Thermwood Corporation
Post a Response Subscribe Guidelines

Woodworking Business

You are not logged in. [ Login ] Why log in
(NOTE: Login is not required to post)

Post a Response
The staff at WOODWEB assume no responsibility for the accuracy, content, or outcome of any posting transmitted at any WOODWEB Forum. Participants should undertake the use of machinery, materials and methods discussed after considerate evaluation, and at their own risk.
Your Name:
Your Website:
Email Address:
Subject: Re: Tax Reform Logic

Message:
(read message guidelines).
Note: Do not use the below fields to advertise your business - only for links related to the discussion.
Thread Related Link URL:
Thread Related Link Title:
  To "point" to an image (picture) from another website, provide the URL (Web Address) of the file ( include ONE reference to http:// )
Thread Related Image URL:

Date of your Birth:

Upload a Thread Related File:
File Types: Image (gif-jpg-png-bmp), PDF, Sketchup, Video (mov avi wmv mpeg mpg mp4 ogg). (Image Upload Tips)

I have read the Site User Agreement and agree with the Terms
  <= Check to receive e-mail notification of responses

Message Thread:

Tax Reform Logic

10/18/17       
cabmaker

One of the tax reform proposals in congress today reduces the time frame that machinery investments are amortized over.

The argument is that "The extra capital should, in turn, make workers more productive, raise their wages and increase tax revenues".

Can somebody explain the logic of this to me? If I was going to make a big investment in my company today would it be one that lowered the cost of labor or one one that raised the wages for labor?

I can understand how this kind of declaration might appeal to the hoopleheads but I am not sure what the cause & effect relationship is.

The most expensive machine in a cabinet shop today is a CNC machine. Aren't those machines marketed with the claim that they will help lower wages?

10/19/17       #2: Tax Reform Logic ...
Pat Gilbert

Not that you will hear me,

The difference between the advanced countries and the not so advanced countries is capital investment.

The difference between advanced cabinets shops and the not so advanced cabinet shops is capital investment.

Encouraging capital investment creates jobs. Encouraging capital investment grows the economy.

I thought this has been going on for some time, wouldn't this just be a continuation of what is already happening?

Labor gets paid according to how productive it is. E.G. a guy running a backhoe makes more than a guy running a shovel. More capital investment = higher wages.

10/19/17       #3: Tax Reform Logic ...
cabmaker

Are you saying increased investment in robotics will increase wages?

Did cabinet shop wages go up as a function of investment in CNC?

10/19/17       #5: Tax Reform Logic ...
Pat Gilbert

You bet.

Anecdotally when I bought my first cnc it certainly created more jobs that paid better.

Not to mention cnc repairmen, cad work, specialized cutting tools, new products and services (for us to build), AND someone who knew how to run a cnc.

BTW this is how the entire economy works (has been going on since the day someone invented the wheel). Robots CREATE jobs they do NOT take them away.

Yeah if you want to continue to make buggy whips that job will shrink. But the quantity of jobs in aggregate will increase, just not the same ones.

10/19/17       #6: Tax Reform Logic ...
Leo G

If you buy a $100K machine, the old way you'd be able to take off $20K a year for 5 years. That limits you because you spent the $100K in one purchase but have to take it off your taxes in lifts.

Now you can make the big purchase and take the whole tax write off at once. That gives you capital right now, not a little bit over the next 5 years.

I'm sure some will argue against it as it can be used to lower taxes over years instead of a one time thing.

I don't know if there is an option to do it either way, or if you'll have to do it as a one time write off.

10/19/17       #7: Tax Reform Logic ...
Jerry Cunningham

Advancements in technology have caused a dichotomy in our economy. We used to have an economy that was vibrant because every citizen at every skill level had an opportunity to participate and earn wages.

Now we have an economy where you can only earn a decent living if you know how to program computers or write code. Those wages are rising, while wages for people who work with their hands have not.

But the catch 22 is that over here in America people at the lower end of the wage scale just don't want to work. I'm sure every shop on here would hire an extra person or two at $10/hour if they were decent people who tried to do a good job.

Robots are down to only $30-40k right now. Very tempting!

10/19/17       #8: Tax Reform Logic ...
Alan F. Member

Basically they are making the rule 179 that has been around since 1981 in various forms permanent instead of waiting until December like they have the last bunch of years

Business Use of Section 179

10/19/17       #9: Tax Reform Logic ...
Pat Gilbert

FWIW

The dearth of construction jobs the last 10 years is because of demographics.

A big factor on the dearth of creating new jobs is minimum wage laws. Also a big factor on automating jobs.

It true that companies off shored many jobs to increase profits, but that is not a current factor. As unemployment is Very low.

10/20/17       #10: Tax Reform Logic ...
Kekaha man

Very few of the posters on this forum would not have been able to take full advantage of Section 179 (depreciating the total cost of equipment in the year of purchase) for the last several years - half a million dollars a year.

Back to the original question.

Sometimes, some companies will replace 2 people with one machine and continue on doing what they always did with no other changes other than increased profitability. More often, you replace 2 people with one machine and increase output, quality and/or diversity of products. Sometimes the only "global" (meaning not internal) difference is transfer of market share, but more often it's not the size of the pieces of the pie that changes, but the size of the pie. More pie = more happy people.

10/20/17       #11: Tax Reform Logic ...
Alan F. Member

Kekaha man,

Its relative to how much true profit you make.

Ideal situation is positive cash flow, cash in bank and low tax liability.

Rule 179 allows you to finance a machine, hold cash, depreciate the asset, reduce taxes.

You can give a vendor 100k, improve your production, reduce your taxes, and defer the payments for 3-5 years to where it may cost .45 to .65 on the dollar after tax savings to buy a machine using rule 179.

If you finance you are theoretically using dollars that have lower future value to make payments.

We have used rule 179 the last 8 years. We are replacing equipment we bought in 2010 this year.

We are significantly more efficient now than we were 4 years ago.

10/20/17       #12: Tax Reform Logic ...
Kekaha man

Alan, I agree with everything you said.

Maybe my point was not clear. Section 179 has been around for a very long time, and for the last almost 10 years the limit has been $500,000. I doubt anyone on this forum felt limited by that amount (unless they were a well-financed startup).

10/20/17       #13: Tax Reform Logic ...
Pat Gilbert

Your point is still not clear to me

10/20/17       #14: Tax Reform Logic ...
Alan F. Member

We had bank approval for more one year but could not make our mind up on two pieces. We ended up spreading it out over 3 years but that was a function of decision making ability. Those years we bought a bunch of smaller items that needed upgrading.

We generally have a budget by April and finance approval before we go to a show.

If you don't have equipment needs put it in a 401k.

There needs to be a strategy to reduce tax liability that also makes business sense.

Maybe if the tax code was less onerous and simpler good business decisions would be good tax decisions.

10/20/17       #15: Tax Reform Logic ...
Kekaha man

If I understood the original post, it was that NEW!!!! tax incentives were NOW!!!! available for depreciation of capital equipment.

My point is that this is nothing new.

But maybe I'm wrong, and most of the posters here would spend 1, 5, 10 million a year if only they could deduct it all the first year.

10/20/17       #16: Tax Reform Logic ...
Pat Gilbert

FWIW Tim's response was not clear.

BTW who is going to buy more equipment eligible on the 187 than they pay in taxes?

No it is not new. And YES lower taxes is always a good thing.

10/20/17       #17: Tax Reform Logic ...
Alan F. Member

Rule 179 allows you to carry forward bonus depreciation if you have $0 taxable income so if you had 150k in profit and bought a new machine for 200k you could carry forward the excess 50k until the next year

intersting link

 

Buy & Sell Exchanges | Forums | Galleries | Site Map

FORUM GUIDELINES: Please review the guidelines below before posting at WOODWEB's Interactive Message Boards (return to top)

  • WOODWEB is a professional industrial woodworking site. Hobbyist and homeowner woodworking questions are inappropriate.
  • Messages should be kept reasonably short and on topic, relating to the focus of the forum. Responses should relate to the original question.
  • A valid email return address must be included with each message.
  • Advertising is inappropriate. The only exceptions are the Classified Ads Exchange, Machinery Exchange, Lumber Exchange, and Job Opportunities and Services Exchange. When posting listings in these areas, review the posting instructions carefully.
  • Subject lines may be edited for length and clarity.
  • "Cross posting" is not permitted. Choose the best forum for your question, and post your question at one forum only.
  • Messages requesting private responses will be removed - Forums are designed to provide information and assistance for all of our visitors. Private response requests are appropriate at WOODWEB's Exchanges and Job Opportunities and Services.
  • Messages that accuse businesses or individuals of alleged negative actions or behavior are inappropriate since WOODWEB is unable to verify or substantiate the claims.
  • Posts with the intent of soliciting answers to surveys are not appropriate. Contact WOODWEB for more information on initiating a survey.
  • Excessive forum participation by an individual upsets the balance of a healthy forum atmosphere. Individuals who excessively post responses containing marginal content will be considered repeat forum abusers.
  • Responses that initiate or support inappropriate and off-topic discussion of general politics detract from the professional woodworking focus of WOODWEB, and will be removed.
  • Participants are encouraged to use their real name when posting. Intentionally using another persons name is prohibited, and posts of this nature will be removed at WOODWEB's discretion.
  • Comments, questions, or criticisms regarding Forum policies should be directed to WOODWEB's Systems Administrator
    (return to top).

    Carefully review your message before clicking on the "Send Message" button - you will not be able to revise the message once it has been sent.

    You will be notified of responses to the message(s) you posted via email. Be sure to enter your email address correctly.

    WOODWEB's forums are a highly regarded resource for professional woodworkers. Messages and responses that are crafted in a professional and civil manner strengthen this resource. Messages that do not reflect a professional tone reduce the value of our forums.

    Messages are inappropriate when their content: is deemed libelous in nature or is based on rumor, fails to meet basic standards of decorum, contains blatant advertising or inappropriate emphasis on self promotion (return to top).

    Libel:   Posts which defame an individual or organization, or employ a tone which can be viewed as malicious in nature. Words, pictures, or cartoons which expose a person or organization to public hatred, shame, disgrace, or ridicule, or induce an ill opinion of a person or organization, are libelous.

    Improper Decorum:   Posts which are profane, inciting, disrespectful or uncivil in tone, or maliciously worded. This also includes the venting of unsubstantiated opinions. Such messages do little to illuminate a given topic, and often have the opposite effect. Constructive criticism is acceptable (return to top).

    Advertising:   The purpose of WOODWEB Forums is to provide answers, not an advertising venue. Companies participating in a Forum discussion should provide specific answers to posted questions. WOODWEB suggests that businesses include an appropriately crafted signature in order to identify their company. A well meaning post that seems to be on-topic but contains a product reference may do your business more harm than good in the Forum environment. Forum users may perceive your references to specific products as unsolicited advertising (spam) and consciously avoid your web site or services. A well-crafted signature is an appropriate way to advertise your services that will not offend potential customers. Signatures should be limited to 4-6 lines, and may contain information that identifies the type of business you're in, your URL and email address (return to top).

    Repeated Forum Abuse: Forum participants who repeatedly fail to follow WOODWEB's Forum Guidelines may encounter difficulty when attempting to post messages.

    There are often situations when the original message asks for opinions: "What is the best widget for my type of shop?". To a certain extent, the person posting the message is responsible for including specific questions within the message. An open ended question (like the one above) invites responses that may read as sales pitches. WOODWEB suggests that companies responding to such a question provide detailed and substantive replies rather than responses that read as a one-sided product promotion. It has been WOODWEB's experience that substantive responses are held in higher regard by our readers (return to top).

    The staff of WOODWEB assume no responsibility for the accuracy, content, or outcome of any posting transmitted at WOODWEB's Message Boards. Participants should undertake the use of machinery, materials and methods discussed at WOODWEB's Message Boards after considerate evaluation, and at their own risk. WOODWEB reserves the right to delete any messages it deems inappropriate. (return to top)



    • Forum Posting Help
    Your Name The name you enter in this field will be the name that appears with your post or response (return to form).
    Your Website Personal or business website links must point to the author's website. Inappropriate links will be removed without notice, and at WOODWEB's sole discretion. WOODWEB reserves the right to delete any messages with links it deems inappropriate. (return to form)
    E-Mail Address Your e-mail address will not be publicly viewable. Forum participants will be able to contact you using a contact link (included with your post) that is substituted for your actual address. You must include a valid email address in this field. (return to form)
    Subject Subject may be edited for length and clarity. Subject lines should provide an indication of the content of your post. (return to form)
    Thread Related Link and Image Guidelines Thread Related Links posted at WOODWEB's Forums and Exchanges should point to locations that provide supporting information for the topic being discussed in the current message thread. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related Link that directs visitors to an area with inappropriate content will be removed. WOODWEB reserves the right to delete any messages with links or images it deems inappropriate. (return to form)
    Thread Related File Uploads Thread Related Files posted at WOODWEB's Forums and Exchanges should provide supporting information for the topic being discussed in the current message thread. Video Files: acceptable video formats are: .MOV .AVI .WMV .MPEG .MPG .MP4 (Image Upload Tips)   If you encounter any difficulty when uploading video files, E-mail WOODWEB for assistance. The purpose of WOODWEB Forums is to provide answers, not to serve as an advertising venue. A Thread Related File that contains inappropriate content will be removed, and uploaded files that are not directly related to the message thread will be removed. WOODWEB reserves the right to delete any messages with links, files, or images it deems inappropriate. (return to form)
    Related Information:
    Knowledge Base: Estimating, Accounting and Profitability | Legal | Marketing

    Recent Threads at all Forums