Small Business Beware
Guest Article by Mark Wells
We have heard repeatedly ( in some cases, 5 phone calls a day from Obama robo-callers to my home phone) that the Obama tax plan is not going to increase the taxes of any person making less than $250,000. Oh wait, $200,000. No, $150,000. Oops, $125,000. Oh hell, lets just go with what he said in his infomercial; $200,000. This seems like a fairly high number, considering the median income in America is around $50,000. But is it really. More importantly, who is effected by this tax and how will it impact me? Good Question. For that, lets look at Small Business.
Both campaigns have talked extensively about small business and their support for it in their respective economic plans. Small Business is the backbone of the American enterprise constituting 51% of all business income and 85% of all employment in the US. However, the Obama tax plan is about to impact the American small business community like a run away virus. I say virus because it is going to act like a silent killer to jobs and growth of the economy. But most people don’t know this. They know only what they are told and don’t look beyond the facts presented. Well, sometime you can tell the truth without telling the “whole” truth. I have learned in life, its these half truths that are worse than a lie.
The most common thing we hear is 95% of all Americans will not pay any higher taxes. So, the top 5% will. In quite a number of cases, the owners of small business are in this category. I know we have heard a lot about Joe the Plumber, as well as how he won’t be effected by the Obama plan, but again that is only half the story. If Joe buys that company and becomes successful by creating jobs, he certainly will be taxed. If you don’t believe me, here is the rest of the story.
Obama claims that most small businesses, with less than 20 employees, make up the vast majority of these companies ( 89.5% to be exact) in America. Therefore there is no tax on those business because the average take home pay of owners in this group is $72,000. However, even in these small companies, 12% of the owners of companies with 1-9 employees make more than $200,000 and companies with 10-19 employees have 26.4% of their owners effected. This is not a minor impact but the argument is that very few employees are effected. And that is the truth. But here is the catch. The companies that have between 20 and 250 employees represent 82% OF ALL SMALL BUSINESS EMPLOYMENT. In other words, the companies with less than 20 employees have little to no impact on small business job growth. But the companies above 20 (those MOST LIKELY to make more than $200,000 for its owners) are the real foundation of the American economy.
You might be asking at this point, why chose companies up to 250 employees? Well its simple, the Small Business Administration, the Bureau of Labor Statistics and the National Federation of Independent Businesses (NFIB) pretty much agree that any company with less than 250 employees represents “Flow-thru Businesses”. These are businesses that do not pay taxes, but pass the tax burden on to the Owners. These are the people that WILL be hit by the Obama tax plan. If you remember from above, these businesses are the ones that represent the 51% of business income in America. This is a dangerous place to stifle growth and jobs.
So how bad will the impact be and who is going to get hit? First, of all the small business owners in America, 26.5% make more than $200,000 from all sources of income. Obama forgot to mention that a lot of people in American have working spouses. For owners of companies with 20- 250 employees, 55% make more than $200,000. So more than half of all business owner, that represent the foundation of our economy, will see their marginal rates go from 33% to 36%, and has high as 38% in 2011 (Bush tax cut expires). Not to mention, Obama will change the Capital Gains tax from 15% to 20% for these owners. So people that make a portion of their income from the business in the form of Capital Gains will be hit again. If you don’t think this is important, let me put it another way: 80,386,680 employees in American will face possible lay offs, reduction in pay, and reduction in benefits. Plus ALL employees in America will see higher costs due to the fact that the increase in income tax will be directly attribute to the cost of goods sold by these companies.
What’s even more striking is the industries these new taxes will target. By business sector, 87% of manufacturing employees will face the effects on their places of employment while the social service sector only has a 64% hit. Well I guess that is understandable, Obama needs to protect his friends in the community outreach industry like ACORN. Using data from the Bureau of Labor Statistics, the top five industries that will see the largest number of employees effected are; the steel industry, grocery stores, auto parts manufacturing, scientific research and headhunters. Three of these are directly tied to Labor Unions and good solid blue collar workers, not the upper class white collar rich. Hits to the scientific research industry will see a drop in new drugs, exploration, new medical devices for the infirmed and other products of benefit to ourselves. But the most striking is Headhunters. This industry will see 95.9% of its employment in companies between 20-250 employees attacked. Kind of like Obama has a grudge against someone for not getting him a “real job” coming out of Harvard Law.
“Buyer Beware” as they say in business.
All statistical information came from the Bureau of Labor Statistics, the Small Business Administration Advocacy Department, the National Federation of Independent Businesses (NFIB) annual poll, barackobama.com, and the Citizens for Tax Justice.
In Response To: Let's Put An End To McCain's Lies About Obama's Tax Plan