Economy Alarm: Obama Sets up Tax Battle with Small Businesses

Obama Acknowledges Small Businesses are “Heart of American Economy”:

“Small businesses are the heart of the American economy. They’re responsible for half of all private sector jobs, and they create roughly 70 percent of all new jobs in the past decade. So small businesses are not only job generators, they’re also at the heart of the American Dream.  After all, these are businesses born in family meetings around kitchen tables. They’re born when a worker takes a chance on her desire to be her own boss. They’re born when a part-time inventor becomes a full-time entrepreneur, or when somebody sees a product that could be better or a service that could be smarter, and they think, ‘Well, why not me? Let me try it. Let me take my shot.’ That’s Marco’s story, which he just shared with us.”  (President Barack Obama’s Remarks to Small-Business Owners and Community Lenders, March 16, 2009)
Credibility Crash:
Small Businesses Brace for Tax Battle

“…But, like most small-business owners, [Gail] Johnson reports her profit on her personal tax return. In a typical year, she and her husband make more than $500,000, according to her accountant, a figure that throws them squarely into the ranks of the richest Americans — and makes them a prime target for the Obama administration’s tax policy.

“Since last year’s campaign, President Obama has vowed repeatedly not to increase taxes for families making less than $250,000 a year. That pledge, while politically popular, has left him with just two primary sources of funding for his ambitious social agenda: about 3 million high-earning families and the nation’s businesses.

“Johnson, with her company, falls into both categories. If Obama’s tax plans are enacted, her accountant estimates that her federal tax bill — typically, around $120,000 a year — would rise by at least $23,000, a 19 percent increase.”

“Republicans and business groups argue that Obama’s plan to tax the rich would strike some of the nation’s most productive businesses. Though certain very large companies must organize as separate entities that are taxed twice — on profits and shareholder dividends — most smaller businesses opt to be taxed only once by reporting their profits on the personal tax returns of their shareholders.”

“Whatever the figure, Republicans argue that those who fall into the upper brackets tend to be firms with the greatest capacity for job creation. In a 2007 survey, the National Federation of Independent Business found that about 15 percent of small-business owners — and half of those with at least 20 employees — said they expected their household income to exceed $200,000. In the Washington region, Census figures show one in seven families earn more than $200,000 a year.”

“Johnson declined to say whether she voted for Obama. But she said she ignored his tax plans until her husband, who handles real estate and construction for the schools, mentioned it one day. ‘I’ve since talked to my accountant,’ she said. ‘And, oh, my gosh!’”

“Johnson said such an increase would force her to consider scaling back operations.

“‘You can try to pass it on to consumers. But if you raise tuition, you put pressure on family budgets,’ she said. ‘For us, we’re caught between the devil and the deep blue sea.’” (Lori Montgomery and V. Dion Haynes, “Small Businesses Brace for Tax Battle,” Washington Post, April 27, 2009)

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