Correspondent of the Day: Cutting Salaries Cuts Taxes, Too
Cutting Salaries Cuts Taxes, Too
Editor, Times-Dispatch: Please forgive me for speaking intuitively, but I'm an accountant. The Obama administration's decision to cut executive compensation at firms receiving government assistance is the biggest hit to the economy since Jan. 20, 2009.
The bonuses, salaries, and even non-cash perks these executives receive are taxed. To put that in terms President Obama might understand: He behaved stupidly. At a time when federal, state, and local governments are running at record fiscal deficits, he just elected to take money out of the coffers in order to satiate a mythical populist outrage.
Obama might give himself a pat on the back for admonishing these high-income earners, but what he has truly done is hurt Americans who are desperately seeking help during these difficult economic times.
Scott Bleicher.
Glen Allen.
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Reader Reactions
Mr. Right
I was just reading an article today about International Paper closing the paper mill in Franklin , VA. It used to be owned by Union Camp, but it was bought out in 1999.
http://www2.timesdispatch.com/rtd/business/local/article/MILL01_20091031-222608/302947/
I thought this quote illustrated what I was talking about, keeping people working and the change that has occured in US business attitudes:
“Some say Franklin really lost its company years ago, when International Paper Co. took over the mill and relocated many of the former Union Camp managers who lived in the area to Memphis and laid off others.
“When you have got top management in town, it makes a big difference,“ said Mac Coker, one of a group of retirees and local businessmen who gathered last week for breakfast at Parker Drug Co. on Main Street, within sight of the plant.
“The Camp family had a different way of looking at the community, because they lived here,“ said Joe Stutts, another retiree from the company who worked as manager of community relations for 30 years.
During the Great Depression, Stutts said, “they [the Camp sawmill] stacked every shelter for miles around with lumber that could not be sold, but they kept people employed.“ When World War II broke out and there was demand for lumber, “Camp manufacturing had it.“
thanks!
‘Sorry I call it as I see. Have a nice day.‘
I’m sure you do Blackbird.I’m sure you do.Thats why I like reading your posts !
mr. right
you just can’t got away from blaming the gov’t for this can you. (“backfires like the CRA.TARP”)
You continue to ignore Big Business’ (Banks) responsibility for their part of the mess. Even after we have bailed out all of these banks they still don’t have the character to be a little “humble” and curb pay…no they want the gov’t to take the blame and “Force” them..so people will react exactly like you and call the Gov’t “manipulating”. Who is being manipulated here? Banks are forcing the gov’t to do it by not doing it themselves.
If I caused my business to fail, (and let’s face it they HAD FAILED) and not only my business, by my whole country’s financial system to buckle (for example.. AIG)...I would have a little humilty. Have you seen ANY humility from the Banks?
You also continue to baulk at the idea of business taking any of “slack” up and hiring people even if they don’t have a backlog of work, couldn’t they continue projects that they cancelled.
But then some how Gov’t is supposed to do this? Gov’t is supposed to “make” work for these people? Come on how many companies have “Shovel” ready projects they could have employed people with, yet they cancelled “because of the economy”.
The Gov’t didn’t lay off people the way the private sector did, but yet it’s Gov’t that is supposed to fix unemployment for the private sector..and they are supposed to do it without a stimulus package that spends money and raises taxes?? I don’t get that. What planet do we live on where the Gov’t has to fix Private Sector unemployment because the Private Sector gets scared and fires people, then the Gov’t has to create a “Pay CZAR” to control Banks wages because the Banks don’t have the sense to do it themselves? And we want to blame Gov’t for this? Oh yeah, it Gov’t and OBama who want to Control EVERYTHING…it’s a massive conspiracy for the Democrats to create a socialist nation…cut me a big break… this is the nation of whiny elite big business who has little trouble firing people at Christmas time and then yelling foul when we wonder why the CEO’s at those same companies are taking BONUSES? Whose side are you on?
The side of the GLOBAL CAPITALIST? or the humble American ciitizen who is bailing out the high flying global capitalist? Quit defending those hi-flying wheeler dealers who made big bucks selling loans they knew were bad.
THEY took the risks…yet they never took the fall, at least they should get the blame, that’s the least responsibilty they should take…they can’t even do that without pointing their finger at the gov’t. What whimps.
Sorry I call it as I see. Have a nice day.
FanTastic..you must be REALLY PROUD of that post to put it up twice on the same thread :)
Blackbird…just a final thought.
As far as hiring people or keeping employees on, what do you do when you have NO WORK.Should a business,big or small,pay people to sit there and do nothing? Of course not.
Basically I think individuals and the economy are much better off when goverment just gets the heck out of the way.I’m a firm believer in the free market system.Sure there have to be regulations and laws, but when goverment trys to manipulate the free market system it usually backfires like the CRA.TARP could backfire simply because of the massive debt it has racked up.
You’re right the government has no problem spending and they don’t have to make a profit.They can just print more dollars or raise your taxes.
Which is the fix we’re in today.
In case you missed it…
Mr. Bleicher,
I too am an accountant, but unlike you, I understand accounting.
Brace yourself… The money that would constitute their salaries IS tax money. They got billions of dollars in bailouts on the American people’s tab. Are you suggesting that we would create tax revenue by taxing a salary made up of taxes? That money was intended to unfreeze credit, not buy a guy a second yacht. Without that bailout money they would have NO salary because their companies would be in bankruptcy.
Secondly, the less money they take in compensation, the more money stays with customers and gets distributed to shareholders who also pay taxes.
Furthermore, if the money is paid as a salary it can be deducted as an expense which lowers corporate income and thus lowers corporate income tax. Corporate tax rates are greater than or equal to even the highest personal income tax bracket and always higher than the capital gains rate. Paying these guys more money would absolutely REDUCE tax revenue in many ways.
Is this really the correspondent of the day, RTD? “Stimulate the economy by giving bank execs who did a terrible job of managing their own companies a huge tax-dollar funded bonus so we can tax it.“ Give me a break.
PS.
Gov’t does have a role to play in general…defense, social stability..the do have obligations that need to be paid for, can’t just cut taxes for services that ARE needed.
PAY GO needs to be reinstated though.
If you are going to cut taxes you have to cut spending, and that gets us back to the question of what’s the difference if Gov’t spends the tax money or you spend it as a business. I realize YOU would like your money back, but either way the money should still get back into the system right?
That holds true ONLY if Businesses spend it…which they aren’t. At least Gov’t is not afraid to spend! HAHA.
“They are waiting for our so called leaders to lead which is a conundrun I admit. But if its up to the private sector ,whats governments role”
You tell me what is acceptable to you for gov’t to do? They have been criticized at EVERY point.
I have been waiting for an answer to this question from those who oppose gov’t intervention.
I believe gov’t role is spent, they have done their job, much to the criticism of everyone.
Their role was to save the US ...they did this by saving the Banking System.
This was heavily criticized as money down the tube, tea parties and such.
But they did it…give them credit.
Maybe they just bought us some time?
Time for what? Time for business to step up and take the reins. Gov’t can’t hire people back.
Businesses were laying off people BEFORE this crisis even took hold,predicting a crisis…it was self fulfilling… only added to the crisis. That is my point. If business would have stayed with their employees, we would be out of the recession by now. Yes, the companies would have had some losses, but so what? Now it will take years to get out of this, and just when we start to get out, all the “time” that the gov’t bought us will expire.
We can’t rely on gov’t for everything.
Unless you really believe all that stuff about Obama the savior…come on!
He’s only one person. He’s trying, but he’s up against a whole lot of people that don’t even think he’s President, but yet they blame HIM for EVERYTHING.
That’s just a cop out. He’s done what he could, passed a huge stimulus, saved the banking system, turned around the stock market. Time to take the storm shutters off the windows and let the sun in. A year ago we were facing a deep depression, now we still have lingering problems but most of the S&P500;has reported acceptable EARNINGS…that’s right PROFIT. Time to do something with the profit.
Gov’t can’t do that…they don’t have profit..except from their dividends from those now surviving and profiting TARP Banks.
Small business and consumers are at the bottom of the chain. Gov’t and Big Business are at the top and it filters down. So maybe I am speaking more to Big Business than smaller ones.
Blackbird…I hear you,but it is what it is.The government doing its part is IMO what has created the problem.It began with CRA and mutated from there.
I’m just a small business man( I mean really small). I can only relate what I see and hear.
And as far as tax cuts, NO Bush’s tax cuts weren’t enough.The less the government has to waste and give away the better.Sorry if you disagree.
But the reality is ours is a consumer based economy and consumer confidence is depressed.So are consumers.
Business owners can’t spend money they don’t have and won’t if they think their profits will be confiscated by he federal government.They can’t get loans to create new jobs because credit is so tight.
Why do think business are laying off, cutting salaries, cutting expenses, Blackbird.Even state and local governments are doing this!
They are playing it safe and I don’t blame them.
They are waiting for our so called leaders to lead which is a conundrun I admit. But if its up to the private sector ,whats governments role?
I challenge you to practice what you preach.Go to your bank today and clean out your savings account, if you have one.Then go spend it.Stimulate the economy.Donate all the food in your pantry to the poor.Give a beggar a crisp new $100 bill.Lead us , Blackbird.
But I bet you won’t do it. Why?
Because you’re too smart. And probably a little scared ,too.
MrRight
“I mean seriously whats the diff between the gov’t letting me keep my own money to spend as I see fit, therby ‘stimulating the economy’ vs. the government taking my money and peeing it away on things like ACORN, Cash for Clunkers or these so called shovel ready jobs that are temporary and according to the last I read aren’t even panning out”
This is my whole POINT…what is the difference…there isn’t any. We have a whole political party out there blaming Obama for spending money, what is the difference if he spends it or business spends it? There isn’t much difference. One could argue from your own statements…“businesses are literally afraid to invest their own”? ..that you wouldn’t spend it anyway..you’d horde it. So why don’t we all quit the fighting and blame game and try something different.
The Gov’t stimulus is history, whether it worked or not. I don’t believe it is up to Gov’t anymore now, it’s up to Business..big and small…start taking risk..start planning the future, stop the trepidation.
You said yourself
“Small business owners I know are sitting on what cash they have in anticipation of things getting worse,including me”. So why not SPEND IT! Take some leadership…quit waiting for the Gov’t to say it’s ok.
This is time for Business large and small to exert some leadership. Take the bull and ride it. Quit waiting and blaming a “tax cut” ...didn’t Bush give enough tax cuts? That’s all I hear about from the Right. If only we had a “Tax cut”...oh bull…I doubt you are any other businessman would go hire someone tommorrow if they got a tax cut. There is a lack of confidence that a tax cut won’t put a dent in.
Some of the best business ideas have come about during recessions and depressions. It’s not the time to sit around and fear your shadow. It’s time to make your move.
If you don’t feed a horse he’s going to die. If you save all your food for a rainy day, it will get eatten by the mice. Gunpowder left may get soggy.
Why not meet with some other local business leaders and make some decissions to hire some people. Why wait for gov’t. Why blame gov’t. Gov’t has done it’s part. It’s time to move on.
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