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From Americans for Tax Reform

Five Things You Might Not Know About Obama’s Small Business Tax Hikes

WASHINGTON, DC— Americans for Tax Reform today released the following “top five” facts related to the Obama tax hike on small businesses:

1.        Two-thirds of small business profits are earned in households making more than $250,000 per year—the very households Obama is shouting from the rooftops that he will raise taxes on (Source: IRS Statistics of Income Bulletin*).  Small business profits are used to create jobs and invest in America .  This is the answer to the Obama campaign’s irrelevant claim that the number of small businesses affected will be small—the fact is that the bulk of profits will face a tax hike. 

2.      Small businesses pay income taxes at the household level.  This means that the Obama plan to raise tax rates is a direct tax hike on small businesses—sole proprietorships, partnerships, S-corporations, and family farms.

3.       The tax rate on the lion’s share of small business income could reach 54.9 percent under a President Obama (the individual top rate will climb from 35 percent to 39.6 percent and the Social Security/Medicare tax rate could climb from 2.9 percent to 15.3 percent.  Put those together, and you get 54.9 percent) (Source: www.barackobama.com)

4.      This 54.9 percent tax rate would be the highest since the Carter Administration, when America suffered through double-digit inflation and unemployment (Source: Congressional Budget Office)

5.       America’s 26 million small businesses employers give a paycheck to 116 million employees (Source: Census Bureau).  When small business taxes go up, millions of these employees will be at risk of being laid off.

“Obama’s tax increases will only affect you if you have a 401(k), have any savings, buy things from small businesses or are looking for a job,” said Grover Norquist, president of Americans for Tax Reform.  “If you fall into one of these categories, his policies will screw you.  Otherwise, you’re fine.”

* “Small business profits” is equal to the net profits less net losses of sole proprietors, S-corporation shareholders, and partners.  According to the IRS, two-thirds of these small business profits are earned in households with adjusted gross income (AGI) equal to or greater than $200,000.  In 2006, $473 billion of the $706 billion (two-thirds) of small business profits was earned in households Obama has said he would raise tax rates on.

If there’s one thing I’ve learned from blogging and receiving tons of email, we all have our “pet” electoral issues and hot buttons – and they vary widely from person to person.  For me, it’s national security first; the economy (and tax policy) second; and energy policy (a closely related) third.

On the subject of the economy, Jack Kemp has a good op-ed on the presidential candidates and their proposed tax plans (thanks to Mike Davis at the NV RLC for bringing it to my attention).  I strongly encourage voters to read the whole thing, but here are some key points (summarized in my own words):

Barack Obama says he supports a tax cut in the form of a $500 refundable income tax credit for all workers (except those in the top 5 percent of income earners, who will pay more taxes) “unless the economy remains weak.”  So…Obama does recognize that tax increases on the rich have a negative effect on the overall economy.  (But why does he think that matters only in “weak” economic times?)

Obama’s tax credit does not reduce marginal tax rates, so it won’t benefit the general economy because it provides no long term (additional) incentives for work, savings, investment or business expansion.  (People will get their $500 refund check, spend it, and that will be That.)

On the other hand, McCain wants to double the personal exemption for dependents from $3,500 to $7,000 for families regardless of income.  (For middle-class workers in the 25% tax bracket, the $3,500 exemption increase would reduce their tax liability by $875 for each child.  Families with three children are thus looking at $2,600+ in tax savings.)

And McCain proposes marginal tax rate reductions – which is great news in country that pays the second highest corporate tax rates in the entire industrialized world.  McCain wants to reduce the federal corporate tax rate from 35 percent to 25 percent – a boon for middle class workers in the form of new jobs, better pay, and a stronger dollar.

And all this will most likely raise rather than reduce tax revenues.  (Why?  Kemp cites a 2007 study by the Treasury Department which showed that Ireland — with a 12.5% corporate tax rate — raises just shy of 50 percent more revenue on a comparative basis than the U.S. does with a 35 percent rate!)

McCain would also keep the top capital gains tax rate and dividend tax at 15% which is needed in the stock world (stocks are now held by more than 2/3rds of all Americans).  McCain further wants to phase out the Alternative Minimum Tax (AMT) which burdens 25 million middle-class families with another $2,700 in taxes each year (on average).

Obama, by contrast, has proposed to raise marginal tax rates for almost every federal tax — the individual income tax, the capital gains tax, the dividends tax, the payroll tax, the death tax, etc. and he would increase corporate taxes where and when he could.

McCain’s plan is a good start, but I agree with Kemp:  we need to promote additional middle-class tax cuts through fundamental reform of our “confusing, contradictory and confiscatory tax code.”

Kemp outlines a proposal by Rep. Paul Ryan, R-Wis. to allow workers to choose a flatter tax system (which is also worth reading about, at the end of his op-ed). 

Here’s the opener to Jonah’s column today.  It’s a Must Read.  As usual.

The US economy — yes, that economy — grew at a 3.3 percent annual rate last quarter. This no doubt caused consternation at the highest levels of the Democratic Party, perhaps forcing some to consider a new convention film at the last minute: “Dude, Where’s My Recession?”

To hear the Democrats at their convention this week, you’d get the sense that a recession is merely a technical term for the worst human misery ever visited upon a once-great people. You’d think Americans were listening to the Democratic speeches as they huddled around their kitchen tables (if they hadn’t already been used for firewood), deciding which of their children to pack off to the orphanage and how much tree bark they can afford to eat next week. 

Last night, Barack Obama proclaimed: “Our economy is in turmoil, and the American promise has been threatened once more.” He went on to describe an America reminiscent of the Grapes of Wrath (if not Mad Max).

But this was a week-long theme. Over and over again, Democrats insisted that the “American dream” is being snuffed out, crushed, beaten, stabbed and quite possibly dismembered in President Bush’s West Wing bathtub, where Bush and Dick “The Cleaner” Cheney can dissolve the remains in sulfuric acid.  …

SUFFERING FROM YUCCA-SCHIZOPHRENIA

“It seems 58 percent of Nevadans polled oppose the Yucca Mountain project, where the government wants to bury the highly radioactive waste from nuclear plants. But in a different question, 58 percent of Nevadans said they had no problem whatsoever digging up more uranium to refine and use in nuclear power.  Thus creating more nuclear waste.  Thus creating a greater need for the disposal of said nuclear waste.  Thus creating more pressure to build and operate Yucca Mountain.  Which 58 percent of Nevadans say they’re against. 

Does that make sense to anybody? We didn’t think so.”

- CityLife editor Steve Sebelius, 8/26/08