With the midterm elections only a few short weeks away, there is a lot of rhetoric being thrown around by both the left and the right, mostly about the economy and taxes. President Obama and the Democrats in Congress hold that it was the policies of the Bush administration that caused our economic downturn, while Republicans rally against this claim, citing the inability of liberal legislation such as TARP and the stimulus act to pull the United States out of the red.

On September 27^th, President Obama signed the Small Business Jobs and Credit Act into law, an effort to help small businesses during this prolonged economic downturn, citing the value of entrepreneurship in the American culture and economy. I won’t refute that claim; in fact, I acknowledge that President Obama is absolutely correct in saying that the Small Business Jobs Act will lessen the tax burden on those who own their own businesses. When compared to the rest of his legislative plundering, however, the tab doesn’t ring up in the taxpayers favor.

We’ve talked in excess Obama’s tax hikes, but here’s a refresher on how small businesses will be affected, thanks to just two policies:

Small business and the expiration of the 2001 and 2003 tax cuts (January 2011)

• Personal income tax rates will rise for all brackets, making the highest tax rate 39.6 percent and the lowest rate 15 percent. Currently, the lowest rate is 10 percent; the highest is 35 percent.
• Itemized deductions and exemptions will be phased out, which will have the same effect as higher marginal tax rates.
• The Death Tax, which has always been especially hard on small businesses, will return with a vengeance at 55 percent on estates worth over $1 million.
• Capital gains taxes will rise to 20 percent while dividends tax rates will rise to 39.6 percent. Both are then slated to rise another 3.8 percent in 2013.

Obamacare and small businesses (now-2016)

• New excise tax on small business owners who do not buy “qualifying” insurance.
• New tax on name-brand drugs which will raise the price on prescription drugs.
• Medicare payroll taxes will increase for the self-employed to 3.8 percent on wages over $200,000.
• Medical device manufacturers will be subjected to a 2.3 percent excise tax for all products over $100.
• Businesses will be required to file 1099-MISC forms for all contracted companies, in addition to filing for contracted individuals.
• The “Medicine Cabinet Tax” will disallow the use of pre-tax dollars to purchase non-prescription, over-the-counter drugs (except insulin) via health savings accounts (HSAs), flexible spending accounts (FSAs), or health reimbursement accounts (HRAs).
• The “Economic Substance Doctrine” will give arbitrary power to the IRS to determine the legality of previously legal deductions.

President Obama seems to have realized his mistake in punishing entrepreneurship – the true life-blood of the American economy – by signing the Small Business Jobs Act. While not a perfect bill by any stretch of the imagination, there are five important tax cuts aimed at the small businesses the purports to help:

• Zero capital gains taxes on investment. Qualified small business stock sold during the remainder of 2010 will not be subject to capital gains tax.
• Increase in expensing limit. Small business owners can deduct up to $500,000 of qualifying property (such as equipment or software) that is used in a taxable year.
• Temporary deduction of health care expenses. Self-employed individuals are able to deduct the cost of health insurance when calculating business taxes.
• Increase in start-up expense deductions. New businesses can now deduct up to $10,000 of their start-up costs, taken to mean any acquisition or activity directly related to starting a new business or trade.
• Five-year carry-back of general business credits. Currently, losses can be carried back for one year or forward up to 20 years. The new law extends the carry-back period to five years for any small business.

For President Obama to say that he has “lowered taxes on just about everybody” is to blatantly mislead the American people. While the Small Business Jobs Act is a step in the right direction, the included tax cuts do not negate the biggest tax increase in history coming on January 1, 2011, nor do they counteract all the new taxes put into effect under ObamaCare.

With a net tax burden of +$352 billion, Obama and the Democrats can no longer claim that they are for everyday Americans.