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Tax Law (Questions About Taxes)/Correlation between # of employees and Corporate Income

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Question
How strong is the correlation between the number of FTE employees in a company and a companies corporate income? Would a tax credit based on the number of employees at a company instead of a graduated corporate income tax have the same economic effects? A graduated income tax is constitutionally prohibited in MA but tax credits are not.

Answer
Each program creates it's own effect and they will be different.

There is no correlation between number of employees and taxable profit, big or small.  Large employee pools or single person businesses, vacillate in profitability. Some may go from large profit to small profit, and others lose money most years while occasionally turning a corner that makes it all worth doing.

What economic affect were you hoping to have?

1. Did you hope that no business would be worth doing because the possibility of a business owner enjoying the fruits of his/her labor would be taken away by yet another needy government program?

2. Did you hope to further widen the pay chasm between private employment and Government employee/entitlement?

3. Did you want Massachusetts to opt out of contributing to the Nation's GDP at all, by removing the incentive for anyone to start an independent business, and to chose instead to only take government jobs that would be support by. . . Who?

4. Did you hope for the ability for the state to spend even more taxpayer dollars on ill-conceived, poorly managed and cost-overrun programs that provide nothing of real value to the people, but merely make them subject to more administrated than ever before?

Or, were hoping for:

1. A balanced state budget?
2. Meaningful and effective government?
3. General prosperity for the citizens of the state?
4. Freedom by the people to manage their own affairs?

For the last 4, you'll need to consider cutting the bloat of Government, not feeding the bloat of Government.

Aside from Massachusetts' incredible healthcare costs, Education is by far the largest single cost at an average of 8 billion dollars per year directly, could it be as effective or possibly more effective for less? Yes, Government waste is appalling. But there is no real oversight of these wasteful programs, so nothing changes.  

And here is a couple of really radical ideas?

If a cattle rancher grazes his stock on Government land, he must pay a privilege tax. Obviously, the Government should get some compensation from those that get personal gain of off Government owned and managed resources.

What about taxing Attorneys and Law Firms for the privilege of using the legal system for their own benefit? The entire State funded court system is free for their use, and yet they profit mightily from it. How about a 20% privilege tax on Attorney and Law Firm income? In 2012 there were about 14,000 lawyers in the Boston-Cambridge-Quincy area alone. assuming a modest $400,000 of revenue, which, at $250 an hour, is only 1600 hours of billings, or 40 weeks (Many bill higher). But at that it would be over 1 billion dollars to the budget. ($1,120,000,000, actually).

What if government employees paid a privilege tax?  A tax for the privilege of supporting themselves on Government owned property?  It would be used exclusively to balance the budget. Could not be used to create new programs, or be paid into entitlements.

That would be a direct increase in the budget, if 70% of MA budget goes to salaries and the tax was 10% then that would be a budgetary increase of 7%. If that is not enough then raise the tax. There would be a couple of affects? One an immediate increase in the budget and within a year, possibly a reduction in salaried staff within the Government. That affect would have an even bigger positive impact on the budget. If 10% of the employees resigned, then not only would you have the 10% additional revenue, but the total payroll would reduce by 10%. AND, (it just keeps getting better) with 10% fewer employees there would be a related drop in the need for supervisors. Since supervisor salary is directly related to the number of employees that are supervised, the cost to supervise those employees would also be recovered.

But those are ideas that are too reasonable to even consider.

WE should just keep taxing the hard working producers in our society.  

Tax Law (Questions About Taxes)

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Richard Fritzler

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Specializing in Business and Corporate taxation. Comparing the advantages and requirements of different business entities, such as Sub-S Corporations, LLC`s, Partnerships (Both Limited and General), Doing Business as a Sole Proprietor, or Using a C-Corporation. Issues regarding K-1 distributions, 1040, schedule C, 1120, 1120s. Are you considering domiciling a Corporation in a low tax state? I can review the benefits and misinformation that exists.

Experience

I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

Organizations
National Small Business Owners Association.
Publications
Contributing author to "The Corporate Standard Newsletter".


Publications
Contributing author to "The Corporate Standard Newsletter".
Ezinearticles.com articlesbase.com

Education/Credentials
I have been in the business of assisting business owners in reducing their taxes and liability since 1986.

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