Riddle me this

[mrnoodle]

I don't know what other factors might have been present, I only go by what he complained about. As I said, he was utterly uneducated about finance, and I'm sure the line between the money he earned/spent personally and the money he earned/spent on the business was quite blurry. He also worked full time in manufacturing as a support tech.

That does bring up another issue about the tax code, though. It really should be something that's translatable by the average schmo. After all, the average schmo is footing the bill. If the money my friend lost was actually lost somewhere other than through taxes, and he was just an inept businessman, then that's the breaks. But for someone who doesn't have an MBA, and just wants to make a family-run business work, it's quite easy to get bumfuzzled.

So, if he lost $X thousand and saw that a simultaneous increase in his tax rate, there might not be a DIRECT cause/effect relationship, but isn't the outcome the same? I ask in all humbleness, not arguing here.

[Troubleshooter]

http://www.freerepublic.com/focus/f-news/666837/posts

Have we covered this yet?

Profiting from death? Lawsuit filed in Wal-Mart life insurance case
Houston Chronicle ^ | April 15, 2002 | L.M. SIXEL

Posted on 04/16/2002 4:15:37 AM PDT by ValerieUSA

Jane Sims always knew her husband was a valuable employee to Wal-Mart. She just didn't know how valuable. Sims discovered recently that Wal-Mart, the company her husband, Douglas, worked for before he died, had taken out a life insurance policy in his name. When Douglas Sims died in 1998 of a sudden heart attack, Wal-Mart received about $64,000. She got nothing from that policy.
"I never dreamed that they could profit from my husband's death," said Sims, whose husband worked in receiving at Wal-Mart's distribution center in Plainview for 11 years.

Companies routinely take out secret life insurance policies on the lives of their low-level employees and collect thousands of dollars when they die. The families never know the policies are in place and typically receive none of the money.
The policies are called corporate-owned life insurance policies or COLIs for short. But they're better known in the insurance industry as "dead peasant" and "dead janitor" policies.

...more...

[Happy Monkey]

Originally Posted by mrnoodle

So, if he lost $X thousand and saw that a simultaneous increase in his tax rate, there might not be a DIRECT cause/effect relationship, but isn't the outcome the same? I ask in all humbleness, not arguing here.

I'm not sure what "lost $X thousand" means. Was his after-tax income actually $X thousand less in his good year than in his bad year? Or was his tax $X thousand more in a year where his income was $X*Y more?