Wednesday, September 1, 2010

Philadelphia About to Tax Blogs Structured to Be Profit-Making

I'm over in Jersey. But, the news out of Philadelphia is significant to all.

If one has a blog structured for profit-making, it must be registered with the City, and pay a $50 annual fee, or a lifetime fee of $300.

The implications are larger.

(1) Even if the blog earns $0.01, it must pay the $50 annually. This will tend to suffocate start-ups.

(2) Registering also subjects the blogs' income to a requirement that the $0.01 blog income be reported on
(2a) a Philadelphia wage tax return;
(2b) a state income tax return;
(2c) a federal 1040 return.

Since blog income must be added to other income, taxability threshholds will not apply to people with other income.

So, let's add-up the tax rates...

(Philadelphia Wage Tax rate 3.93%) + (Pennsylvania Income Tax rate 3.07%) + (modal functional threshhold Federal Income Tax rate 15%) = ~22%.

Ignoring any federal deduction for state and local taxes paid, since the deduction must be amortized over all income, not just the blog, and since it is a deduction, not a credit, the result of going after the blog income, including First-Amendment-protected blogs, is...

(1) The blog must earn more than $64 to net any money at all. Up to the first $64, the blog operates at a loss. One has to PAY to express one's views in a for-profit blog.

(2) On $100 of gross blog income, the net income = $100 - $50 - $22 = $28. So, the functional tax on $100 is 72%.

(3) On $200 of gross blog income, the net income = $200 - $50 - $44 = $106. So, the functional tax on $200 is a little less than 50%.

(3) On $400 of gross blog income, the net income = $400 - $50 - $88 = $28. So, the functional tax on $400 is 34.5%.

So, new blogs have to earn about $400 in income a year before government revenue stops engaging in confiscatory levels of income seizure.

In an article the other day, the Philadelphia Inquirer soft-pedaled the "hit." The truth is that it's a roundhouse right for beginner blogs.

2 comments:

  1. I'd just like to state here that I am sending you a penny today to compensate you for your work on this blog. I may have read this blog from a site in philadelphia (hard to recall)

    ReplyDelete
  2. J-j-j-just d-d-d-don't issue a t-t-t-t-ten ninety-nine!!!!!

    ReplyDelete