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INDEX

Majority of Small Business Sector
Facing Higher Taxes Under Obama Plan

From Ryan Ellis on Monday, July 26, 2010 10:51 AM
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[See Also:  Six Months to go Until the Largest Tax Hikes in History]

  • The Obama Administration and Congressional Democrats have said that they want to raise taxes in the top two income tax rates in January 2011.  Under their plan, the 33 percent rate will rise to 36 percent, and the 35 percent rate will rise to 39.6 percent automatically in January.  These rates affect families and small business owners earning at least $200,000 per year
  • Unlike corporations, small businesses usually don’t pay their own taxes.  Rather, business profits flow through to the business owner.  The business owner pays taxes on her small business by adding the profits to her income tax form.  Therefore, personal income taxes are the same thing as small business taxes.
  • According to the IRS, most small business profits pay taxes in households making more than $200,000 per year.  The IRS keeps track of two types of small business income: sole proprietors, and “pass-through” entities like partnerships and S-corporations.
  • All small businesses.  There were 30 million tax returns reporting small business income in 2008.  On net (profits reduced by losses), these owners reported business profits of $631billion.  A large chunk of this net profit--$457 billion—faced taxation in households making more than $200,000 per year.  A majority of small business profits will face a tax rate hike under the Obama-Pelosi-Reid plan.
  • Sole proprietors.  There were 22 million tax returns reporting sole proprietor income in 2008.  On net (profits reduced by losses), these owners reported business profits of $264 billion.  A large chunk of this net profit--$90 billion—faced taxation in households making more than $200,000 per year.  34 percent of sole proprietor profits will face a tax rate hike under the Obama-Pelosi-Reid tax hike plan.
  • S-corporations and partnerships.  There were 8 million partners and S-corporation shareholders in 2008.  On net (profits reduced by losses), these owners reported business profits of $367 billion.  Virtually all of this profit faced taxation in households making more than $200,000 per year. Aggregate pass-through entity profits will almost entirely fall in households making more than $200,000 per year.

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Comments

this, on top of the 1099 scheme will probably force the closure of my operations.
>> craig Monday, July 26, 2010 12:59 PM Report Comment

This is a huge slap in the face to small businesses. Obama, you just DON'T GET IT!
>> REDPOLITIC Monday, July 26, 2010 1:29 PM Report Comment

Unions do not like small business, and apparently they run the show nowadays as the Obama administration continues to pile on disincentives for entrepreneurs. Mr. Obama seems to rationalize the loss of small business jobs by telling the faithful that government hires will somehow pick up the slack. How out of touch can a man get?
>> Joe C Monday, July 26, 2010 1:29 PM Report Comment

Rolling back the Bush Tax cuts to levels lower than during Ronald Reagan's Presidency is NOT an increase. It is getting rid of the DISCOUNT they have gotten for 10 years. Where are all those new job as a result of giving the top 2% all that refund? The rich with tax cuts are supposed to generate jobs. We lost more jobs in this last decade than ever before! All these billions tacked on to the deficit and still no jobs.
>> Tom Tuesday, July 27, 2010 3:18 PM Report Comment

-Tom.There isn't a service that Uncle Sam provides that couldn't be done cheaper/more efficient by private business.America grew strong from unsurpassed quality and prices with a strong manufacturing base.Unions, excessive taxation & regulation, effectively priced the US out of the viable world labor pool.Our manufacturing base went overseas to Asia, now experiencing the industrial boom that once made us the largest creditor Nation.The supposed "boom" of the 90s-2006ish was largely due to credit for anyone(regardless if they could repay it)and made us the largest debtor nation.Facts ceased being important to the public at large.It's much easier to blame the people better off than you for your own failures in life I suppose
>> Hamburglar Tuesday, July 27, 2010 6:49 PM Report Comment

I am a owner of a small business. In 2008 I received a check on December 31. It showed as a large profit to my company. However I owed that plus a large payment to my creditors. This filtered through as a profit on the books that did not really exist and yet I had to pay over 90K in tax to the various tax agencies. Of course the following year I had a huge loss because I had to pay those creditors. Did the IRS refund the taxes from the false profit? NO. Of course I get to claim the loss for a few years as a carry over. I can tell you now I will be laying off one secretary and probably one production tech if these tax increases go through. I am not taking the tax out of my own pocket.
>> Poppy Tuesday, July 27, 2010 7:35 PM Report Comment

This article is very carefully written to rile up the 'right'kind of people. Read carefully and you will see that the vast majority of small businesses do not make anything like 200k NET PROFIT and therefore will not be subject to any tax increase at all. As a small business owner myself, I have written off so many expenses against profit - in order to get a NET PROFIT of 200K I would have to earn at least 2 million in Gross revenue. The above article says "34% of the profit" and carefully NOT 34% of small businesses and that as you should know is nothing like 34% of small businesses. Obama is doing small business a great favor, because he is actually smart. Sorry , but it's true.
>> John Apple Tuesday, July 27, 2010 9:16 PM Report Comment

Given that, according to the SBA, over 99% of businesses in the U.S. are small businesses, and approximately 50% of our population is employed by these businesses, why do so many legislators continue to promote policy that will have a direct, negative impact on entrepreneurs? They are the Americans chasing that "dream" that has been promoted as our country's selling point since its inception. We have to quick vilifying economic development, for without the free economy and economic incentive for innovation, our country would not be the greatest country on the planet. www.NPRChamber.org
>> Justin Velez-Hagan Tuesday, July 27, 2010 10:34 PM Report Comment

So an individual takes risk, puts his family home, assests and retirement at risk. Chases his dream and starts a company. He hires peopled to work for him. Finally after years of low or no pay, working 80 or more hours per week, and doing the job of 5 people he finally gets the business into the black and starts to see the rewards of his hard work and risk. Let's punish him. He is just an evil rich guy. Probably even conservative. Take his ill gotten money that was made off the hard work of other?
>> poppy Tuesday, July 27, 2010 10:47 PM Report Comment

It irritates me when political hacks say that rich people or big business deserves to pay high taxes. Look about ten years ago, when I learned about how public utility companies simply take all their expenses add 15% to them and pass all the cost back to the "rate-payer", consumer, etc. that they ultimately don't pay taxes. They're simply a passed through cost. Many large companies (that are 'too big to fail') are structured this way, including oil & gas companies.
>> Guv5000 Wednesday, July 28, 2010 12:03 AM Report Comment

to poppy: "Smart??? How can you say that. Where are his SAT scores, What about his GPA from college or his grades. Funny the media does not insist on them. There is something to hide obviously or else he would have released it all like every president and presidential candidate prior." The following will answer your question.. From: Catherine J Frompovich Infowars.com July 27, 2010 "Obama’s very first executive order was No.13489 of January 21, 2009 [the day after he took office] Presidential Records that, in essence, sealed any information about him being made public." http://edocket.access.gpo.gov/2009/pdf/E9-1712.pdf
>> iratd Wednesday, July 28, 2010 4:04 AM Report Comment

631 billion divided by 30 million is ONLY 21034 per tax return net taxable profit no where near 200K
>> nick Wednesday, July 28, 2010 12:37 PM Report Comment

http://voices.washingtonpost.com/ezra-klein/assets_c/2010/07/071410-snapshot-thumb-454x352-22462.jpg http://voices.washingtonpost.com/ezra-klein/assets_c/2010/07/071410-snapshot-thumb-454x352-22462.jpg
>> Cowboy Saturday, July 31, 2010 1:06 AM Report Comment

"Read carefully and you will see that the vast majority of small businesses do not make anything like 200k NET PROFIT and therefore will not be subject to any tax increase at all.... The above article says "34% of the profit" and carefully NOT 34% of small businesses and that as you should know is nothing like 34% of small businesses." Of course, the bulk of small business employees are in those businesses making at least $200K in profits... And then there is that inconvenient fact that the claim "Nobody making less than $200K a year will see any tax increase" was quite simply false...
>> Cowboy Saturday, July 31, 2010 1:41 AM Report Comment

According to the Brookings Institution Tax Policy Center only 8.9% of people earning over $250K have any income at all from a small business. Because the definition of small business owners also includes people who are passive investors the percentage is actually much smaller. Furthermore over 98% of small business owners are not in the top two tax brackets and would not be effected. In my opinion any impact from rolling back these tax rates is minimal compared to the potential impact of raising the national debt which would upwards of a trillion dollars a year. For the record I'm a small business owner and investor.
>> Marc Kenyon Sunday, August 8, 2010 11:07 AM Report Comment

Ok, so my post was too big so I put it in a picture. I broke down the math to show you that unless you make more than $236,000 you actually pay less taxes. Even making $350,000 you only pay about 1% more in *TOTAL* taxes. Even making a MILLION dollars you pay 2.25% more in taxes, and at that point can you even be considered a small business? You can see the math here - http://i.imgur.com/krL5a.gif
>> Willtron Tuesday, August 24, 2010 4:10 PM Report Comment

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