Can someone help me out here? Is raising taxes on the rich going to hurt the small business owners?

[CTyankee]

I'm just thinking about several of the small businesses I know in my area (greater New Haven). A Korean run nail salon, a Vietnamese run dry cleaner/tailor shop, a small boutique/gift store, a family run farm stand, a day spa, a little cafe, a jeweler, Chinese restaurant, just to name a few.

I really can't see ANY of these small business owners making over $250,000 a year in their own pay. Many are family owned and have family members working there. I support them wholeheartedly (I even tutor ESL at the nail salon as a Literacy Volunteer but I pay in full for any services I get there).

Aren't the taxes on the rich INCOME taxes? That is, what they take home in pay? All of these places have to hire people to work for them but the owners work there too, right alongside the other workers.

Any data out there to back up my assumptions?

[thunder rising]

1. First, get a clue about deductions. Any "income" earned by an S1 that is passed to the owner

excludes everything you can possibly purchase. Microwaves, jets, jet fuel ... get the idea? Even toilet paper and carpet pass through the small business.

The only money you can't hide is the principle on the house payment.

[CTyankee]

6. :Please expand on this. Are you saying that there are small businesses and there are

"small businesses." I understand about business deductions but seeing how these businesses operate it seems to me that they are pretty close to the bone. In fact, I don't see how they can make much money, esp. given the economy. Two businesses here have gone out, one of which was a pack and ship place that I absolutely loved and depended on.

In fact one of the businesses started another business in the neighborhood, developed it and then quickly sold it to finance expansion of their original business. So all of their capital was put right back into operation...

[thunder rising]

8. So, you've answered your own question. They are not making over $250K per year.

[Kber]

2. I think you are on target

My husband runs his own IT consulting company and I can say for absolute fact that we are only taxed on his income after expenses, not on the revenue.

[Kurt_and_Hunter]

3. No, it will not hurt them.

The rates are on profits above the line and any small business that has PROFITS well over 250K is on fire.

A key Republican disinformation point since at least 1920 has been promoting the false notion that rates are not marginal. You hear stories about people who cannot afford to make more money because it would put them in a higher tax bracket and it is a LIE. The bracket only applies to the amounts within the bracket.

[LiberalFighter]

9. So many people don't understand the difference between one tax rate on all income vs

different tax rates for each portion of the income.

[Clear Blue Sky]

4. Business owners will try to maintain their income.

Raising taxes means they may not hire someone or purchase new equipment. Or may lay someone off.

[CTyankee]

7. If they hire new people or purchase equipment it would seem to me that the

owners themselves would have LESS left over for their personal income from the business.

Second, this administration just announced their idea to get rid of some taxes on small businesses in order to encourage hiring new people...

[karynnj]

12. The new hire and equipment increase income

otherwise why would the business do it?

The new tax cuts are on things that encourage hiring, innovation etc. If there were any genuine impact on businesses, they could design similar provisions to assure that small businesses are not hurt. This really is a Republican line that wants you to ignore that not everyone caught by that MARGINAL rate is a small business owner. It is more likely an investment banker.

In addition, that marginal rate is the rate paid in the Clinton years. I remember small businesses doing fine with that rate schedule.

[karynnj]

11. Doesn't work that way

i assume that you are saying they would do that to have greater profit, so their after tax income remains the same. That however implies that the income due to adding the person or buying the equipment is less than their cost. That would mean they never made economic sense. (This doesn't even mention that those costs are deductible.

[Romulox]

14. It also ignores that prices are set by *supply* and *demand*, not *cost*

(this is apparently a very difficult concept for many!)

[Romulox]

13. Do you think that if we cut taxes on the rich, some of the difference might "trickle down" to us?

:silly:

[sandnsea]

17. That is such bullshit, complete bullshit

They are not going to keep even $50,000 income if they need the employee they're paying that money to. Most small business owners are lucky to have an income of $100,000 a year, let alone $250,000. That is just the biggest scam the Republicans have ever run.

[ieoeja]

19. Or they will invest more while taxes are high knowing someday an extreme rightist will lower taxes.

Cash out under Republicans. Cash in under Democrats. My theory on why the economy always does better under Democrats.

[One_Life_To_Give]

5. Some might

Depends upon how much they choose to take in disbursements from the buisiness. Most probably are not taking that much and will only get hit with Capital Gains when they decide to sell.

[thunder rising]

10. However, capital gains is addressed in the proposed legislation. I see a lot of uninformed posts

The first clue that a post is either ignorant or a concern troll is that it reduces the problem to simple terms without addressing the entire effect of the issue.

The rollback on the tax cuts just take the load back to Clinton era. Business did fine and the economy boomed.

[CTyankee]

15. What I was looking for was some data that could prove my point, which is in essential

agreement with you. I admit that I am ignorant--that is my reason for asking the question in a post. I wanted to know where I could find proof to back me up. I'm no troll, but I am a very curious sort. And I love to debate with RWingers and hate to see their assertions go unchallenged. And yes, I know the tax cuts just take the rich back to the Clinton days...that is essentially the argument of the WH. That is tangential to my question, tho.

[One_Life_To_Give]

18. Recind Bush cuts and tax wealthy are not the same

Increasing marginal tax rates on AGI over 250K is not the same as reszcinding the Bush tax cuts. That former only affects how much income some people take home and therefore how much will or will not be moved over to Capital Gains as a means to avoid being counted as income.

Recinding the Bush Tax cuts changes the Capital Gains rates for certain investments and will cause the wealthy to rebalance their portfolios to favor growth over dividends. Hence we would expect drops in the Large Caps, DJIA, S&P 500, and corrsponding growth in Nasdaq. Argualbly this will favor small startup companies and venture capital markets.

[Igel]

16. I have a different problem with it.

First, in response to your question--it's an empirical question. Don't know if the data are available, but I'm going to venture a guess that some small business owners do make, in some years, more than $250k. Not a whole lot. Not in every year.

But I'd also point out that my parents fell into a very high tax bracket. One year. The year that my father retired. He opted for a lump-sum payment for his retirement. Income averaging over 5 years had already gone away. He thought it was a better choice because many of his coworkers had died within a few years of retirement--had they lived to be 80 they'd have received more from a monthly check but they died quickly so a lump-sum would be better for his family.

However, they were easily in the top 5% of wage earners that year. Not before that. Not after that. (In fact, a hefty percentage of "the rich" are "transient rich".)

Lump-sum early retirement is a convenient way for organizations to dispose of high-salaried workers.

[CreekDog]

20. Might surprise you that Joe the Plumber asked basically the same question

and then wouldn't accept the answer Obama gave him.

despite Obama being very clear about it and explaning it thoroughly.