Sunday, October 3, 2010

Politicians Manipulate Advantages of a Tax Cut for Small Business

Of the 26,911,465 business establishments operating in the USA, only 7,387,724 had employees, which is less than a third of all businesses. (US Census statistics) Recently, politicians have been claiming the difficulty of small businesses to create jobs, as a reason for not letting the tax rates of Americans earning $250,0000 or more to automatically return to the rates that were in place prior to the George W. Bush tax cut for wealthy Americans.

As a small business, in the 'no employees' category, I feel this lobbying for renewing the Bush tax cuts, which is on personal income, (not business income), by Republicans, supposedly on behalf of small businesses, is misplaced and misleading. It implies that not renewing this tax break for wealthy Americans somehow affects small businesses in general. It certainly doesn't affect mine. Even if we did earn a personal income of over $250,000, (which is not likely in my lifetime, as our income would have to increase many-fold to do so), we still wouldn't hire people. It is just too much life-complication for a very small business like ours.

And my suspicion is that the scheduled return of pre-Bush-era tax-rates still would not be all that relevant, in terms of hiring decisions for businesses, with an increase in personal tax rates for those earning a personal income of $250,000 or more. Why? Because the decision to hire or not to hire would likely have to do with whether it would make sense for overall for the long-term profitability of the business itself, and not so much for the amount left over for the business owners after some share of the business profit is removed from the business and added to the payroll that owners typically pay themselves as employees in their own businesses. In other words, for a business that is large enough and complex enough to have employees, decisions to hire and retain employees aren’t so directly tied to an increase in the owner’s personal tax rate.

So, as far as I’m concerned, if you are a politician lobbying to renew the Bush tax cuts, do so based on the honesty of declaring how you want to keep more of your personal money when you have high incomes, and not on the basis of somehow keeping small businesses from being detrimentally affected.

- Richard Chandler

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