Interesting article appeared in local paper. Written by small business owner. Shows to me how much mis-information is out there. Way too many sound bites coming from both sides. A lot like many of the political threads that get started on this site. If its my opinion then it must be true. Again this was not writen by me.
I own a small business that generates $2.5 - $3.0 millon gross revenue a year. Business is orginized in what is calles a "subchapter S" which means profits flow through to family income. So our personal income is what we pay ourseves for running the business plus any net profit the business makes.
Wages paid to employees plus payroll taxes paid on employee wages( Social Security, Medicare and some other small taxes like unemployment and workmans comp) are what is taken out of gross profit to arrive at net profit.
Bottom line: For my small business which employs 16 people we don't generate $250,000 in net profit. Under Obama's plan I would not pay any additional tax. If I saw that I might be affected we would work to minimize our tax exposure by putting away $40,000 in a 401k or providing our employees a year end bonus. We might do it by reinvesting in the business. There are always investments that small business needs and those investments would go towards reducing there tax exposure.
Obama has proposed a $3500 tax credit for each new employee I hire. A tax credit directly reduces my taxes. A tax write-off reduces only my net profit. So that $3500 tax credit is like a $10,000 tax write-off if your in that 35% bracket. Now that is a deal.
Someone like me who is in the middle zone can never seem to excape paying payrtoll tax(not paid on income over $102,000) nor do I have extra money laying around to invest in something other than my business. Someone who earns $500,000 pays the same payroll tax as me, 15%(7.5% for the employee and 7.5% for the employer, which in my case is both). So if I earn $102,000 I pay $15,300 in payroll tax. If I earn $500,000 I pay the same $15,300 in payroll tax. Now this is truly a regressive tax.
Further If I had a bunch of money to invest I could earn capital gains. Capital gains tax is 15% and there is no payroll tax on capital gains. So if your able to earn $500,000 through capital gains rather than wages your tax is $75,000. Now if you earn $500,000 in wages your tax is $190,750 (35% income tax and 15% payroll tax on income up to $102,000)
True patriots should stop complaining about paying there fair share and stop putting the burden on the poor and middle class today and our children and grandchildrens tomorrow.
