admit who they are, will claim 1098 will force them to fire people. Just waiting for Smitty to chime in!!
August 30, 2010 at 6:39 pm #700883
KBearParticipantAt any rate, the anti-tax crowd aren’t moved by facts.
August 30, 2010 at 6:43 pm #700884
superman1179Memberwhy in the world would vote to increase taxes to anyone? do you people really think they will lower the sales tax in this state, it is complete bs. we need to stop baby sitting the poor and drop a lot of government housing projects to save money.
August 30, 2010 at 6:48 pm #700885
KBearParticipantLike I said.
August 30, 2010 at 6:49 pm #700886
CarsonParticipantWe can always tax the poor!!!
August 30, 2010 at 7:12 pm #700887
DPMemberThanks for the calculator link, Julie!!
My taxes won’t be affected by 1098 (not even close) so I don’t need such a calculator, but I’ll check it out anyway.
Carson, I agree with you that a lot of people wouldn’t be willing to admit that they make over $200,000 per year, but that doesn’t necessarily mean they are trying to hide their motives. It’s just not the type of thing some people feel comfortable mentioning in a public discussion.
Nevertheless, there was a person on this blog who bravely admitted that he would be affected by the tax, remember? He also happened to be FOR I-1098, which I think is significant. His blog name is “Oliver” and here’s an excerpt of comments he made on a different thread:
Oliver: “The state income tax would apply to me and I am all for it. I don’t see it as unfair because there is a lot that is unfair to people who are not high income earners – such as a regressive sales tax and reliance on property taxes. 10% on a pair of jeans for my kid is nothing to me, but it’s quite a lot to the people of the farming community in Eastern Washington that I am from . . .”
I thought that was particular well said by Oliver.
Here’s a link to the original thread from which I excerpted:
https://westseattleblog.com/forum/topic/anyone-for-1098
—David
August 30, 2010 at 7:15 pm #700888
CarsonParticipantDP,
I am not talking about people making enough to pay 1098 taxes, I know enough of those. The question was business owners that would be affected and the possibility it might cause them to tighten their business belts and hire less or fire more as a direct result. I am still willing to wager the number of business owners that would be affected is very very small.
August 30, 2010 at 7:20 pm #700889
JulieMemberCertainly, some people (on either side, btw) aren’t moved by facts. I don’t object to people posting the same old opinions over and over–I do it myself, sometimes, because I keep hoping to express my opinions more clearly and cogently.
But I’m confident–and we’ve seen examples on this blog–that there are people on both sides actually interested in gathering facts, and I’m also confident that some of us are willing to refine, adjust, or outright change our opinions if enough facts lead us to do so.
I am a strong supporter of 1098, because all the information I have so far leads me to conclude that any harm it does will be far outweighed by the good. I think it does not serve us well to deny any possible harm, however. But vague claims of harm or of good are not as helpful to any of us as specific examples. Hence my request to business owners, both supporters and opponents, who will lose or gain by 1098.
August 30, 2010 at 9:05 pm #700890
JoBParticipantsuperman1179
somewhere in this thread is a tax comparison that clearly shows that this will still be a relatively low tax state for those who will be affected by the tax…
and somewhere else is a table that shows that increasing taxes apparently doesn’t deter high income residents.. since they tend to live where the taxes are the highest.
somewhere else is a table that shows how much property tax relief would be available to homeowners…
so do i think passing a tax that will pass some of our tax burden onto those wealthy enough to afford it is a good idea? well.. yes.
this is a property tax relief bill for most washington taxpayers…
who in their right mind wouldn’t vote for a property tax relief bill that doesn’t bankrupt essential services or schools?
August 31, 2010 at 1:55 am #700891
pmichaelMemberHi,
I figured I might as well post something since somebody requested a specific example. I’m an entrepreneur running a small tech startup here in Seattle. If 1098 passes I plan to move the company out of state either to Austin, Texas or to Silicon Valley (where they have income taxes, but the Washington competitive advantage is gone). I have a low salary income since we are startup, but as we grow and maybe get acquired in a couple of years we might have a reasonable pay day making up for the years of a sub-standard salary. Washington will tax this at 10% while federal taxes will be 15-20% (long term capital gains). There is no way in 1098 to amortize my income over several years so when I do make money I get punished much harder than if I had a normal salary.
It will be too bad since I really do love Seattle, but my partners and I can’t justify staying.
August 31, 2010 at 2:13 am #700892
JoBParticipantpmichael..
do you also own a home here?
and have you spoken with a tax accountant about how you might manage those circumstance to avoid a substantial tax burden?
August 31, 2010 at 2:26 am #700893
pmichaelMemberHi,
I wanted to also comment on S Corp vs C Corp since I’ve had both. Choosing an S Corp or C Corp is dependent on many business variables and there are many reasons why you would want a S Corp vs a C Corp and vice-versa.
In a C Corp if you distribute profits as dividends to owners you get double-taxed (once at the corporate level and again on the personal level). S Corps were created for generally small businesses to avoid this and pass both losses and income to the owners directly on their personal income tax. There are tons of IRS nuances between the two types of corporate structures, but I recommend you go see a good accountant. Lets just say there are strong reasons to stay in an S Corp if that fits your business needs.
One of the many caveats with a C Corp: You can’t just pay yourself a higher wage instead of getting double-taxed on a dividend – that sets off red flags at the IRS.
“With a C corporation, it’s usually a good idea to keep your compensation as regular and level as possible to avoid waving any red flags at the IRS. The major problem to avoid is having the IRS recharacterize some of your salary as disguised dividends, which are not deductible to the company. This becomes a danger if your salary grows beyond what is considered reasonable for your position.”
Taken from:
http://www.toolkit.com/news/newsDetail.aspx?nid=fairwage
I just searched google and found this random link with a very basic comparison:
August 31, 2010 at 2:32 am #700894
pmichaelMemberJoB,
I own a home, but will most probably sell it unless it somehow works out on a personal level where I can spend 6-9 months out of state and the summers here.
I have spoken to an accountant and there is no way to amortize out income or to not have 1098 tax capital gains. The best way he said was not to have Washington residency.
August 31, 2010 at 3:26 am #700895
JoBParticipantpmichael…
you may be one of the rare few for whom 1098 may not work.
if you throw the buyout dice..
stick to a S Corp to maximimize cash in hand
and win big
you would have to pay tax on your windfall profits.
but look what you will have to give up to do that..
August 31, 2010 at 3:47 am #700896
pmichaelMemberJoB,
You are right, I really hate to leave Seattle – I think most startup entrepreneurs are in the same boat, of course who knows how many will make the same decision I have made. Luckily I don’t have a family to move, just Washington state assets that I will sell. I don’t think there are too many of us compared to most normal salaried people so we probably won’t have any short-term impact.
—-
Personal opinion:
I think it will be tough for Washington State to attract future technology/biotech/etc startup businesses to Washington compared to other states, but this is my personal opinion.
August 31, 2010 at 4:44 am #700897
DPMemberpmichael: Thanks for providing a concrete example of how I-1098 might affect a business like yours.
If you don’t mind me asking, how many people does your company employ?
I’m not clear on whether you’re worried about the tax you’d have to pay after getting a windfall from a buyout, or whether you’re worried about having to pay taxes on a bigger paycheck that you’d presumably be getting after your company gets on its feet (with or without a buyout.) In any case, you won’t be paying the tax for whatever length of time you keep giving yourself a smaller paycheck—unless 1098 fails to differentiate between what the corporation makes and what you make, which seems to be one of the issues in question.
Here’s what the text of 1098 says about S Corps:
Sec. 504. PARTNERSHIPS AND S CORPORATIONS.
(2) S corporations are not subject to tax under this chapter. Shareholders of S corporations are subject to tax under this chapter in their separate or individual capacities.
(3) “S corporation income” includes both distributed and undistributed federal taxable income of the S corporation.
Also, FYI: The top tax rate under 1098 (for individual income above $500,000) will be $15,000 + 9%. The actual percentage rage will thus fluctuate. Therefore, your total tax could actually be slightly more than 10%, but the more taxable income more you make, the more it will move downward toward 9%.
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August 31, 2010 at 4:56 am #700898
JulieMemberBut that’s 9% on the portion OVER $500,000, no? No taxes at all on the first $200,000, 5% on the portion BETWEEN $200,00 and $500,000 (that’s the 15,000), and the 9% on the amount OVER $500,000. So, if you were one of the lucky less than 1 in 100 people in Washington to make, say $1,000,000, your tax rate would be, not 10%, but 6% total.
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