Professor Elam

3 responses to “What Are They Thinking?”

1. 

   Tina C

   July 12, 2009

   I agree that we need to find ways to fix this problem rather than using funds that are not available. I disagree that zero income tax and social security matching would be a fair solution. Having worked with small businesses for many years, the payroll taxes, while still a burden, may not make that big an impact for just one quarter. Many of these entities (small businesses) are set up as sole proprietorships, partnerships and S-Corporations. Instead of taking large salaries, the owners tend to take smaller salaries and are taxed on their income through their personal tax returns at the end of the year. With these small businesses, there are usually fewer employees and more family working to make the business successful.
   For small businesses, you would also have to consider the reporting impact of doing something like this for just one quarter. With Intuit drowning out the competition, QuickBooks is often the software of choice for small business owners. It has serious limitations when it comes to changing something mid-stream. Last year TWC issued a rate change mid-quarter that created havoc for many of my clients all year just because of inflexibility of the software. What these clients saved in TWC tax was quickly taken up in paying their bookkeeping consultant to come out and fix the problems. I can only imagine what it would cost the clients with a change such as this for one quarter.
   Also to consider is how to be fair to the owners of pass through entities that pay both the employee & employer portions of social security tax on their own income in their personal tax returns. Would there be a proration or allocation during the year? How could they (the taxing aurhorities) efficiently and effectively create fair reporting of this? How much would it cost to implement such a system? Would it be cost effective to do so?
   This solution might be helpful to mid to large businesses with many employees and (hopefully) highly skilled internal payroll staff. Companies such as these tend to pay higher salaries to top executives and more wages overall. With a larger salary base, the impact of payroll taxes would be more significant. It would still be an accounting nightmre for the payroll department…

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2. 

   Dennis Elam

   July 12, 2009

   Tina’s insights reveal the realities of trying to BE FAIR.
   And the realities of the myriad reporting requirements already on the books.
   Of course whatever happens it wioll be voter and politically driven, not based on quik books….

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3. 

   Tina C

   July 13, 2009

   How true you are. Politicians (federal & state) set all of this into motion without fully thinking through the effects it will have. The Texas State Comptrollers office is still over whelmed by the “new & improved” Texas Franchise tax that was put into motion last year. At the rate they are going it could be years before the dust settles. When it’s reviewed at that point, then we’ll know if the benefits truly outweigh the cost of implementing it…

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