Draginol Draginol

The government's "money"

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The government's "money"

from JoeUser Forums

Obama joke

 

So my tax bill for April is starting to come together and it's looking pretty bad. I've been paying estimated taxes all year but we had a particularly good year this year and since many of our projects run under S-corporations, their profits get tied to my personal return (like most small business owners).

Our company has around 70 people in it. We'd have more but we literally can't fit anyone else in the building.  We're in the process of building out other parts of the building we own but of course, that requires a lot of money.

Some of these projects will have to be put off until mid next year or later depending on how well Demigod, Sins of a Solar Empire: Entrenchment, Object Desktop 2009, and ironically, how well our partner Dell does (buy Dell computers! :)).

The reason they have to be put off is not that we don't have the capital to build out more of the building and hire more people, we do. It's that that money is going to go to the government instead in the form of income taxes -- almost $2 million of it in fact.

Now obviously, the government needs money to pay for vital services. I don't begrudge paying taxes on principle.  But too often, people forget where government money ultimately comes from. Worse, they are totally unaware of the consequences of taxation.

Taxes should always be kept as low as humanly possible because when you tax, you are literally taking from the people who are the most productive with capital and often giving it to the least.

Stardock, for instance, is based in the Detroit area of Michigan. So there is a certain sense of irony that the $2 million the government is taking from us is going to be given to the Auto companies and other companies have have absolutely demonstrated that they are terrible with capital.  Heck, our $2 million probably was used up in the hearings leading up to the vote on the bail out for the auto industry which Bush ultimately and unwisely decided to ignore.

So instead of using that $2 million to hire workers to build out another 8000 square feet so that we can hire an additional 24 more people this next year (to open more development teams to work on more projects for OEMs, gamers, and general consumers) we'll have to wait until we make enough money from the sales of our projects next year.  Way to go government...

56,256 views 149 replies
Reply #126 from Stardock Forums Top

Quoting maudlin27, reply 139


  As I already mentioned, I was talking about corporation tax (the tax on a company's profits).
End of maudlin27's quote

Most businesses are not corporations.

 

Reply #127 from JoeUser Forums Top

Quoting chadwbaker, reply 15


Most businesses are not corporations.

 
End of chadwbaker's quote

The same applies for a non-corporate business, since it will still be taxed on a % of it's profits, and expenses such as staff will still be allowable (hence why I referenced both in earlier posts).

Multiplicity - Control multiple PCs using one keyboard and mouse
Reply #128 from JoeUser Forums Top

Now, not only are you jerking around employees (and have a damn hard time hiring anyone qualified with that reputation), but you are incurring more costs than you thought! How? I dont know if they have it in your place, but there is something here called the UI tax. And guess what? That goes up the MORE you fire people. So if the company had waited to hire people when they KNEW how much money they had (note the estimated above), they would not have had to fire them all the time, and incur ANOTHER tax.

But with all this, I still donot expect you to understand. In your perfect world, companies make the same money every month, so they can work on fiscal month basis, and hire people before uncle sam gets his dough. But as you can see (if you want to read and understand), is Uncle Sam is going to get his money anyway.

Oh, and one more thing. While ALL profits are taxed, not all losses can be written off against future earnings. And get this one, companies do not get rebates when they LOSE money. They just can offset future tax payments with part of the current losses.
End of quote

You ARE trying to be deliberatly obtuse.

No one said that they are trying to pay profit taxes on a monthly basis. At the end of their yearly report, they simply calculate gross revenue, they deduct expenses, they deduct other tax benefit they  might have earned, and then they have the net profit. They pay profit taxes on the net profit. There is no guesswork there.

But a man's paid salary is part of the expenses. So let's say Obama raises Stardock's corporate taxes from 40% to 45% (random numbers thrown in the air, for argument's sake) as Draginol seems to be so afraid. If Stardock has 1 Billion in gross revenu, but 900 millions in different expenses (salaries, real estate, etc...) he had to pay 40% of the 100 million left, and now it's 45%.

If he want to check wether he wants to hire a new employee, looking at the profit margin POST-tax when he makes a decision is.. well, stupid, since the money in excess that he will use is the one before taxes. Either a new employee will be worth the cost, and he should hire him regardless of the new tax rate, or it isn't. Before and after the tax cut, he has as much money to pay staff and expand. Actually, a tax raise is a good incentive to private companies to re-invest money, since it's considered a bad time to cash in on those company, and until the tax rate diminish, it's a better economical decision to merely wait and re-invest and hope to gain even more money.

Some public companies have to deal with sharky shareholders that are quite aggressive when it comes to final return on their investments, and the change in the corporate taxe rate will force the CEOs of those companies to fire people/hire less because they have to keep the shareholders happy. But the way I understood it, Stardock's shareholder (singular) is also their CEO. Whatever change there is in the corporate tax rate will only influence how much cash gets into his own personnal bank account, not the money available to pay new staff.

And since a talented new staff, new projects on his part, or any kind of expenditure will increase Stardock's networth anyway on the long run (merely delaying the money that was supposed to get to him), Draginol's personnal fortune grows anyway with Stardock's (the joy of private ownership). What was he whining about?

Oh yhea. His candidate lost, and he tries to make up excuses.

Reply #129 from PolMach Forums Top

Quoting Cikomyr, reply 17

Now, not only are you jerking around employees (and have a damn hard time hiring anyone qualified with that reputation), but you are incurring more costs than you thought! How? I dont know if they have it in your place, but there is something here called the UI tax. And guess what? That goes up the MORE you fire people. So if the company had waited to hire people when they KNEW how much money they had (note the estimated above), they would not have had to fire them all the time, and incur ANOTHER tax.

But with all this, I still donot expect you to understand. In your perfect world, companies make the same money every month, so they can work on fiscal month basis, and hire people before uncle sam gets his dough. But as you can see (if you want to read and understand), is Uncle Sam is going to get his money anyway.

Oh, and one more thing. While ALL profits are taxed, not all losses can be written off against future earnings. And get this one, companies do not get rebates when they LOSE money. They just can offset future tax payments with part of the current losses.
You ARE trying to be deliberatly obtuse.

No one said that they are trying to pay profit taxes on a monthly basis. At the end of their yearly report, they simply calculate gross revenue, they deduct expenses, they deduct other tax benefit they  might have earned, and then they have the net profit. They pay profit taxes on the net profit. There is no guesswork there.

But a man's paid salary is part of the expenses. So let's say Obama raises Stardock's corporate taxes from 40% to 45% (random numbers thrown in the air, for argument's sake) as Draginol seems to be so afraid. If Stardock has 1 Billion in gross revenu, but 900 millions in different expenses (salaries, real estate, etc...) he had to pay 40% of the 100 million left, and now it's 45%.

If he want to check wether he wants to hire a new employee, looking at the profit margin POST-tax when he makes a decision is.. well, stupid, since the money in excess that he will use is the one before taxes. Either a new employee will be worth the cost, and he should hire him regardless of the new tax rate, or it isn't. Before and after the tax cut, he has as much money to pay staff and expand. Actually, a tax raise is a good incentive to private companies to re-invest money, since it's considered a bad time to cash in on those company, and until the tax rate diminish, it's a better economical decision to merely wait and re-invest and hope to gain even more money.

Some public companies have to deal with sharky shareholders that are quite aggressive when it comes to final return on their investments, and the change in the corporate taxe rate will force the CEOs of those companies to fire people/hire less because they have to keep the shareholders happy. But the way I understood it, Stardock's shareholder (singular) is also their CEO. Whatever change there is in the corporate tax rate will only influence how much cash gets into his own personnal bank account, not the money available to pay new staff.

And since a talented new staff, new projects on his part, or any kind of expenditure will increase Stardock's networth anyway on the long run (merely delaying the money that was supposed to get to him), Draginol's personnal fortune grows anyway with Stardock's (the joy of private ownership). What was he whining about?

Oh yhea. His candidate lost, and he tries to make up excuses.
End of Cikomyr's quote

 

Did you go out and buy your BO plate and coin?

Reply #130 from JoeUser Forums Top

You ARE trying to be deliberatly obtuse.

No one said that they are trying to pay profit taxes on a monthly basis. At the end of their yearly report, they simply calculate gross revenue, they deduct expenses, they deduct other tax benefit they might have earned, and then they have the net profit. They pay profit taxes on the net profit. There is no guesswork there.
End of quote

No, you are missing it.  I have stated that.  YOu and Maudlin think that a company can spend profits (as expenses) not yet realized.  YOu earn profits at the end of the year, not monthly.  YOu estimate monthly.  And if you "mis-estimate" you are our of business.  So you cannot hire someone before you have the money to. Unless you want to get your reputation and UI taxes ruined.

Reply #131 from JoeUser Forums Top

Oh yhea. His candidate lost, and he tries to make up excuses.
End of quote

From what I understand, his candidate never had a chance.  As the last he mentioned it, he did not vote for McCain or Obama.

So perhaps it is you who is making excuses?  Understandable for anyone that backed Obama.

Reply #132 from JoeUser Forums Top

No, you are missing it. I have stated that. YOu and Maudlin think that a company can spend profits (as expenses) not yet realized. YOu earn profits at the end of the year, not monthly. YOu estimate monthly. And if you "mis-estimate" you are our of business. So you cannot hire someone before you have the money to. Unless you want to get your reputation and UI taxes ruined.
End of quote

Actually, you earn profit trough the year. Your sales are coming constantly, and your expenses are spread trough the year (except some other expenses). Depreciation of assets is important to calculate what is your theoretical profit when it comes to taxes, but you aren't actually loosing money (except net worth) because of it.

At the end of the year only do you calculate how much you owe the governement in taxes. But then again, if you are at the middle of the 3rd Quarter and sales are good and you can definetly expect a profit at the end of the year, and if you have to choose NOW wether or not to hire new employees and start new projects, it's stupid to look at the tax rate, since the money used will be the one before-taxes. I don't think it's possible (or even legal) for a company to use post-taxes money to spend somewhere, since it's en expenses, and expenses are deducted from your profits.

Look at it another way. Let's say (for example), Stardock has 1 million in profit this year. It could try to find a specific project to start, or maybe buy new assets to use. If it still decides to re-invest that money the next year, even if the money was generated last year, the expenses will be noted in the new year, and Stardock will still get proper expenses. Hell, if next year, on an accounting basis, Stardock spends more money than it generated, it will have tax break for futur years. But since the money used to pay for such expenses is already there, Stardock won't go bankrupt.

You have to make the proper dichotomy between the accounting way of viewing money, and the "real" flow of money. Accounting is pretty abstract when you think about it, but it is the one that matters when it comes to tax evaluation. NOT the actual cash spent day-to-day.

So... if Draginol has to check wether it wants to hire new staff to expend its business, he's stupid to look at the tax rate, because it's irrelevant, period.

Did you go out and buy your BO plate and coin?
End of quote

BO Plate and coin?... I don't think I understand. Is that a jibe, or a genuine question?

 

Reply #133 from JoeUser Forums Top

Actually, you earn profit trough the year
End of quote

No, you have revenue through the year.  Profits are at the end of the year since many expenses are on an annual basis, not a monthly basis - by law.

But then again, if you are at the middle of the 3rd Quarter and sales are good and you can definetly expect a profit at the end of the year,
End of quote

Well, let's look at one example.  Oil was $140/barrel in the 3rd quarter of 2008.  SO I can then extrapolate out how much money I as Exxon would earn based upon that, and see my dough rolling in!  SO I spend it.  ANd if I had?  Yea, big loss for the bozos!

The only thing guaranteed in business is that estimates are not facts.  Again, you cannot spend what you do not have, and you do not have it, until the end of the year.  Before that, you only have revenue, not profits.

BO Plate and coin?... I don't think I understand. Is that a jibe, or a genuine question?
End of quote

Probably both.  They already are huckstering those things.  I guess for the disciples of the new Messiah.  It is cultish, and stupid.  And they are probably making a ton of money off of them.

Reply #134 from JoeUser Forums Top

let's look at one example.  Oil was $140/barrel in the 3rd quarter of 2008.  SO I can then extrapolate out how much money I as Exxon would earn based upon that, and see my dough rolling in!  SO I spend it.  ANd if I had?  Yea, big loss for the bozos!
End of quote

Depends. If they were stupid enough to think that oil price (which up until then had been extremally volatile) would somehow stabilise, then yes they would be stupid to heavily rely on that price remaining constant. If instead they had obtained the relevant futures/forwards or alternatively fixed price contracts that would allow them to actually count on the price (for them) being $140/barrel for a set period, then yes they could confidently project based on that.

Your 'accountancy' approach of waiting until the end of the year to see what your profits were for that year, and then (and only then) spending them just wouldn't make sense in businses - you're not utilising your assets effectively, your cash is just sitting in a bank earning little interest, and so a competitor who is prepared to actually use their money wisely will do so and overtake you, all else equal. In some cases your estimates may be so uncertain, and the negative impact of incorrectly investing based on them so high that it might be worthwhile to wait (if alternatives aren't available to negate the problem), but those are the exceptions to the rule, rather than the rule itself.

you cannot spend what you do not have, and you do not have it, until the end of the year
End of quote

Wrong. You do have it, you just don't know exactly how much it is. Profit IS made throughout the year. You then decide on an arbitrary time period (typically a year, although it would be possible for a country to require profit to be reported semi-annually etc., and of course companies can have shorter and longer accounting periods) to look at what your profits are throughout that. Those profits will be the sum of all the profits made every single day, or every single hour, or every single minute (since those are all arbitrary time limits as well) throughout that period. That doesn't mean that you have made no profit until the final day of the year where you suddenly make a ton of profit (or alternatively you make no profit for all that year, and instead only make it a few months later when the accounts are finalised).

Reply #135 from JoeUser Forums Top

If they were stupid enough to think that oil price (which up until then had been extremally volatile) would somehow stabilise,
End of quote

SO do you think any company is going to be that stupid?  WHy does it take an extreme example (considering all companies sales - i.e. revenue - is at the whim of the customer) to make you see that you cannot spend money not yet realized?  Projections are fine, but if you bank on them and they do not materialize, you either are in line at Bankruptcy court, or in front of congress asking for a bailout.

Wrong. You do have it, you just don't know exactly how much it is.
End of quote

No, you are wrong.  All you have is a revenue stream - and it is unpredictable.

Reply #136 from JoeUser Forums Top

"or in front of congress asking for a bailout." - so wait, you spend money you don't have based on money that you EXPECT to get in the future, and when you don't get that money in the future you go crying to congress and THEY give you the money? than what is the incentive to spend within your means?

Reply #137 from JoeUser Forums Top

than what is the incentive to spend within your means?
End of quote

Are you asking the feds?  The ones that is made up of failures?

Reply #138 from JoeUser Forums Top

you are wrong.  All you have is a revenue stream - and it is unpredictable
End of quote

I guess I should have started at the basics. Profit = revenue - costs. A firm receives revenue throughout the year, and incurs costs throughout the year => The firm is making profit throughout the year (if revenue>costs of course, otherwise it's making a loss). To ignore costs is absurd.

Also revenue streams are predictable - an ice cream seller can expect sales to increase in summer, especially if it's a hot summer, but to drop in the winter. Similarly retail shops can expect an increase in sales up to Christmas, and then a drop in them after christmas (if they don't change their prices etc. to try and affect that). You can't get the exact number of sales every single time, but you can get a decent idea of what they're likely to be.

Reply #139 from JoeUser Forums Top

To ignore costs is absurd.

End of quote

I don't think anybody suggested that one should ignore costs.

May I ask how big your company is?

I still tend to believe Draginol here. I don't know anything about running a business myself, but I know that he does.

 

Reply #140 from JoeUser Forums Top

Also revenue streams are predictable
End of quote

Really?  Tell that to Exxon, WalMart, Circuit City, GM, ReMax, etc. 

And another "unpredictable" factor is cost.  Let's look at the oil market once again, but from a different perspective.  Trucking company Abbot contracts with the Army to move trucks.  They charge $1.50 per mile.  Price of Diesel, about $2.  Wham!  Arabs go wild, and the price goes to $5/gal!  Shazzaam!

Their revenue stream is very predictable.  They are getting the same amount of money they did 6 months ago.  But the costs are kind of different.  And wowzer!  They made some money in the first 6 months and spent it all!  In the second 6 months they lost a ton, and guess what?  have no money at the end of the year.  They are now in chapter 13 (or in front of Al Franken and his clowns).

So you spend your revenue like a drunken sailor.  Go right ahead.  There is no law against it.  But you will not be in business long.  And most Entrepreneurs (these are the people that start and build businesses, not necessarily the ones that run the big boys) are not going to be that stupid.  If they were, they would never have been able to build it in the first place.

Reply #141 from JoeUser Forums Top

It sounds like you're contradicting yourself now. Anyway, lets summarise this into a few quick statements, and you can say if you disagree with any of them:

1) Profit = revenue - costs

2) A business gains revenue through the year

3) A business incurs costs through the year


(The result of all 3 of these is that a business gains profits (/incurs losses) through the year).


Now on to the other part:

You keep talking about spending "profits" each month, and I keep trying to tell you - they do not exist.  They ESTIMATE profits
End of quote

From 1) above, profits = revenue - costs, hence to estimate profits they're estimating revenue-costs, hence these are predictable to some extent (or you couldn't really estimate). However:

"revenue streams are predictable" Really?  Tell that to Exxon, WalMart, Circuit City, GM, ReMax, etc.
End of quote

Suggests that you now disagree with this. The alternative is that you think a company can only estimate it's profit (/revenue and costs) as they suffer/gain them, and can't estimate them into the future. I guess I should number these points as well:

4) Companies can estimate profits

5) Revenue streams can't be predicted

6) Companies can't estimate future profits but can estimate current/past profits

Reply #142 from JoeUser Forums Top

From 1) above, profits = revenue - costs, hence to estimate profits they're estimating revenue-costs, hence these are predictable to some extent (or you couldn't really estimate). However:
End of quote

YOu keep ignoring the estimated part.  As in some costs are annual.

Suggests that you now disagree with this. The alternative is that you think a company can only estimate it's profit (/revenue and costs) as they suffer/gain them, and can't estimate them into the future. I guess I should number these points as well:

4) Companies can estimate profits

5) Revenue streams can't be predicted

6) Companies can't estimate future profits but can estimate current/past profits
End of quote

No, now you see the word estimate.  But an estimate (or guesstimate in this case) is not a realization.  The guesstimate future revenue and costs, they realize past revenue and costs and thus know their profits.  That is what I said.

I am not taking anything away, I just gave you another scenario.  Like how paragraphs are a normal break between thoughts?  And you totally ignored the reality of the business world.  Here's an even better one, and right out of the pages of today.

Company X hires 10 people based upon first half earnings and their guesstimate of sales for the second half.  But what happened to sales during the PRIME profit/selling season for virtually all sellers this year?  They tanked!  Badly!  so those 10 people would be laid off, and instead of a small profit the company would realize a loss.  Great way to stay in business, right?  That is not a hypothetical, it happened to all retailers this year.  Even WalMart, while "Guesstimating" an increase of 2.8% in sales in December, only realized a 1.2% gain (and I dont think any one else even had a gain).  SO they hire based on 2.8% and what happens?  Their sales go up 1.2%, but they lose since their costs far exceed the additional revenue.  If they had hired based upon profits, then they still have a profit, albeit small, not a loss.  Keep doing it and you dont stay in business long.  And if you are not WalMart, even a shorter period of time.

Reply #143 from JoeUser Forums Top

some costs are annual
End of quote

Apportionment (accruals+prepayments) easily solves that.

 

Company X hires 10 people based upon first half earnings and their guesstimate of sales for the second half.  But what happened to sales during the PRIME profit/selling season for virtually all sellers this year?  They tanked!  Badly!  so those 10 people would be laid off, and instead of a small profit the company would realize a loss.  Great way to stay in business, right?  That is not a hypothetical, it happened to all retailers this year.  Even WalMart, while "Guesstimating" an increase of 2.8% in sales in December, only realized a 1.2% gain (and I dont think any one else even had a gain).  SO they hire based on 2.8% and what happens?  Their sales go up 1.2%, but they lose since their costs far exceed the additional revenue
End of quote

in other words their sales were predictable - they were out by only a small amount proportionately, since instead of being 102.8 they were 101.2 (100=sales previous year). Also to extend your argument it means firms shouldn't hire anyone - since if their profit is unpredictable they may end up with too many people and have to fire them. Just because something is predictable it doesn't make it certain, and as I said before it doesn't make it risk free. The key to business is taking on those risks that will on average yield you a healthy return. Sometimes you lose, but more often than not you win.

Reply #144 from PolMach Forums Top

wheeeee..... and the love keeps coming.... so are they now thinking of another bail out ranging of 800+ Billion.... GM is talking about not lasting long again! HAPPY JOYS! They are gonna be back for even more money! Book it!

 

 

Reply #145 from JoeUser Forums Top

so are they now thinking of another bail out ranging
End of quote

And when it fails, the Republicans will be pointing blame fingers at the Democrats and vice versa!

It won't end until each side gets the log of economic idiocy (that it's possible for everyone to have maximum individual ecomonic profit) out of their own eye.

Also and just as paramount, is that We the people actually have the power and we must get our congressman back to understanding that they can't legislate in the concept of wealth, that no matter what or who gets helped or hurt, the ends justify the means.  

Reply #146 from JoeUser Forums Top

in other words their sales were predictable - they were out by only a small amount proportionately, since instead of being 102.8 they were 101.2 (100=sales previous year). Also to extend your argument it means firms shouldn't hire anyone -
End of quote

YOu are being obtuse.  YOu INVEST profits.  But you cannot invest what you do not have.  SO you invest after you have them (and after they are taxed).

And your example is funny.  I guess you think that companies earn a gazillion percent on their revenue!  Must be, because a small shortfall is nothing, right?  But if you are planning (guestimating) a $100 increase, and you spend it, and you only get a $50 increase, what do you have?  a $50 loss. And like I said, you dont stay in business long.

As for annual costs - you can estimate them monthly, but you cannot declare dividends on them until they are realized (again).  So yes, they are estimating monthly (as I said), but not realizing.  You keep thinking that a guesstimate is gospel, and you have yet to show a shred of evidence where a successful company has ever done that.  But dont worry, I dont expect you to.  Since it cant be done.

Reply #147 from JoeUser Forums Top

you cannot invest what you do not have.  SO you invest after you have them (and after they are taxed)
End of quote

See before:

1) Profit = revenue - costs

2) A business gains revenue through the year

3) A business incurs costs through the year

If a company doesn't make profits through the year, then it doesn't gain revenue/incur costs through the year. It doesn't matter if you don't know exactly what those are for them to exist. Here's a simple analogy to help: I decide to raise some money for charity. I take a box around to people, and ask them to put sealed envelopes (containing an undisclosed amount of money) into the box. I have little to no idea of how much money is in there. I leave the box lying around for a month, and then open it and count out the money. When was that money raised?

a. the day I went out and raised the money

b. the day I counted the money

Similarly, when do I have that money?

a. the end of the day I went out and raised the money

b. the day I counted the money

Apply the same thing to revenue and costs. Then apply the profit = revenue - costs rule. Hopefully if that's not too hard for you, you'll realise that actually you can earn profits during a year. If you can understand that far, it's a small step to then go to realise that if you're earning those profits, similarly you can spend(/invest) them.

Reply #148 from PolMach Forums Top

Quoting lulapilgrim, reply 10

so are they now thinking of another bail out ranging
And when it fails, the Republicans will be pointing blame fingers at the Democrats and vice versa!

It won't end until each side gets the log of economic idiocy (that it's possible for everyone to have maximum individual ecomonic profit) out of their own eye.

Also and just as paramount, is that We the people actually have the power and we must get our congressman back to understanding that they can't legislate in the concept of wealth, that no matter what or who gets helped or hurt, the ends justify the means.  
End of lulapilgrim's quote

 

The problem with that is most people see a little "free money" handout to them and they are more than happy to bend over and take it

Reply #149 from JoeUser Forums Top

An absolutely hysterical (and DEAD ON) article seems appropo here:

Mark Steyn