Can America’s Small Businesses Afford the Wrong Change?
American small businesses are the largest engine for job creation and innovation in the nation today. Nearly 16 million people operate small businesses as their primary occupation each year, while collectively they employ more than half of our country’s private sector employees.10
Yet, in a recent survey of its members, the National Federation of Independent Business found that optimism among small-business owners is dropping in addition to members reporting weaker job creation, and reduced capital spending.11
As unbelievable as it may sound, Senator Obama has said that he would cut taxes for large corporations, while at the same time raising taxes on small businesses! Is now the time to raise taxes on small businesses and their owners?
Taxes on small businesses could be as high as 62.3%: Most Americans would agree that paying more than 50 percent in taxes is simply too much. Yet, Senator Obama’s plan calls for tax increases that would raise total tax rates to well over 62 percent for millions of small businesses.
Fact: Under Senator Obama’s proposed plan, “The top 35% marginal income tax rate rises to 39.6% adding the state income tax, the Medicare tax, the effect of the deduction phaseout and Obama’s new Social Security tax increases the total combined marginal tax rate on additional labor earnings (or small business income) from 44.6% to a whopping 62.3%.” (Michael Boskin, “A Closer Look at Obamanomics.”)
Fact: "The business income from sole proprietorships, farm proprietorships, partnerships, S corporations, etc., is all taxed at the owners' individual income tax rates. This year 34 million business owners are expected to receive this type of income and pay tax on this income through the individual income tax. These businesses are typically small and often entrepreneurial in nature, and a source of innovation and risk-taking in the economy. Moreover, these business owners are frequently subject to the highest individual income tax rates." (" Topics Related to the President's Tax Relief," U.S. Department of the Treasury, May 2008)
Fact: “About one-third of the workers affected by raising the Social Security earnings cap would be small business owners." (Michael Tanner, "Keep The Cap," The Cato Institute, www.cato.org, 6/8/05)
The “death tax” tax will rise from the grave: Under Senator Obama’s plan, death tax will rise again from the dead.
Fact: Since the estate tax was addressed in 2001, “death” tax rates have been dropping and will be all together repealed for in 2010 for just one year… unless Congress acts. Rather than keeping the repeal in place, Senator Obama has proposed reinstating the tax at a rate of 45 percent for estates valued over $3.5 million – this isn’t just the rich guy down the street. Many small businesses and family farms that have been passed down for generations will be hit by this tax.