Please help me to help myself ... I really want to have compassion for Rep. Fleming

[musclemom]

Look, I'm not the smartest bulb in the box when it comes to economics, I admit that. But isn't the money he reinvests into his own companies separate from what he puts in his pocket as income? He's talking about his personal income, right? And after he's taken care of his business expenses and fed his family he's left with $400k and considers this a hardship.

If I'm wrong, I can accept that, I just want to understand.

Rep. John Fleming (R-La.) appeared on MSNBC Monday morning to express opposition to President Barack Obama's deficit reduction plan, which includes a proposal to raise taxes on the wealthy.

Fleming charged that the plan is a terrible idea which kills jobs provided by wealthy "job creators" who pay personal income taxes. When asked about his business ventures -- including his role in a number of Subway restaurants and UPS stores -- from which he earned $6.3 million last year, Fleming told MSNBC host Chris Jansing that his business expenses left him with little to tax "by the time I feed my family."

Fleming told Jansing that the $6.3 million is "before you pay 500 employees, you pay rent, you pay equipment and food."

"The actual net income of that was a mere fraction of that amount."

“By the time I feed my family, I have maybe $400,000 left over," Fleming said.

Jansing pointed out that to a person making $40,000 or $50,000 per year, making $400,000 annually is "not exactly a sympathetic position," but Fleming responded by calling his success a "virtue" and noting that “class warfare has never created a job."

"This is all about creating jobs," Fleming said. "This is not about attacking people who make certain incomes."

John Fleming, GOP Congressman, Blasts Obama Over Buffett Rule: I Can't Afford A Tax Hike

 

[EnderJE]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

I would have thought he would have paid himself less and and used more company assets.

I also thought that the tax hike would be for people who's personal income is in the millions rage and not a business.

 

[-SD-]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Would you have posted this if he had a "D" after his name?

 

[musclemom]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Would you have posted this if he had a "D" after his name?

Actually took me a second to figure out what you were referencing. His political affiliation didn't even factor into the vapor lock my brain went into.

But short answer, yes.

Also didn't know he's a representative for the state of Louisiana (the ironies just keep coming) until I went to his website, either.

 

[mrplunkey]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Look, I'm not the smartest bulb in the box when it comes to economics, I admit that. But isn't the money he reinvests into his own companies separate from what he puts in his pocket as income? He's talking about his personal income, right? And after he's taken care of his business expenses and fed his family he's left with $400k and considers this a hardship.

If I'm wrong, I can accept that, I just want to understand.



John Fleming, GOP Congressman, Blasts Obama Over Buffett Rule: I Can't Afford A Tax Hike

This is just a wild guess, but he's mostly likely an LLC, where the profits of the company flow through his personal tax return. So he'd get to expense his depreciation expenses as he goes, but new equipment/facilities/services would have to be funded from either profits, debt or fresh money he puts into the business.

As far as a $400k profit on $6.3M in sales, it really depends on three things:

1) What's the risk profile? On any given year, is his income anywhere from -$200k to +$500k, or is it a steady $400k just like a clock?

2) How much capital does he deploy? Is he making $400,000 on $1,000,000 worth of assets (which would be great) or is he making $400,000 on $10,000,000 worth of assets (which would be terrible).

3) What's his opportunity cost? Did he give-up a $450,000/year law practice to setup this chain?

Did he say his profit was pre or post tax? If he's making $400k after taxes on $6.3M, that's 6% -- which is decent. If he's paying another $160K in taxes, then he's only at 3.8% which isn't so impressive IMO.

Here's an interesting way to look at this -- Let's back into his income statement:

400K in after-tax profit (I'm assuming it's after tax)

Federal: 35% (yeah, the first part is cheaper, but not material)
State (LA): 6%

So 400K/0.59 = $678K pretax -- so he's paying $278 in income taxes

6.3M in sales @ 4% sales tax = 242K in sales taxes

His costs must be = 6.3M - 678K = $5.6M

Let's assume labor is 40% of his cost (conservatively). So payroll taxes ~ 9% (UI, SS, Medicare, DI) = 5.4M * .4 * .09 = $194k

Let's ignore licenses, property taxes, use taxes, permitting, regulatory costs, etc. etc.

So this $6.3M business generates:

$278k
$242k
$194k
----
$714K in taxes

So you tell me (honestly here, not messing with you). Is it reasonable for someone to be forced into $714K in taxes just so they can risk making $400k in income?

Seems high to me.

 

[lartinos]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Ya, the average Joe feels real bad for him lol.

 

[TableFun]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

This is just a wild guess, but he's mostly likely an LLC, where the profits of the company flow through his personal tax return. So he'd get to expense his depreciation expenses as he goes, but new equipment/facilities/services would have to be funded from either profits, debt or fresh money he puts into the business.

As far as a $400k profit on $6.3M in sales, it really depends on three things:

1) What's the risk profile? On any given year, is his income anywhere from -$200k to +$500k, or is it a steady $400k just like a clock?

2) How much capital does he deploy? Is he making $400,000 on $1,000,000 worth of assets (which would be great) or is he making $400,000 on $10,000,000 worth of assets (which would be terrible).

3) What's his opportunity cost? Did he give-up a $450,000/year law practice to setup this chain?

Did he say his profit was pre or post tax? If he's making $400k after taxes on $6.3M, that's 6% -- which is decent. If he's paying another $160K in taxes, then he's only at 3.8% which isn't so impressive IMO.

Here's an interesting way to look at this -- Let's back into his income statement:

400K in after-tax profit (I'm assuming it's after tax)

Federal: 35% (yeah, the first part is cheaper, but not material)
State (LA): 6%

So 400K/0.59 = $678K pretax -- so he's paying $278 in income taxes

6.3M in sales @ 4% sales tax = 242K in sales taxes

His costs must be = 6.3M - 678K = $5.6M

Let's assume labor is 40% of his cost (conservatively). So payroll taxes ~ 9% (UI, SS, Medicare, DI) = 5.4M * .4 * .09 = $194k

Let's ignore licenses, property taxes, use taxes, permitting, regulatory costs, etc. etc.

So this $6.3M business generates:

$278k
$242k
$194k
----
$714K in taxes

So you tell me (honestly here, not messing with you). Is it reasonable for someone to be forced into $714K in taxes just so they can risk making $400k in income?

Seems high to me.

There's an awful lot of numbers in this post. Just sayin.

 

[mrplunkey]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

There's an awful lot of numbers in this post. Just sayin.

It's much easier to say: "He needs to pay his fair share!!!"

Bottom line is he pays waaaaaay more in taxes than he ever takes home in pay.

 

[TableFun]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

It's much easier to say: "He needs to pay his fair share!!!"

Bottom line is he pays waaaaaay more in taxes than he ever takes home in pay.

precisely.

 

[mrplunkey]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

precisely.

Maybe we'll get lucky and drive him out of business. That will sure show those greedy rich people.

And let's not even dig into the payroll and income taxes those 500 jobs are forced to pay as well.

 

[TableFun]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

The Most Patriotic Thing You Can Do

by Mark Cuban

Bust your ass and get rich.

Make a boatload of money. Pay your taxes. Lots of taxes. Hire people. Train people. Pay people. Spend money on rent, equipment, services. Pay more taxes.

When you make a shitload of money. Do something positive with it. If you are smart enough to make it, you will be smart enough to know where to put it to work.


continued..........

The Most Patriotic Thing You Can Do blog maverick

 

[mrplunkey]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

And some of them get health insurance.

Qualified Subway workers enjoy a variety of health and wellness benefits, such as medical, dental, vision, life, and disability insurance. Eligible associates may receive savings benefits, such as a 401(k) retirement plan with a 75% company match of up to 4% of annual salary. Other work benefits include paid time off, free food, restaurant discounts, direct deposit pay, and credit union membership.

Maybe someone should send this guy a thank you note.

 

[musclemom]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

6.3M in sales @ 4% sales tax = 242K in sales taxes

His costs must be = 6.3M - 678K = $5.6M

Let's assume labor is 40% of his cost (conservatively). So payroll taxes ~ 9% (UI, SS, Medicare, DI) = 5.4M * .4 * .09 = $194k

Let's ignore licenses, property taxes, use taxes, permitting, regulatory costs, etc. etc.

So this $6.3M business generates:

$278k
$242k
$194k
----
$714K in taxes

So you tell me (honestly here, not messing with you). Is it reasonable for someone to be forced into $714K in taxes just so they can risk making $400k in income?

Seems high to me.

But that's not right. First of all, you're really making a huge amount of assumptions.

But more importantly, you're putting things together to get one set of numbers but not taking another into consideration to get the other part.

As a business owner, he pays XYZ in state, local and fed. taxes and other associated fees.

His business pays XYZ in other operational fees (a lot of which are tax deductible or can be tax shelters).

If he's collecting a salary from the company, then he has to pay taxes on his income, just like anybody else who gets a W2, but that is entirely separate from the taxes the company pays.

You don't take the total in taxes on everything then count that only against what you assumed his personal gross income is (and I realize everything is hypothetical here, we're talking for the sake of illustration), because the other stuff is company stuff.

So, if you're counting the total taxes, then you count the total income, i.e., 6.3 million. Looked at that way, he paid $714k on $6.3 million (I could very well be wrong, I totally admit I have MAJOR problems with both economics and math).

We're working with simplified and admittedly hypothetical numbers. However, you guesstimated Mr. Fleming could very well pay $278k in taxes on $678k in income, which means 41% of his gross income goes to taxes.

My husband pays roughly 28% of his gross income in taxes (and soc. sec., medicare, etc) but his gross income is somewhere in the vicinity of 200% less than Mr. Fleming's.

Looks to me like Mr. Fleming is getting off easy either way.

 

[TableFun]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

but his gross income is somewhere in the vicinity of 200% less than Mr. Fleming's.

I don't see how that is Mr Flemig's problem.

 

[miplank]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

your husband should've opened up some subways

 

[brownbrown]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

My husband pays roughly 28% of his gross income in taxes (and soc. sec., medicare, etc) but his gross income is somewhere in the vicinity of 200% less than Mr. Fleming's.

Looks to me like Mr. Fleming is getting off easy either way.

He sure is

 

[TableFun]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

your husband should've opened up some subways

 

[TableFun]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

or

 

[musclemom]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

your husband should've opened up some subways

In all honesty, were the putting aside of money something we were able to do, then purchasing a franchise might be a nice little family business.

However, it is very difficult to put money away when you are living tight to the vest. Every time we get a little set aside, something comes up (car, health, dental, house) and poof, there goes a grand or two in the blink of an eye that took you the better part of a year to put away.

And this is not directed at you, Plank:

I don't appreciate mockery when I'm trying to understand, TableFun. I don't think my questions are unreasonable and I do appreciate Plunkey taking the time he did with his response, but his response only created more questions in my mind.

 

[mrplunkey]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

But that's not right. First of all, you're really making a huge amount of assumptions.

But more importantly, you're putting things together to get one set of numbers but not taking another into consideration to get the other part.

As a business owner, he pays XYZ in state, local and fed. taxes and other associated fees.

His business pays XYZ in other operational fees (a lot of which are tax deductible or can be tax shelters).

If he's collecting a salary from the company, then he has to pay taxes on his income, just like anybody else who gets a W2, but that is entirely separate from the taxes the company pays.

You don't take the total in taxes on everything then count that only against what you assumed his personal gross income is (and I realize everything is hypothetical here, we're talking for the sake of illustration), because the other stuff is company stuff.

So, if you're counting the total taxes, then you count the total income, i.e., 6.3 million. Looked at that way, he paid $714k on $6.3 million (I could very well be wrong, I totally admit I have MAJOR problems with both economics and math).

We're working with simplified and admittedly hypothetical numbers. However, you guesstimated Mr. Fleming could very well pay $278k in taxes on $678k in income, which means 41% of his gross income goes to taxes.

My husband pays roughly 28% of his gross income in taxes (and soc. sec., medicare, etc) but his gross income is somewhere in the vicinity of 200% less than Mr. Fleming's.

Looks to me like Mr. Fleming is getting off easy either way.

My assumptions were very conservative. He's paying much more in taxes than he could ever make in take-home profit at any assumption level anyone could reasonably make.

If Fleming takes money out via salary, he pays his withholding (~ 9%) as well as the company's portion (~ 9%) in taxes, then he pays income taxes (35% federal and 6% Louisiana state). Those aren't assumptions, those are just the way things are. So if he issues himself $1 in pay, he'll pay 18% + 35% + 6% = 59% in taxes. In all fairness, the 18% would come out of pre-tax profits, but the company would still be taxed 35% + 6% on that income. There is a cap on those payroll taxes, but it's fairly high.

He'd be better of doing an LLC distribution to himself. I believe that would be at a measly 35% + 6% = 41% rate.

The other issue here is you are confusing revenue with income. You'd never calculate his tax rate based on revenue. Picture this, if I buy something for $100M and sell it for $100.001M, I had $0.001M in income. If it instead cost $0.01M and sold it for $0.011M, I'd still make $0.001. A person's wages are considered income because they presumably have no legitimate business expenses to deduct against them. But if someone finds themselves in an industry where they must supply materials or additional labor, they most definitely should recognize and deduct those expenses against their gross revenue.

 

[miplank]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Damn...it takes you almost a year to save up a grand or two?


That sucks

 

[TableFun]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

In all honesty, were the putting aside of money something we were able to do, then purchasing a franchise might be a nice little family business.

However, it is very difficult to put money away when you are living tight to the vest. Every time we get a little set aside, something comes up (car, health, dental, house) and poof, there goes a grand or two in the blink of an eye that took you the better part of a year to put away.

And this is not directed at you, Plank:

I don't appreciate mockery when I'm trying to understand, TableFun. I don't think my questions are unreasonable and I do appreciate Plunkey taking the time he did with his response, but his response only created more questions in my mind.

lol, not really

 

[musclemom]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Damn...it takes you almost a year to save up a grand or two?


That sucks

It doesn't work exactly like that, I think of it as the slinky effect. We have a HUGE expense and it devours all of our savings or ends up going on a credit card and we have to pay it off, which prevents or seriously reduces putting any money away.

And before anyone says anything about credit cards, our card has a 4.9% purchase interest rate. For dental we have a 0%/12 mo. same as cash.

Things weren't so bad until my stepdaughter and the problems associated with her moved in (which just happened to be the same year we needed a new furnace and roof).

 

[miplank]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

It doesn't work exactly like that, I think of it as the slinky effect. We have a HUGE expense and it devours all of our savings or ends up going on a credit card and we have to pay it off, which prevents or seriously reduces putting any money away.

And before anyone says anything about credit cards, our card has a 4.9% purchase interest rate. For dental we have a 0%/12 mo. same as cash.

Things weren't so bad until my stepdaughter and the problems associated with her moved in (which just happened to be the same year we needed a new furnace and roof).

Don't you rent? and even if you do own, shouldn't your homeowners insurance have paid for your roof?

 

[WoodyO]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Who needs a roof? A brand new tarp will run you like $50.

 

[mrplunkey]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

And MM... here's another thing to consider.

Your husband is paying 28% on money paid to him.

Mr. Fleming is paying anywhere from 59% (on true pay) to 41% (on shareholder distributions). He's roughly paying double your husband's rate.

But also remember Mr. Fleming is generating a huge wake of sales tax, payroll taxes, jobs, employee benefits (including some health insurance), property taxes, use taxes, license fees, etc. etc. -- and still paying 41% on what's left over.

So let's be objective for a moment: Isn't there a point where the government should stop sucking? At some point, they should stop issuing tax bills and issue thank-you notes instead.

 

[Mr. dB]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

It's much easier to say: "He needs to pay his fair share!!!"

Bottom line is he pays waaaaaay more in taxes than he ever takes home in pay.

You're including payroll taxes for all his employees in those numbers?

 

[musclemom]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Don't you rent? and even if you do own, shouldn't your homeowners insurance have paid for your roof?

Unfortunately no, stupidly let ex stick me with house in divorce instead of saying "Let's sell" (long story, my mother's $$$ were also involved). Refinanced to get ex off deed 30 year fixed at 5.75%. The RE market in this region absolutely tanked. Houses are foreclosing regularly. The ones that are selling are going for $20k less than what I bought this place for 20 years ago.

For example, a house that I know (because tax assessor books are online and way easy to search in our township) sold for $168,000 in 2008 just sold four weeks ago for $77,500.

The roof was final layer, 20+ years old. Luckily we got slammed with lateral winds last year and this whole neighborhood was considered a catastrophe zone. The roofer was amazed that the ins. company gave us anything at all.

 

[mrplunkey]

You're including payroll taxes for all his employees in those numbers?

Only the employer's portion, which is his responsibility to pay.

 

[miplank]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

Unfortunately no, stupidly let ex stick me with house in divorce instead of saying "Let's sell" (long story, my mother's $$$ were also involved). Refinanced to get ex off deed 30 year fixed at 5.75%. The RE market in this region absolutely tanked. Houses are foreclosing regularly. The ones that are selling are going for $20k less than what I bought this place for 20 years ago.

For example, a house that I know (because tax assessor books are online and way easy to search in our township) sold for $168,000 in 2008 just sold four weeks ago for $77,500.

The roof was final layer, 20+ years old. Luckily we got slammed with lateral winds last year and this whole neighborhood was considered a catastrophe zone. The roofer was amazed that the ins. company gave us anything at all.

still..The insurance should've paid for the roof. You should'nt have had to come out of pocket for anything besides deductible (if you don't know how to work it).

Yeah, you would've gotten a small amount upfront from ins. on a 20 year old rough, but you would've got the remainder of the balance in recoverable depreciation once it was fixed.

 

[PICK3]

Re: Please help me to help myself ... I really want to have compassion for Rep. Flemi

I like teh footlong