Tax Hike Raises Ire of Small Manufacturers
Posted 41 minutes ago in Politics, Business

(Newser) – Small-business owners aren’t big fans of President Obama’s plan to let the Bush tax cuts expire in 2011, and they’re making themselves heard on Capitol Hill, Politico reports. Many small businesses file taxes as individuals, and they fall well beyond the $250,000 income threshold. The White House says the increase will hit only the top 3%, but that fraction includes most of America’s small manufacturers.

“The businesses that are most likely to be hit by this tax increase employ about a quarter of the US work force,” says one small business lawyer. A whopping 68% of American manufacturers file as individuals, with an average income of $570,000. But owners say they reinvest profits, making their net much lower. “I don’t drive a BMW,” said one man who employs 320 people at three plants. “The entrepreneurial class is being exhausted.”

http://www.newser.com/story/53009/tax-hike-raises-ire-of-small-manufacturers.html



More interesting details at:

http://www.politico.com/news/stories/0309/19852.html

Perfect - increase the tax on small manufacturers that employ 1/4 of our work force. Bet ya that one will keep unemployment down.
Oh well, as long as it looks like the rich are paying for the stimulus.

ok...i know i had been out of the loop in polictics for a while (my own doing) but i thought obama was going to help the small guys

With his free college for all program, there won't be anyone needing a manufacturing job. We are all going to be PHDs, writing books, saving the world from global warming, and organizing our communities.

Many small businesses file taxes as individuals, and they fall well beyond the $250,000 income threshold. The White House says the increase will hit only the top 3%, but that fraction includes most of America’s small manufacturers.


That's just an excuse.
Small businesses should not file taxes as individuals. That was a way for them to exploit a loop-hole in the tax system.
Several holes actually, taking advantage of Bushes Tax-cuts to the wealthy, but I cant get in to it now.

If these businesses apply for a Fed Tax Tax ID and do business properly they can stay in business just fine. If they cant turn a profit the correct way then they should probably get out of business.
They are in a bad, non-profitable business!
Probably without employees, or not providing their employees the services required by law!

how can small businesses do that? even as a contract dance teacher....i file under my tax id number

are you saying they are filing their business as if they were only employees?

this messs is burdensome to all of us in one form or fashion,thats a fact and it will be for quite some time..i've lived long enough to see alot of idiots voted into office,but i dont see obama being one of them,i'm sure there will be some decisions we will not agree with especially when it affects us,
..but i honestly think that he is trying to do what he sees is best,where most of us form our opinion by dribs and drabs of media release the truth is that we can only form opinions by the information given,which we know is wrong most of the time..myself included ..leaving neither side sure if they are right or wrong til the end..
..personally the only thing i see is to sit back and hope for the best and do what i can to help out..mind you i dont like the current situation but..
.. i am glad to see that we will be trying to put an end to our boys staying in a war brought on through total disinformation ...hopin' for the best for everyone..jmo

Now you're getting it.

Either that or they are like good'ole Joe the plumber!
Dont pay taxes at all and are plants of the Republican Party!

i know a democrat that doesn't pay taxes on his side jobwhich is a full time business itself.

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.

“If we take away their incentives to take risks, grow and succeed — as this budget does — we will be unnecessarily shooting ourselves in the foot,” said Bruce Josten, the chamber’s executive vice president for government affairs.

Obama’s budget plan also includes provisions that could hurt residential and commercial real estate.

The limit on itemized deductions for upper-income taxpayers would reduce the value of the mortgage interest deduction for many homeowners, particularly in high-cost areas such as the Northeast and California.

The National Association of Realtors contends the proposal would hurt not only these taxpayers, but also home values across the board.

“There is never a good time to propose something that undermines the basic foundation of homeownership, but given our current housing crisis, this has to be the worst possible time,” said NAR president Charles McMillan.

http://www.bizjournals.com/milwaukee/stories/2009/03/09/story18.html?b=1236571200^1790476

For Fanta:


At the crux of the Barack Obama tax plan is a tax cut on the +95% of the American population who earn less than $250,000. This group of the population would see the following tax cuts: $500-per-worker tax credit for people who earn less than $150,000 and do not itemize. $4,000 credit per child in college. And seniors who earn less than $50,000 would pay no federal income tax.

Barack Obama would like to have every American thinking that anyone earning over $250,000 a year is fabulously wealthy, and therefore can afford greater taxes without consequence (and that it is their responsibility to pay more). $250,000 in annual income is a lot, and puts these households in the top 5% of income earners in the country.

The problem is that many of those people in this country who earn greater than $250,000 are small business owners. Lets take a hypothetical small business called Widget Factory. Widget Factory is a sole proprietor LLC (a very common business formation for small businesses) owned by Joe (not Joe the plumber). Widget Factory has annual sales of $3 million. Joe is paid a healthy, but not excessive CEO salary of $150,000. After expenses, Widget Factory earns a profit of 15%, or $450,000. The company is successful, and has grown over the years creating lots of jobs.

As a sole proprietor LLC, Joe is taxed on his regular income. But with an LLC that files as a S-corporation (again, very common), the income from the company flows directly to Joe's personal income tax, and is taxable as personal income. So Joe's taxable income is $600,000, not $150,000. Even if Widget Factory retains 100% of its income for future investments such as a new factory or salaries for new employees, Joe must pay taxes for Widget Factory on his personal income tax return.

Under the current tax law, Joe would pay 33% on income between $164,550 and $357,700, and 35% on income above $357,700. His total federal tax bill is $181,575. Under Barack Obama's tax plan, Joe would pay 39% on all income above $250,000. Assuming that his taxes on all income below $250,000 remained the same, his new federal income tax bill would be $197,729 ($61,229 on the first $250,000 of income, plus 39% X $450,000 = $136,500). His federal income taxes increase by $16,154 under Barack Obama (note that my back of the envelope calculation doesn't take into account all the other intricacies of the tax plan from Barack Obama).

But that is only the start of the increased taxes. Barack Obama also plans to apply a social security tax on all income above $250,000. As a small business owner, Widget Factory pays 7.5% of his social security, and he individually pays the balance. But since Joe owns the company, he is essentially picking up the entire tab. So on the $450,000 in income above $250,000, Joe pays another 15%, or $67,500.

Joe the small business owner will see his taxes increase $83,654 under Barack Obama. I'm not suggesting that we should feel sorry for people earning over $250,000 per year. Assuming that the average Widget Factory employee earns $40,000, this $83,654 that will now go to the government could have instead paid the annual salary for two new employees.

Small businesses typically lead the charge in job creation. The more the government taxes these small businesses, they less capital they have available to do things like invest in infrastructure and hire employees. The less they invest in these things, the slower their growth becomes. In turn, their profits (future taxable income) grows at a slower rate. And as their growth slows, they are less likely to hire more employees (or may hire fewer). This means there are less new jobs, and fewer people to participate in the economy (and be taxed).

Second, studies have demonstrated that increasing the highest marginal tax rate does two things. It results in slower growth rates for the economy (since the government is taking capital away from businesses), and it results in lower overall tax receipts. This has been seen in European countries including Ireland and Russia. The opposite was also in the United States, following the Bush tax cuts (lower taxes = higher growth).

Historically, lowering the highest marginal tax rate increases growth, creates more jobs, and increases overall tax receipts. Sounds like a proven recipe for success. It is not a zero sum game of taking money from the rich to fund the government's spending. There are consequences to increased taxation, and unfortunately, the resulting slower growth coupled with fewer new jobs won't help to bolster the already struggling U.S. economy.

So why DOES Barack Obama want to raise taxes on those earning more than $250,000? Not in order to pay the upcoming bills for new government spending (he could do that by maintaining or lowering the highest marginal tax rate). It is unclear to me, and seems that this aspect of Barack Obama's economic plan may be flawed and is based upon the assumption that all people earning more than $250,000 are very wealthy, and have the responsibility to pay incrementally more in taxes.

http://www.ianwyatt.com/entry/why_barack_obamas_tax_plan_hurts_small_businesses_entrepreneurs_and_the_eco/

He never read Robinhood. It's supposed to be, take it from the elite and give it back to the poor.

I can't get those pictures to work.

what a crock!!! when you start your small business your FEIN is usually your social security number. if you are a sole proprietor then you have to do your taxes as an individual.

why do we need to ask permission of the government to do business in whatever way one should choose? private business.. leave it alone.

it's the life blood of america. a guy has an engine shop and builds race engines, pays his taxes, miinds his business, employs a half a dozen people or so.. leave him alone already..

some how I'm reminded of the hotel bathroom scene from fight club..

Not true, small business are suppose to file as a business not an individual filing taxes.

Deregulation is what got is the mess we are in now. And you want more???

Fanta says...If they cant turn a profit the correct way then they should probably get out of business.

you mean like all of the business's that Obama keeps bailing out ?...in other words let them fail...I agree wit ya' !!

Drag, I believe you are wrong. Sole proprietors file Schedule C which is a part of Form 1040 US individual tax return.

The OP is about jobs created by small manufacturers that have more than $250,000 annual income yet the proprietor (individual) may only draw a modest salary so he can use the profits to expand thus providing more jobs. Under Obama's plan taxes go way up for these individuals and these types of small manufacturers provide 1/4 of the jobs in the US. See example.

really??

http://www.youtube.com/watch?v=ivmL-lXNy64&feature=related

http://www.youtube.com/watch?v=hxMInSfanqg

please tell again how it was the democrats saying or doing something about it while the republicans were obstructing regulation on fannie and freddie..

awesome

what's so awesome about putting 1/4 of American wage earners at risk??


please explain..what's so ??