Thursday, September 23, 2010

GOP: Savior of Small Business? Obama: Enemy of the Rich?

I’m a small business, a very small business:  me.

I suppose I should be on the side of the GOP which says that letting the Bush tax cuts on what Obama calls the “rich” expire will hurt small business, the engine of economic development.

But here’s the problem I have.  Small businesses (SB), for the most part, don’t pay taxes.  Don’t yell now.  The people that own small businesses do pay taxes, but no more than their individual tax burden based on their income.  SB owners are usually sole proprietors, or more commonly, LLC’s – Limited Liability Companies, which usually elect “Subchapter S” tax status.  That means the LLC, while it files tax returns, doesn’t pay taxes – the money “flows through” to the owners who pay taxes based on their individual tax status.

It seems to me that both sides of the debate are playing word games. 

The cut-off to keep the Bush tax breaks in Obama’s proposal is $250K in yearly income.  To his mind, going over that amount makes you “rich” I guess as that’s what he’s calling such people.  I doubt that most people in that range and a bit higher consider themselves to be rich.  But, I am sure that someone pulling down $35K a year considers $250K a year to be pretty damn good money.  If you go over the magic number, Obama wants you to kick in another couple of percent of your income to the IRS.  Depending on how far over the threshold you are, that could be a few hundred, or multiple tens of thousands of, dollars.

Either way, I really don’t think the tax increase is a death knell for small business.  SB owners will have less money for discretionary spending and saving.  Will that bring down the economy?  No. 

The question then becomes should the better off in the country pay another chunk of their income while the less better off don’t – classic economic class struggle.  Progressive, regressive?  Trickle down gold or basic living standards for the poor?  Send your congressperson and senators your answers.


LLC Tax said...

I appreciate your understanding of this subject, Well Done.

Dave said...

Thanks LLC.

Kim said...

I hope you have a chance to read the ABA Journal article "Law Prof's Deleted Post: 'I'm Not "Super-Rich" Enough for Higher Taxes" and the comments posted to the article. I want commenter Ashley to run for president.