Problem w/Obama's tax plan for Small Bus. - Tilted Forum Project Discussion Community

aceventura3 · 10-21-2008, 11:40 AM

The highest tax rate for small business, those using S Corps. would be 45%, while the highest tax rates on "big business" or those using C corps would be 35%. Given Obama's plan, he thinks this is good for the little guy, going to cause the big guy to pay more and create jobs. He is wrong. If any of you run a small business and support Obama, please help me understand how the Obama tax plan is good for small business, and how it will create jobs.

I read an article on the WSJ opinion page today, that helps add some clarity to the issue. Not in favor of Obama by the way.

Quote:

Barack Obama declared last week that his economic plan begins with "one word that's on everyone's mind and it's spelled J-O-B-S." This raises the stubborn question that Senator Obama has never satisfactorily answered: How do you create more jobs when you want to levy higher tax rates on the small business owners who are the nation's primary employers?

Loyal Democrats have howled over the claim that small businesses will get soaked by the Obama tax plan, so we thought we would seek an authority they might trust on the issue: Democratic Senate Finance Chairman Max Baucus of Montana. Here is what Mr. Baucus wrote in a joint press release with Iowa Republican Charles Grassley on August 20, 2001, when they supported the income tax rate cuts that Mr. Obama wants to repeal:

". . . when the new tax relief law is fully phased in, entrepreneurs and small businesses -- owners of sole proprietorships, partnerships, S corporations, and farms -- will receive 80 percent of the tax relief associated with reducing the top income tax rates of 36 percent to 33 percent and 39.6 percent to 35 percent."

Then they continued with a useful economics tutorial:

"Experts agree that lower taxes increase a business' cash flow, which helps with liquidity constraints during an economic slowdown and could increase the demand for investment and labor."

Twelve Senate Democrats voted for those same tax cuts. And just to be clear on one point: An increase in "the demand for investment and labor" translates into an increase in J-O-B-S. So if lowering these tax rates creates jobs, then it stands to reason that raising these taxes will mean fewer jobs. From 2003 to 2007 with the lower tax rates in place, the U.S. economy added eight million jobs, or about 125,000 per month. The Small Business Administration says small business wrote the paychecks for up to 80% of new jobs in 2005, for example.

Mr. Obama's tax increase would hit the bottom line of small businesses in three direct ways. First, because 85% of small business owners are taxed at the personal income tax rate, any moderately successful business with an income above as little as $165,000 a year could face a higher tax liability. That's the income level at which the 33% income tax bracket now phases in for individuals, and Mr. Obama would raise that tax rate for those businesses to 36%.

Second, the Obama plan phases out tax deductions (the so-called PEP and Pease provisions), thus raising tax rates imposed on this group by another 1.5 percentage points. Finally, Mr. Obama would require many small business owners to pay as much as a four-percentage-point payroll tax surcharge on net income above $250,000. All of this would bring the federal marginal small business tax rate up to nearly 45%, while big business would continue to pay the 35% corporate tax rate.

Mr. Obama responds that more than nine of 10 small businesses would not pay these higher taxes. Last Thursday he scoffed in response to the debate over Joe the Plumber, saying that not too many plumbers "make more than $250,000 a year." He's right that most of the 35 million small businesses in America have a net income of less than $250,000, hire only a few workers, and stay in business for less than four years.

However, the point is that it is the most successful small- and medium-sized businesses that create most of the new jobs in our dynamic society. And they are precisely the businesses that will be slammed by Mr. Obama's tax increase. Joe the Plumber would get hit if he expanded his business and hired 10 to 15 other plumbers. An analysis by the Senate Finance Committee found that of the filers in the highest two tax brackets, three out of four are small business owners. A typical firm with a net income of $500,000 would see its tax burden rise to $166,000 a year under the Obama plan from $146,000 today.

According to a Gallup survey conducted for the National Federation of Independent Business last December and January, only 10% of all businesses that hire between one and nine employees would pay the Obama tax. But 19.5% of employers with 10 to 19 employees would be socked by the tax. And 50% of businesses with 20 to 249 workers would pay the tax. The Obama plan is an incentive to hire fewer workers.

For many months Mr. Obama and his band of economists have claimed that taxes don't matter much to growth or job creation. But only last week Mr. Obama effectively admitted that even he doesn't believe this. His latest "stimulus" proposal includes a $3,000 refundable tax credit for businesses that hire new workers in 2009 or 2010.

So what sense does it make to offer targeted and temporary tax relief for some small businesses, while raising taxes by far more and permanently on others? Raising marginal tax rates on farmers, ranchers, sole proprietors and small business owners is no way to stimulate the economy -- and it's certainly no way to create J-O-B-S.

Socking It to Small Business - WSJ.com

I guess the logic is that unsuccessful business will pay less tax before they fail, successful business will pay more, and that will in the end create jobs. Is that how Obamanomics work?

dc_dux · 10-21-2008, 11:48 AM

ace...I would suggest reading more than one source and educating yourself!

That would apply to learning as much as you can about Obama's or McCain's positions on the issues and not just what you want to read or hear.

aceventura3 · 10-21-2008, 11:53 AM

Quote:

Originally Posted by dc_dux

ace...I would suggest reading more than one source and educating yourself!

Is this responding to the issue or addressed to me personally?

What should my response to this be? Please help.

dc_dux · 10-21-2008, 11:56 AM

ace...nothing personal.

IMO, it is the best way to education oneself on the issues, particularly reading from sources that you generally dont subscribe to.

Speaking only for myself, I dont see the sense in responding to every WSJ op ed column with an agenda.

Halx · 10-21-2008, 12:04 PM

dc_dux, please respond to the topic. Feel free to introduce an opposing source that has different information.

dc_dux · 10-21-2008, 12:06 PM

halx....I'll pass.
-----Added 21/10/2008 at 04 : 40 : 19-----
OK...here you go.

Most small businesses won't be subject to Obama's tax increases.

Quote:

It seems likely that Obama is right, according to data and an analysis from the experts at the Tax Policy Center.

Obama's plan is to roll back the Bush tax cuts on the top two tax brackets. In practice, this means that people with income above $200,000 for single people and $250,000 for couples would see taxes increase.

Now what does this mean for small businesses? It's not as easy as you might think to identify small businesses via the tax code. But there are several typical ways that small business owners pay their taxes, usually by declaring business income on their individual tax returns. Many people who declare business income are small businesses, though the group also includes professionals like lawyers, authors, or public speakers.

Looking at all the tax filers who report any business income at all, the Tax Policy Center confirms that about 2 percent will see their taxes increase under Obama's plan.

In an effort to focus more effectively on small business owners, the Tax Policy Center did an additional analysis where they looked at people who reported business income that accounted for at least 50 percent of their income. This means people who derive a significant living off their business income.

In 2007, about 2 percent of those tax filers would have made enough money to see a tax increase under Obama's plans.

There is a small bit of uncertainty in the best data available; it includes some people who we would not think of as traditional small business owners. But still, Obama's statement during the debate that "98 percent of small businesses make less than $250,000" matches the findings of a respected, non-partisan group of tax analysts. For that reason, we rate Obama's statement True.

PolitiFact | Most small businesses won't be subject to Obama's tax increases.

10-21-2008, 11:48 AM	#2 (permalink)
dc_dux Location: Washington DC	ace...I would suggest reading more than one source and educating yourself! That would apply to learning as much as you can about Obama's or McCain's positions on the issues and not just what you want to read or hear. __________________ "The perfect is the enemy of the good." ~ Voltaire

10-21-2008, 11:56 AM	#4 (permalink)
dc_dux Location: Washington DC	ace...nothing personal. IMO, it is the best way to education oneself on the issues, particularly reading from sources that you generally dont subscribe to. Speaking only for myself, I dont see the sense in responding to every WSJ op ed column with an agenda. __________________ "The perfect is the enemy of the good." ~ Voltaire

10-21-2008, 12:04 PM	#5 (permalink)
Halx Please touch this. Owner/Admin Location: Manhattan	dc_dux, please respond to the topic. Feel free to introduce an opposing source that has different information. __________________ You have found this post informative. -The Administrator [Don't Feed The Animals]