Monday, March 09, 2009

Business Leery Of Obama’s Tax Plans


The nation’s most successful small business owners could pay higher taxes under President Obama’s budget plan.

The income of most small businesses is taxed at the individual level. The budget plan calls for increasing the top two tax rates to 36 percent and 39.6 percent in 2011, up from the current rates of 33 percent and 35 percent.

These higher-income taxpayers also would not receive the full value of their itemized deductions, and they would see their capital gains and dividends taxed at a 20 percent rate instead of 15 percent.

That’s bad news for small business owners who report more than $200,000 in income as individuals or more than $250,000 as joint filers.

Only 9 percent of taxpayers who report small business income make this much money, however, according to the Center on Budget and Policy Priorities. Plus many of these taxpayers are passive investors in small businesses, not owner/operators.

Most small business owners are middle-income individuals who would receive tax cuts under Obama’s budget and would benefit from his proposal for health care reform, said Robert Greenstein, the center’s executive director.

“In fact, small businesses would win under this budget,” Greenstein said.

Small business owners who make the most money, however, also are the most likely to invest in their businesses and hire additional workers, according to the U.S. Chamber of Commerce.

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