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Can Small Business Owners Dodge New Tax?

Friday, February 27,2009 05:19 PM

Honestly, politicians are so wacky. Even though it's hard to know who to believe anymore, I think we should all be able to agree that a tax on individuals making more than $250,000 a year isn't going to hurt truly small businesses...unless they're doing something crazy like reporting their business income on their personal tax returns. But why would anyone who has employees (and who, therefore, creates jobs) do that? In any case, it's true that if they did that and they are making some money at it, they would likely be exposing their business earnings to the higher tax rates of yore. I didn't know until I started reading up on this that small businesses are defined as businesses that have less than 500 employees. 500? That seems like a huge business to me. So, technically, the owner of a business that employs 500 or so peeps night be making more than $250,000 in salary from running the business. But the higher tax on the personal income he takes from the business shouldn't affect his business or his ability to employ people per se (unless he's named Ebeneezer Scrooge).

Rosanne Altshuler of the nonpartisan Tax Policy Center insists most small-business owners will dodge this bullet completely. Among taxpayers who get most of their income from their own businesses, she says: "More than half have income below $30,000, and 80 percent make less than $100,000. So most business owners are safe from Obama's individual income tax increases."

Phew! So I guess we can move on ... possibly to making a new definition for a truly small business. One that has less than, say, 10 employees. Tiny business? Mini-business? Anyone? Just a note: the US has roughly 6 million businesses that employ people and 20 million that don't. The latter group are mostly individuals like doctors and lawyers and others who organize themselves as business for some reason known to them and their accountants. When we're talking about small businesses, should we be talking about them? Read the full article here: http://marketplace.publicradio.org/display/web/2009/02/27/small_biz_tax/ and then let us know what you think! Will truly small businesses really be hurt by this tax rollback?