By Jim Cox, Guest Blogger
Over the weekend, President Obama went all Elizabeth Warren on us and claimed that successful business owners are not responsible for their success, government is. The Left is happy because the President expressed their sentiments. The business community is aghast because it demonstrates, in their eyes, the President’s utter lack of knowledge about how business and government work. So, let’s see exactly who pays for the government we get.
I will start with my hometown of Burlington, VT, the heart of Blue State America and the home of Socialist Senator Bernie Sanders (I-VT). Full disclosure, I am great friends with his son Levi and graduated high school with him.
Burlington, Vermont is a pretty city on the shores of Lake Champlain. Its income tax rate is 9.5%. Its sales tax is 7%. The state corporate income tax rate is 8.5%. This is not a state to live in if you want to be in business. It is expensive.
The federal corporate rate for businesses who earn $18million in 2012 is 38%. The state share of that revenue is $948,000. If the business is a products company, and $10million of the revenue is from sales, then the total sales tax paid on that revenue is $700,000.
For 2012, a successful business in Burlington, Vermont will have a total tax bill of $1.65million on top of the $6.84million paid to the federal government. There is more to consider. Let’s assume that this company employed 250 employees – a true small business. Let’s say the average salary was $35,000 per employee. The federal income tax on that revenue is 15%.
Assume no deductions, the total tax on that revenue is $5,250. Their net income is then $29,750. Their state income tax bill is $2,826. Let’s assume that of the 250 people employed 65% earn $35,000. The total tax revenue from individuals from this company is $460,638 for the year. Add that to the total above and you get $2.1million in tax revenue.
Let’s assume that of their remaining disposable income, these Burlington employees spent 25% of their income on retail and food. That comes to $674 per month per employee. The total sales tax revenue from these 250 employees in the city of Burlington would be $1.7million per year. If you add this number to the state income state revenue that total is $2.2million for the city of Burlington. That number is 24% of the total expenses in the Burlington city budget for business related activities. This is on top of the total revenue the city charges for services.
If there are two companies in the city of Burlington that match this fictional company then more than half of the city’s expenses would be covered by income and sales tax revenue. That is what pays for the roads, airports, water, electricity and telecom. It is not the government who pays, it is us.