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August 31, 2010 at 5:45 am #700899
JanSParticipantI knew I should have studied math harder – lol….
August 31, 2010 at 6:26 am #700900
pmichaelMemberHi DP,
We are currently a company of 3 people plus 1 part time contractor. We are thinking of hiring one more person, but might not until we see the Nov results.
My personal salary is zero right now (eating into savings trying to build company). Keep in mind I don’t have pensions or 401k, etc. I’m worried about paying the windfall on a buyout.
I’m not sure I understand your point in terms of how 1098 is failing to differentiate between myself and a corporation. 1098 is a personal income tax – not a corporate tax.
Partnerships and S Corp income and losses flow to the individual owners pro-rata of their ownership share.
C Corp’s don’t, but to remove money you get doubled taxed by the federal government via dividends.
My company is a C Corp because we expect future investment from non-owners. You can’t bring in investors into a S Corp for my type of company – they would only invest into a C Corp.
None of this matters anyway in my main case. If somebody purchases the company for $2,000,000 and I own 50% I get $1,000,000.
If I get a windfall in a couple of years of $1,000,000 – then I owe a lot of Washington tax that I’m unwilling to pay. If I had that $1,000,000 paid over a period of 5 years I would pay $0 income tax.
August 31, 2010 at 6:36 am #700901
pmichaelMemberHi Julie,
You are right, the tax would be $60,000 on a million and $150,000 on 2 million. Something I’m personally not willing to pay for a variety of reasons so I will be forced to establish residency back where I’m originally from (Austin, TX) to comply with the new law. I hate to leave Seattle, but I also like Austin. Again this is my personal choice as well as my other partners’; I bet most people won’t make a drastic change like me. But I bet it will discourage future entrepreneurs from choosing WA.
I’m not here to change opinions because I know I won’t and frankly don’t have time. Somebody simply asked for a concrete example of how it will harm my business (I believe you originally asked).
August 31, 2010 at 7:01 am #700902
pmichaelMemberFor what it is worth, here is another startup that has similar views to mine. Again, I’m guessing most people have completely different views, but Julie asked for concrete examples of how it might harm future or potential job creating businesses.
http://www.aguywithanidea.com/category/business/
He wrote an article explaining his personal views and how it is bad for himself/his business:
August 31, 2010 at 1:59 pm #700903
CarsonParticipantpmichael,
Lets see. Roughly one in 10 start ups, survives. Of those, less than 1 in 25 actually hit it big. I wish you all the luck, you will need it. I will still vote for 1098. If you do hit the start up lottery and move, make sure and enjoy those nice cool Texas Summers or that super friendly Calif tax rate! Tom Stewart pretty much did the same thing, he took his ball home, check out how that tax evading Karma helped him avoid taxes!!
August 31, 2010 at 2:45 pm #700904
CarsonParticipantPretty funny when you read about Loudlever. The guy is not even close to breaking even, let alone paying taxes!! I am sure there are many many right wingers that oppose all taxes, but again, I have not seen one that says they will move, besides a Smitty fantasy company. I am sure once we get closer to election time the right will run a few ads with business owners saying this will force them to move..
August 31, 2010 at 3:38 pm #700905
pmichaelMemberWow – I’m sorry I even posted on here. I’m not right-wing, actually liberal leaning, but the only reason why I posted on here was to cite a couple of examples. I don’t care how you vote.
I have nothing more to add to the forum.
August 31, 2010 at 3:43 pm #700906
CarsonParticipantYou posted one example and it wasn’t even a real example, just a guy (loudlever) who says 1098 would hurt, but not him personally since he is not close to getting into that tax bracket.
August 31, 2010 at 4:34 pm #700907
JulieMemberpmichael, thank you for sharing your opinions–but I note you didn’t actually address my specific question, which was asking how your (current) tax situation for yourself and your business would change under 1098–up or down, and how much? (The link you posted also does not answer this question. Some of the comments on that article make interesting reading, though.)
August 31, 2010 at 6:13 pm #700908
DPMemberI don’t know if pmichael is still watching, but here’s my take on his situation:
He’s looking at his start-up company as an investment, hoping he’ll get bought out. If that happens, he’ll get a windfall of maybe a million bucks or more, on which he’ll have to pay a hefty tax, when you add it all up.
Since pmichael has effectively been taking a pay cut for the past x years while he’s been groing the company, he’s going to feel like he’s getting punished for deferring that reward.
I really feel for him. That would suck!
An analogous situation would be one in which a person puts money into a tax-deferred IRA on the theory that his post-retirement income would put him into a lower tax bracket . . . but then, right before he retires, the government decides to impose a steep new tax on IRA withdrawals.
Carson, even if it’s not going to change your vote, don’t you agree that pmichael’s getting the shaft on this?
On the other hand, pmichael’s particular case does not really constitute a spot-on example of the business exodus the anti-1098 people are claiming will happen if 1098 passes.
Supposing he does get bought out. In that case, there’s a good chance the buyer might take the business out of state anyway, for reasons having nothing to do with taxes. Moreover, it often happens with a buyout that the new owner lays people off, which would also constitute a job loss, though it has nothing to do with 1098.
As Carson implies, start-ups are subject to many vagaries. These can include a fluctuating business climate, changing tax rates and regulations, or even just dumb luck. Established businesses are subject to the same pressures, of course. But these businesses should be a bit more resistant to the effects of a known quantity like an income tax, particularly for the brackets we’re talking about here. As I said earlier in this thread, it’s hard for me to imagine a scenario in which a small business owner with an annual income of more than $200,000 would be teetering on the edge of profitability such that a tax of 5% on the amount OVER $200,000 (and below $500,000) would push them and their business out of state. —In fact, I daresay that if someone with that kind of income did leave, someone else would probably step in to fill the vacancy.
Feel free to try to change our minds, pmichael, though admittedly some of us (read: CARSON!!) are a tougher sell than others. ;-)
August 31, 2010 at 6:21 pm #700909
CarsonParticipantDP,
You know, as well as I do this is mainly being fought by the anti-tax crowd. You know the type, they oppose any and all taxes. They have a script, which is scare the voters into thinking this is anti-jobs and will hurt far more than it will help. That’s why I call out each and everyone to be exact. What company? As you pointed out, logic defies that it actually harms very many small businesses. I don’t like taxes, but I also don’t want WA state becoming another backwater state with minimal services. We already have lots of them.
August 31, 2010 at 6:35 pm #700910
DPMemberCarson, I agree with you. But look at this way: This is a forum we’ve got going here; we’re trying to get people to come out and debate the topic. I think the best way to do that is just to let them speak, then subject their analyses and examples to criticism, which is what we’ve been doing, and doing a good job of. I can assure that this thread is getting a wider readership all the time, and that’s precisely because we’re keeping it nice.
Even though I agree with you about some of the anti-1098 rhetoric being phoney, I’m not convinced that every person who’s against 1098 is a shill. Sure some are; but some aren’t. Why take a chance on scaring them all away by tossing that accusation around? If the opposition goes away, then this won’t be an interesting place any more, and you’ll lose a valuable chance to convince more people to vote FOR 1098.
FWIF: You didn’t say anything wrong to pmichael. If he bugs out because of anything you said, I think he was just being thin-skinned.
August 31, 2010 at 6:50 pm #700911
CarsonParticipantI agree, its a forum, to discuss. But when someone posts something, something that can spread fear and is most likely false then I do what we should all do. Call them on it. I called pmichael on it, and he left the state….
September 1, 2010 at 3:59 am #700912
JoBParticipantCarson..
i can see why guys like pmichael would choose a tax structure that would let them average the income from windfalls.
and it is a point well worth mentioning…
but in the larger scheme of things… if we are talking losing jobs… not so relevant.
pmichael mentioned himself and a partner…
and possibly one employee and one contract person.
that’s pretty much the norm for start ups.. actual employees are few and far between when those dice are rolling… and most of them work for minimum wages and the hope of a piece of that windfall.
i sincerely hope he enjoys Austin.
I disagree that this tax will be a large enough barrier to prevent smart investors from choosing Seattle metro as a start-up environment…
our particular pool of expertise, innovation and experience is not easy to match…
and you need a fairly large pool to attract like minds who are willing to invest huge amounts of time and effort on the iffy promise of a big payout.
if you need risk loving geeks to invest in you..
you have to go where the geeks are…
if what i see on the street is any indication.. these days we may out geek the silcon valley :)
September 2, 2010 at 2:28 am #700913
JoBParticipanti think it’s time for a little perspective here..
Because of our reliance on sales tax and property tax which gets passed on to renters.. washington’s poor pay very high taxes…
http://www.sightline.org/maps/animated_maps/state-tax-on-poorest-households
Nuff said.
September 2, 2010 at 3:18 am #700914
maplesyrupParticipantSo is this measure going to reduce sales taxes?
September 2, 2010 at 3:54 am #700915
JoBParticipantmaplesyrup..
no. it will reduce property tax…
i wish that would reduce rents..
but he current renters market has done a pretty good job of that already.
September 21, 2010 at 10:58 pm #700916
DPMemberUpdate on some of the “Yes on 1098” campaign’s B & O tax figures:
September 21, 2010 at 11:16 pm #700917
JiggersMemberI’m not voting for it because they also are saying that education will benefit from passing the initiative. Anything that says education or children will be involved(nothing against it) is a false lie.
September 22, 2010 at 12:03 am #700918
miwsParticipantSeptember 22, 2010 at 1:41 am #700919
maplesyrupParticipantDP I know you’re pro-1098 so it was good of you to post that bit on the property taxes. Basically with that savings I can afford to take the family out to what for us is a nice dinner.
Here’s something else regarding the 375,000 businesses that will have their B&O tax lowered:
http://seattletimes.nwsource.com/html/truthneedle/2012944784_1098truthneedle20m.html
When the income tax rolls down to the less-than-rich in 5-10 years I think a lot of people are going to regret having voted for this initiative.
September 22, 2010 at 4:12 pm #700920
JiggersMemberDP: I’m voting “No” regardless, so don’t try to proselytize me. :)
September 22, 2010 at 4:41 pm #700921
DPMemberOK, Jiggers. I won’t proselytize you any more.
I thought you were being sarcastic on the other thread, but I guess you weren’t.
No sweat.
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