Here's something to think about when it comes to the idea of starting a small business or not: Corporations pay approximately 6% to the federal government in tax, but W-2 employees on average are paying 39%.
The government encourages the creation of small business because the more businesses there are, the more W-2 employees that will need to be hired to help run those businesses, and the more W-2 employees the more tax the government can collect.
The government wants new businesses because it's banking on more people being afraid to become a 6% paying corporation than working for someone else in a "secure" situation and forking over 39%. The more businesses, the more W-2 employees, the more money coming in. Who's winning here?
Why Start a Home-based Business?
October 10th, 2007 at 01:19 am
October 10th, 2007 at 03:45 am 1191984331
October 10th, 2007 at 02:06 pm 1192021614
Now, I hope I don't seem like I'm picking on you. It's certainly not the way I like to conduct myself on this website. It's just that you have some very intriguing ideas, and naturally, it gets me asking questions.
First of all, can you explain why W-2 employees pay as much as 39%? As far as I know, the current tax bracket for those making more than 170k each year is at 35%. It's still pretty high, but to be fair, it also represents the highest tax bracket, and not everyone earns that much. Also, portions of your income will be taxed at a lower income bracket before it moves up to the highest, so even those who are in the 35% bracket are not technically taxed at the full 35%.
And while corporations may indeed pay very low rates, I think the original conversation dealt with home businesses? In which case, can you really pay as low as 6%? I had a home business once as well, albeit a failed one , but I was never able to itemize things that far down. I guess my deduction-fu wasn't quite up to snuff.
This is sort of a carry-over from the previous conversation, but I think it's worth noting that retirement funds also enjoy such deductions as well. Namely, it automatically "writes-off" as much as 15k per year! Compared with home businesses anyway, I think it's fairly competitive. It's certainly enough to push me down to a lower bracket.
Finally, I don't remember how all this conversation started, but I think comparing the benefits of retirement funds versus businesses are an apple vs. orange affair. Truth is, you can have your cake and eat it too. I am certainly all for having both. There are retirement funds that are available for people who are self employed. SEP-IRA and Keogh are two terms that comes to mind....
October 10th, 2007 at 02:29 pm 1192022958
October 10th, 2007 at 07:28 pm 1192040895