- Joined
- Sep 19, 2004
- Messages
- 2,547
To ame, and others who want to know how the tax system basically works.
Please note that I have only skimmed some of the preceeding post, so gently let me know if I''ve mistated things.
ame: I understand you are angry. You have a right to be angry. So are others.
However, what follows is the basics of how the tax system is structured.
There are basically 4 different tax codes in the US based on the following classifications:
-- Employee
-- Self Employed (small business, perhaps a small number of employees)
-- Business (larger business with many employees and stockholders)
-- Investors
I will note that many people cross these boundries, but are often mainly in one catagory. For example, I am an employee, who is also self employed in a small business.
Each group is treated totally different.
The worst taxed group is the employee. An employee largly can only save or invest in after tax dollars.
The governement provides tax breaks for the Self Employeed and Business, because they want business''s to succeed. A simple fact is that virtually every job in america is paid for from operating business''s. Business''s have employees - and pay all the wages of those employees, and have business profits. Those wages and business profits are taxed to support government positions (while government wages are also taxed this is just a partial recycle of the original money that came from a business). Investors set up investment bussiness, and successfull ones make a profit and have to pay taxes. With the exception of import duties - all other money in america comes from businesses. That is why the the government grants tax breaks to a business - because it, and the american economy is dependent on them.
Investors are a special form of business - and often lubricate the formation of new business or new products. Thus, they get some breaks as well as the business of america is business (unfortunately, the schools don''t normally teach this).
Even charities get all of their money from businesses either directly or through the employees.
The self employed have one set of tax benifits.
The bigger Business has another set of tax benifits.
Depending on what you are producing, depends on where the best tax breaks are.
A self employed person who is in a service industry (plumber, painter, Dr, etc) is actually fairly highly taxed (many of the previous tax breaks were taken away a decade or so ago).
A self employed person who is selling products or services provided by others gets many more tax breaks.
If you need large capital equipment you are usually better off in the structure of a Business where eveyone is an employee and there are stockholders.
The employee is part of what a Business needs to succeed, and they have no inherent econominc advantage to the government (the US used to run just fine when there were relatively few Businesses, and most people were Self Employed).
Thus, the employee bears the brunt of the tax code. They have no leverage.
Concerning your concept that starting a business is not easy. You are again right - in a way.
Actually, starting one is very easy because the government wants you to be in business as it creats jobs and taxes in the economy.
The tough part is learning how to make a profit.
The hardest thing is that people have to learn to think and act diferently. The school system trains you to be employees. Not a business person. Most people don''t have a clue what to do because they were never taught.
If the schools taught business (and not MBA type business which is just another class of employee), but really the hows and whys of presentation, marketing, profit, book-keeping, etc I suspect that many more people would be in their own business instead of being an employee.
But they teach you to be an employee because that is what Business needs. employees. Where does most of the tax money originate from. Business. Why was the higher level public education system really started (beyond simple reading and basic math: what most students can do by 4th grade). (check the history on this if you wonder) = because business needed educated employees for the factories (note that Jr Hi and High schools only sprung up where there were factories). Very few people got a college education - and you could get into college with the equivelent of todays 5th grade education - if you could afford it (they were expensive and private).
Remember, get a good education and get a good job. Isn''t that what the schools teach. The only problem is that the system is not very successfull. Very few people can retire from a job and live a good life. The reason is that jobs are set up to allow your employer to suceed and as a tax base for the government.
The minute that the employer stops making money from what you do - is the minute that your job ended (although in today''s parlance they might have you hang arround for a bit while they figure out a "proper" way to let you go).
So you have a right to be mad.
The only solution that I found was that I had to learn to go into business for myself. You have to be willing to learn to change to succeed. You have to accept that you will probably fail - and learn to fall forward and pick yourself up. I have come a long way, and have a way''s to go yet. Fortunately, if you are interested there are a number of sources of information on how to learn to succeed in business. Be it the local Chamber of Commerce (trust me- they want more business''s in the area), business development groups, or some of the better multileve organizations (the better organizations do have great training programs - which often take years to get through that you can apply anywhere). Of course, there are a lot of junk programs - and junk multilevels out there. be highly sceptical of getting education from someone or some orgainzation that cannot show you that they have succeeded in business. Why is it that most business schools are staffed with people who have never run a business in their life, or a few people who failed and ran back to be on staff.
Anyway, I hope I have helped explain the system to you.
If your an employee and mad at the sytem. Then I encourage you to step out and start learning about how to build your own business. I have learned more lessons of life by doing that than anyting I have ever learned on the day job.
Perry
Please note that I have only skimmed some of the preceeding post, so gently let me know if I''ve mistated things.
ame: I understand you are angry. You have a right to be angry. So are others.
However, what follows is the basics of how the tax system is structured.
There are basically 4 different tax codes in the US based on the following classifications:
-- Employee
-- Self Employed (small business, perhaps a small number of employees)
-- Business (larger business with many employees and stockholders)
-- Investors
I will note that many people cross these boundries, but are often mainly in one catagory. For example, I am an employee, who is also self employed in a small business.
Each group is treated totally different.
The worst taxed group is the employee. An employee largly can only save or invest in after tax dollars.
The governement provides tax breaks for the Self Employeed and Business, because they want business''s to succeed. A simple fact is that virtually every job in america is paid for from operating business''s. Business''s have employees - and pay all the wages of those employees, and have business profits. Those wages and business profits are taxed to support government positions (while government wages are also taxed this is just a partial recycle of the original money that came from a business). Investors set up investment bussiness, and successfull ones make a profit and have to pay taxes. With the exception of import duties - all other money in america comes from businesses. That is why the the government grants tax breaks to a business - because it, and the american economy is dependent on them.
Investors are a special form of business - and often lubricate the formation of new business or new products. Thus, they get some breaks as well as the business of america is business (unfortunately, the schools don''t normally teach this).
Even charities get all of their money from businesses either directly or through the employees.
The self employed have one set of tax benifits.
The bigger Business has another set of tax benifits.
Depending on what you are producing, depends on where the best tax breaks are.
A self employed person who is in a service industry (plumber, painter, Dr, etc) is actually fairly highly taxed (many of the previous tax breaks were taken away a decade or so ago).
A self employed person who is selling products or services provided by others gets many more tax breaks.
If you need large capital equipment you are usually better off in the structure of a Business where eveyone is an employee and there are stockholders.
The employee is part of what a Business needs to succeed, and they have no inherent econominc advantage to the government (the US used to run just fine when there were relatively few Businesses, and most people were Self Employed).
Thus, the employee bears the brunt of the tax code. They have no leverage.
Concerning your concept that starting a business is not easy. You are again right - in a way.
Actually, starting one is very easy because the government wants you to be in business as it creats jobs and taxes in the economy.
The tough part is learning how to make a profit.
The hardest thing is that people have to learn to think and act diferently. The school system trains you to be employees. Not a business person. Most people don''t have a clue what to do because they were never taught.
If the schools taught business (and not MBA type business which is just another class of employee), but really the hows and whys of presentation, marketing, profit, book-keeping, etc I suspect that many more people would be in their own business instead of being an employee.
But they teach you to be an employee because that is what Business needs. employees. Where does most of the tax money originate from. Business. Why was the higher level public education system really started (beyond simple reading and basic math: what most students can do by 4th grade). (check the history on this if you wonder) = because business needed educated employees for the factories (note that Jr Hi and High schools only sprung up where there were factories). Very few people got a college education - and you could get into college with the equivelent of todays 5th grade education - if you could afford it (they were expensive and private).
Remember, get a good education and get a good job. Isn''t that what the schools teach. The only problem is that the system is not very successfull. Very few people can retire from a job and live a good life. The reason is that jobs are set up to allow your employer to suceed and as a tax base for the government.
The minute that the employer stops making money from what you do - is the minute that your job ended (although in today''s parlance they might have you hang arround for a bit while they figure out a "proper" way to let you go).
So you have a right to be mad.
The only solution that I found was that I had to learn to go into business for myself. You have to be willing to learn to change to succeed. You have to accept that you will probably fail - and learn to fall forward and pick yourself up. I have come a long way, and have a way''s to go yet. Fortunately, if you are interested there are a number of sources of information on how to learn to succeed in business. Be it the local Chamber of Commerce (trust me- they want more business''s in the area), business development groups, or some of the better multileve organizations (the better organizations do have great training programs - which often take years to get through that you can apply anywhere). Of course, there are a lot of junk programs - and junk multilevels out there. be highly sceptical of getting education from someone or some orgainzation that cannot show you that they have succeeded in business. Why is it that most business schools are staffed with people who have never run a business in their life, or a few people who failed and ran back to be on staff.
Anyway, I hope I have helped explain the system to you.
If your an employee and mad at the sytem. Then I encourage you to step out and start learning about how to build your own business. I have learned more lessons of life by doing that than anyting I have ever learned on the day job.
Perry
. Sorry to depress you!
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