The Oil Drum

50 comments on The SUV disease spreads

Comments can no longer be added to this story.

spooky on October 4, 2005 - 12:51pm

Just something for you guys to think about. Those who own their business pay much higher taxes than those who work for someone else. To offset these taxes, you must basically spend quite a bit of money in the form of "Business Expense" or else the chunk Uncle Sam takes is pretty hefty.

Uncle Sam pays not only mileage expense but let's you depreciate your vehicles. The more expensive the vehicle, the more you get to depreciate. But it has to pass the "business use" sniff test, so buying a Viper or a Lamborghini will not usually work.

What will nearly always work is buying a 4-door luxury car or a 4x4 diesel truck, with every gizmo and option you can get them to stick on it. Since they raised the mileage expense, it helps to offset higher gas prices as well.

Uncle Sam gives you two choices - feed him or feed his debt driven consumer economy. If you feed him, you get bupkiss. If you feed his economy, at least you get to drive something nice...

Comments can no longer be added to this story.

Ed Ames on October 4, 2005 - 1:03pm

Well said and extremely relevent to the depth of the hole we've dug.

Comments can no longer be added to this story.

Stuart Staniford on October 4, 2005 - 1:43pm

I have workd for myself and as an employee, and I don't think it's true that the self-employed pay extra taxes. The only reason it looks like that is because of the SE tax, but that basically offsets employer contributions for payroll employees (ie it's money that doesn't look like it's coming out of an employee's paycheck, but really it is part of the difference between what an employer has to pay, and what the employee gets).

Comments can no longer be added to this story.

Glenn on October 4, 2005 - 2:21pm

I think the issue is that you have more control over how you spend that money. Anything that could be a dual purpose - conference at a resort for instance - goes in as a business expense and does not get taxed. It is an inducement to overconsume if you can book the expense as a business expense.

Comments can no longer be added to this story.

Stuart Staniford on October 4, 2005 - 2:36pm

I agree those incentives exist.

Comments can no longer be added to this story.

Southsider1 on October 4, 2005 - 8:20pm

I've been responsible for the finances of a Subchapter S corp. owned by a small circle of individuals. Sure, business expenses are pre-tax, which means, depending on your bracket, you save roughly a third versus post-tax expenses. But they're still expenses, and any good business person strives to minimize unnecessary expenses. I've never seen an instance in which we spent money simply because it was "deductible."

Comments can no longer be added to this story.

jonniesmokes on October 4, 2005 - 1:50pm

Please enlighten us as to how business owners pay more taxes than the rest of us. I'm not just trolling here; I'm really curious.

When I had a consulting business, I remember having to pay self employment taxes (the other half of social security and medicare). But that's really just a tax that everyone has to pay. It's just that the business owners get to do the paperwork for it.

Or are you talking about something else like state taxes?

What business owners can do that the us low class wage earners can't do is deduct business expenses like SUV's, fancy lunches with 'clients' and the expense for the fancy aquarium in the waiting room. We can only spend our after tax income on those things.

Comments can no longer be added to this story.

Adam on October 4, 2005 - 5:59pm

The self-employment tax is particularly nasty because it's regressive: People who have high-paid (ie. over ~$80K) jobs but do some extra work on the side don't have to pay it, whereas the genuinely self-employed do. Combined with state taxes, it can easily drive the marginal tax rate to >50%.

The other big cost is health insurance. Not technically a tax, I know, but the effect is the same.

Comments can no longer be added to this story.

Biologyfool on October 4, 2005 - 7:25pm

I believe everyone is taxed on the first ~80K. Those high-paid people do pay the tax (their employer actually pays it). But if their employer paid them as a contractor, the employer could afford to pay them more (their salary+the payroll taxes). Uncle Sam gets it one way or another.

Comments can no longer be added to this story.

Southsider1 on October 4, 2005 - 8:23pm

Health insurance isn't a free good; it's part of your total compensation package. It's always better to look at your total compensation (salary + employer's social security contribution + benefits) rather than your salary alone to determine how much you get paid.