POSSIBLE RECESSION and starting as and Owner Operator?

Simply not true.

Lets take two examples, the section 179 deduction and the corporate tax rate.

The section179 "deduction" allows an entrepreneur to depreciate an asset in the year it is put into service, rather than depreciating it over 3, 5 or more years, based on the IRS depreciation tables. it's not a "extra deduction", it just makes depreciation a little quicker.

How does this affect business investment? If I have $150,000 in profit, and I invest in (buy) a new $150,000 truck under the old rules, my $150,000 profit is gone, and I get to deduct something like $40,000 in expenses from my taxes. I still owe the 35% corporate income tax on the remaining $110,000, or close to another $40,000. So, unless I invest a total of $190,000 in the business that year ($150,000 for the truck, and $40,000 for the associated taxes), I can't buy a new truck. The old tax law prevents especially small businesses from expanding quickly. With the 179 deduction, we just write off what we buy the same year. Have money? Buy asset, write off asset. The next year, the profit produced by that asset is fully taxable, which increases tax revenue, and totals far more than it would have been without the new truck I bought. The total we get to deduct is the same, but the total we pay in taxes will absolutely be higher (and I love it, because that means I made more money). In past years, the level of the section 179 deduction was a political football, and democrats used it as a bargaining chip. There have been several years where I held back on an investment because the Dems were playing games and we could not be sure I wouldn't be hit with a tax bill I couldn't pay. Now we have a long term planning horizon we can work with, and I'm investing like crazy.

The corporate tax is even worse. Multi national companies can locate anywhere on the planet, and they move money around like chips on the poker table. If the US tax rate and tax laws are such that the corporations don't keep as much of the money they earn in the US, first thing they do is quit making as much money. The prices they charge between sub divisions changes just enough that the corporation in the US just never seems to make a taxable profit. All those profits gets stashed overseas, and what is far WORSE, used for INVESTMENTS overseas, where the corporation is allowed to keep more of it's money.

See, the thing about lowering the corporate tax rate is not that we let corporations pay less taxes, its that we make it attractive to make the money HERE and not overseas. It makes it attractive to invest HERE instead of there, and employ people HERE and not THERE. If you study economics long enough, you realize that corporations don't really pay taxes, they see taxes as a cost that is passed on to the consumer. Lowering the corporate tax rate not only makes companies like Apple bring home and pay taxes on a mega-pile of money, it makes companies like Apple build new campuses in Austin TX. It increases tax revenue by increasing the tax base. And that's the only way to grow a country.

 

Personal experience, observing others, how many people who win the lottery, just a couple millions jackpot not half a billion, end up bankrupt?

 

So so true! If it wasn’t for the 179 deduction my business would be maybe half the size it is today. It really sucked during the Obama’s years when we had to wait until literally end of December to see if we got 179 deduction that year or not. The uncertainty was killer and meant mid six figures in difference of tax that would have to be paid. That’s enormous for a small business with a few trucks at the time.

Great post man! It’s really nice to see others on here that get it and been affected by all of this bs like I have.

 

You observed others......not me bro. As for the lottery winners, some people have no discipline. They change their lives so drastically without the thought of money actually running out.

 

Have any of you seen the statistics on lottery winners? The vast majority of lottery players are “poor” people. Also, the majority of them, that even won millions of dollars, are back flat broke within a few years. Why you ask? It’s because if you can’t manage $100 you can’t manage a million. Also, playing the lottery thinking you’ll win big and that will be the answer to your problems is poor people thinking. First of all, the odds of you winning are very, very slim, and even if you do win, statistics say you’re likely to screw that up too. I’ve sat there and watched people buy their quart of beer and a hand full of lottery tickets, and then try to scrape up enough change out of their ash tray to buy enough gas to get home.

I know people that trade for a new vehicle every couple of years. Their thinking is you are always going have a car payment anyways, you might as well drive something new. This is “poor people thinking” because you’ll never get ahead having perpetual payments.

Running a balance on credit cards is “poor people thinking”, and I’d submit that leasing a truck also falls in that catagory. Most of this falls into the “I want it now” line of thinking most of this country hasn’t bought into. Instead of waiting until you are financially able to do something, you look for the quick way of leasing or big loans.

But what do I know? I was on the verge of bankruptcy in 2002. I had borrowed up to my eyeballs in a business venture and was in a very deep hole. I managed to get out of that, and vowed I’d never borrow another dime. Now I own another business with substantial assets, a house on a farm, and 2 late model vehicles setting in the drive, and I don’t owe anybody a dime for any of it. All I had to do was to stop doing poor people things and start trying to copy what wealthy people do.

Most people want to just sit around and blame the “rich man” for all their problems, instead of getting off their butt and trying to beat him at his game.

 

If people could just have the discipline to keep their same standard of living after getting a raise or making more money then they would actually achieve what they want long term. Make $75 bucks more per week? Spend $75 bucks more per week. I call that up on jacks with the wheels spinnin.

 

A million ain’t what it used to be. The only thing I disagree with is the statement Rich people don’t borrow money. Even the biggest Corporations carry debt.A lot of people got rich by Mastering The Leveraging of money. The whole monetary system is a debt system

 

You clearly have no idea how depreciation works. The only difference now is the accelerated depreciation rule that allows 1 yr Full depreciation. You could buy a Truck for $150 k and fully depreciate (Cost x 80. %) ($120) in 1 yr. The $120 comes right off your bottom line after other costs, deductions etc. Then next year you sell Truck for $130 k. You would owe Capital gains tax (15% currently formerly 20%) on $100 k. Since you already depreciated it down to $30 k from original price. The Capital gains football is 15%vs $20%. Not enough to affect most O/O. Unless retiring and selling out.In my example $5k

 

Absolutely agree on your entire post there.

Wasn’t this the main issue in the 2008 recession - as soon as folks lost jobs, their entire house of cards collapsed - easy credit, HELOCs on inflated house prices . . .

Yet still, 10 years later my advice to anyone about repairing credit, saving money, investment in retirement, cheap cash paid trucks, business plans and living within ones means - . . . for the most part falls on deaf ears.

I’ve been trying to sell a ‘75 Vette for 4 months now. Lots of offers to trade. Nobody has yet even came and looked at it.

Conclusion? Nobody has $12k to lay on a table.

Anyway - carry on. Good discussion.