Showing posts with label taxes and small business. Show all posts
Showing posts with label taxes and small business. Show all posts
Thursday, July 19, 2012
Obama, Small Business and Taxes
On July 9, we heard a lot from the White House about tax cuts, including for small businesses. Was any of this rooted in actual, sound tax and overall economic policies, or was it simply a case of political spin?
Unfortunately, but not surprisingly, it was the latter. In particular, when you read the material on the White House’s website, it’s overwhelmingly rhetoric rooted in class warfare politics.
President Obama’s emphasis was on extending for a year the Bush tax cuts for those earning less than $250,000, and pushing the idea that only three percent of small businesses would face tax increases under this plan.
This was nothing new from President Obama. And again, the obvious question is: Why raise taxes on anyone, especially in a long-struggling economy?
After all, as noted in a July 2010 analysis on some of the President’s proposed tax increases, the nonpartisan Joint Committee on Taxation reported the following on higher personal income tax rates: “The proposal also results in increased marginal tax rates on upper income taxpayers (as is provided for by the present-law sunset of EGTRRA), which will correspondingly reduce incentives for these taxpayers to work, to save, and to invest. Opponents of this latter aspect of the proposal often note that many small businesses, and a large fraction of small business income, will be adversely impacted by an increase in the top two tax rates. The staff of the Joint Committee on Taxation estimates that in 2011 just under 750,000 taxpayers with net positive business income (three percent of all taxpayers with net positive business income) will have marginal rates of 36 or 39.6 percent under the President’s proposal, and that 50 percent of the approximately $1 trillion of aggregate net positive business income will be reported on returns that have a marginal rate of 36 or 39.6 percent.”
It’s worth repeating: 50% of net positive business income will be directly impacted by these higher tax rates.
For good measure, a 2008 analysis from the Treasury Department pointed out: “About 81 percent (about $27.3 billion) of the total $33.8 billion in tax relief this year from lowering the top two tax rates will be received by flow-through business owners. Individuals with more than 30 percent of their income from flow-through businesses receive 44 percent (or about $15.0 billion) of the total tax relief from lowering the top two tax rates.” Those entrepreneurs will be hit by the Obama tax increase.
How can any of this possibly be good for small business and the economy?
Consider also that the biggest challenge for small businesses is to get the capital needed to grow. That capital comes from investors. And it’s higher income investors that have the resources to undertake such ventures. And those include angel investors, who often are successful business owners who reach out to support and invest in start-ups.
Again, how could raising taxes on such individuals possibly be beneficial to the entrepreneurial sector of our economy?
The President, of course, chooses not to address such issues. Raising taxes on upper income earner is a political strategy, again rooted in class warfare, that cannot be justified on the basis of sound economics.
In the end, one must ask: Where would these resources be put to the best use? Is it better to leave them in the private sector, where entrepreneurship, innovation, economic growth and job creation occur? Or, is it best to take such resources from those who earned them, and hand those dollars over to politicians?
On the President’s proposal, an analysis on the White House website proclaims: “This should be one of those rare moments where everyone in Washington can agree.” Indeed, this is a moment where agreement should be strong. But not in favor of the President’s proposal. Instead, agreement should stand in favor of making the 2001/2003 tax relief measure permanent as a start, and then building by implementing pro-growth tax and regulatory relief that will spur risk taking and the economy forward.
Raymond J. Keating is the chief economist for the Small Business & Entrepreneurship Council.
Monday, January 23, 2012
The State of the Union and Small Business
On Tuesday, January 24, President Obama will deliver the annual State of the Union address. Small business owners will quickly decode whether the speech is an official kick-off to the president's reelection campaign, or whether he intends to pursue pro-growth policies that will help entrepreneurs grow their firms and create jobs.
Here are some of the key issues that small business owners want policy details on:
Tax code stability, and no tax increases. What is the President's plan for bringing some certainty and stability to the array of tax incentives, tax rates and various provisions that either expired at the end of 2011, or are set to expire in 2012? If the president continues to call for tax increases on entrepreneurs and investors, he will continue to get the same gloomy performance from the economy. Our economy needs capital and certainty, and calling for tax increases works against both.
Health coverage affordability. The President said he would look at provisions of ObamaCare that are not working, so he needs to focus on repealing provisions that are driving cost (and will drive costs) higher, including: the health insurance tax, employer and individual mandates, the medical device manufacturers' tax, the essential benefits package, the grandfather rule and much more. Health insurance costs continue to go up, not down as promised.
Affordable energy. Fuel prices remain high, and the President needs to explain himself on the lack of progress regarding domestic energy development and production. Please explain the Keystone XL decision?
Jobs, jobs, jobs and economic growth. Small business revenues remain depressed. Consumer and business confidence remains low. Jobs will not be created given such an outlook. What is the game plan on jobs? And, again, what was the rationale for killing Keystone XL?
Access to capital. Will the President use the power of his office to push through crowd fund investing legislation? What is his plan to bolster investor confidence, and improve the economy so that capital is flowing more abundantly again?
Regulatory relief and restraint. New regulations continue to cascade out of federal government agencies and departments. Is there any plan to rein in the out-of-control central planners in the Administration?
Global trade. Are there any new deals in the works? Will the President expedite action on existing efforts to strike agreements and accords?
Government spending. What, specifically, does the President plan to cut? How, specifically, will his Administration begin to act on entitlement reforms?
Small business owners and entrepreneurs will be listening on these issues, and many more. But more than talk, they want action on pro-growth policies. They want Washington to get out of the way. Please follow SBE Council President & CEO Karen Kerrigan on twitter @KarenKerrigan during the State of the Union address. SBE Council will also post updates on Facebook.
Karen Kerrigan, President & CEO
Here are some of the key issues that small business owners want policy details on:
Tax code stability, and no tax increases. What is the President's plan for bringing some certainty and stability to the array of tax incentives, tax rates and various provisions that either expired at the end of 2011, or are set to expire in 2012? If the president continues to call for tax increases on entrepreneurs and investors, he will continue to get the same gloomy performance from the economy. Our economy needs capital and certainty, and calling for tax increases works against both.
Health coverage affordability. The President said he would look at provisions of ObamaCare that are not working, so he needs to focus on repealing provisions that are driving cost (and will drive costs) higher, including: the health insurance tax, employer and individual mandates, the medical device manufacturers' tax, the essential benefits package, the grandfather rule and much more. Health insurance costs continue to go up, not down as promised.
Affordable energy. Fuel prices remain high, and the President needs to explain himself on the lack of progress regarding domestic energy development and production. Please explain the Keystone XL decision?
Jobs, jobs, jobs and economic growth. Small business revenues remain depressed. Consumer and business confidence remains low. Jobs will not be created given such an outlook. What is the game plan on jobs? And, again, what was the rationale for killing Keystone XL?
Access to capital. Will the President use the power of his office to push through crowd fund investing legislation? What is his plan to bolster investor confidence, and improve the economy so that capital is flowing more abundantly again?
Regulatory relief and restraint. New regulations continue to cascade out of federal government agencies and departments. Is there any plan to rein in the out-of-control central planners in the Administration?
Global trade. Are there any new deals in the works? Will the President expedite action on existing efforts to strike agreements and accords?
Government spending. What, specifically, does the President plan to cut? How, specifically, will his Administration begin to act on entitlement reforms?
Small business owners and entrepreneurs will be listening on these issues, and many more. But more than talk, they want action on pro-growth policies. They want Washington to get out of the way. Please follow SBE Council President & CEO Karen Kerrigan on twitter @KarenKerrigan during the State of the Union address. SBE Council will also post updates on Facebook.
Karen Kerrigan, President & CEO
Monday, October 03, 2011
Buffett-Obama Tax Policy
Warren Buffett might be a great stock picker (I've never assessed his track record and am going purely on reputation here), but he is stunningly clueless when it comes to public policy, in particular, tax policy.
Buffett, like so many people, wants to base tax policy on his personal experience and preferences. And since he seems to like big government and higher taxes on upper incomes, then that's what everyone should be for. And since he is a wealthy, successful guy, then it should be obvious that high taxes do not deter wealth creation and economic growth. Right?
Besides, isn't it outrageous that Warren, according to his own reporting in an August New York Times op-ed, pays a lower effective tax rate than some of his staff who earn far less?
Buffett naturally has become President Barack Obama's favorite rich guy, since the President wants to hike taxes on upper income earners. Indeed, in the President's so-called plan for economic growth and deficit reduction, his tax ideas specifically subscribe to "the ‘Buffett Rule' that people making over $1 million should not pay lower taxes than the middle class."
Where to start?
First, let's get it straight as to what the breakdown is in terms of who pays federal taxes.
The Congressional Budget Office's most recent analysis on this was released in April 2009 (2006 data). Check out the key details:
• In terms of shares of individual income taxes, the top 1% of income earners (the super rich, as Buffett likes to call them) paid 39.1% of federal income taxes; the top 5% paid 60.9%; the top 10% paid 72.8%; the top 20% paid 86.3%; and the top 40% paid 99.2%. In contrast, the middle 20%, with average pretax income of $60,700, paid just 4.4% on individual income taxes, and the bottom 40% actually came in at -3.6%, getting money back through the EITC.
• As for shares of total federal taxes, the top 1% paid 28.3% of the total liability; the top 5% paid 44.7%; the top 10% forked over 55.4%; the top 20% paid 69.3%; and the top 40% covered 85.8% of all federal taxes. In contrast, the middle 20% paid 9.1% of federal taxes; and the bottom 40% paid 4.9%.
• What about their effective tax rates, which seems to be Buffett's issue? Well, as for effective individual income tax rates, the rate for the top 1% of income earners was 19%; the rate for the top 5% was 17.5%; for the top 10%, it was 16%; the top 20% faced a rate of 14.1%; the fourth quintile a 6.0% rate; the middle quintile 3.0%; and the second and lowest quintiles had effective rates of -0.8% and -6.6%, respectively.
• As for total federal taxes, the effective tax rate on the top 1% of earners was 31.2%; the top 5% paid a rate of 29.0%; the top 10% had a rate of 27.5%; the top 20 percent a rate of 25.8%; the fourth quintile was at 17.6%; the middle quintile at 14.2%; and the second and bottom quintiles came in with effective rates of 10.2% and 4.3%, respectively.
So, it is undeniable that the Buffett/Obama assumptions about who pays taxes and what their rates are simply do not hold up when looking at the overall data.
For good measure, it must be understood that Buffett is comparing apples and oranges, as much of the income earned by higher incomes turn out to be capital gains, dividends and other investment income.
In a recent column, Ralph R. Reiland, an associate professor of economics and the B. Kenneth Simon professor of free enterprise at Robert Morris University, pointed out: "An honest portrayal would acknowledge that dividends and capital gains are double taxed, first as corporate profits at the highest corporate income tax rate in the industrialized world, 35 percent, and then again as individual income when dividends are distributed or stock is sold. The total tax rate on capital gains is ‘closer to 45 percent than 15 percent' stated a Wall Street Journal editorial on September 20. In fact, the tax hit on capital gains is higher than the Journal states because capital gains are not indexed for inflation, producing taxes that are levied on illusory gains. The stock seller is taxed not only on real gains in purchasing power, but also on phantom gains attributable to inflation."
Finally, Buffett proclaimed in his op-ed, "I have worked with investors for 60 years and I have yet to see anyone - not even when capital gains rates were 39.9 percent in 1976-77 - shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off."
To say that the return on an investment - which obviously is directly affected by the tax rate - does not affect investment decisions is misleading and preposterous. The tax rate does not determine everything, obviously, but it most certainly influences investment decisions, especially when considering the risk involved in starting up, building and investing in businesses. It also matters when having a choice of investments that are taxed at different rates - such as tax-free returns on safe, government bonds, for example, versus taxed investments in risky entrepreneurial ventures.
Finally, there is the simple matter of where would resources be used more effectively for the economy. Are we really supposed to believe that economic growth and job creation would be enhanced by taking resources out of the private sector - away from astute investors such as Buffett - and handed over to politicians to spend on their politically favored projects? Again, that's just preposterous.
In the end, the so-called "Buffett Rule" is silly economics being peddled by a wealthy investor and a President who let their political ideologies inform their preferences on tax policy.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.
Buffett, like so many people, wants to base tax policy on his personal experience and preferences. And since he seems to like big government and higher taxes on upper incomes, then that's what everyone should be for. And since he is a wealthy, successful guy, then it should be obvious that high taxes do not deter wealth creation and economic growth. Right?
Besides, isn't it outrageous that Warren, according to his own reporting in an August New York Times op-ed, pays a lower effective tax rate than some of his staff who earn far less?
Buffett naturally has become President Barack Obama's favorite rich guy, since the President wants to hike taxes on upper income earners. Indeed, in the President's so-called plan for economic growth and deficit reduction, his tax ideas specifically subscribe to "the ‘Buffett Rule' that people making over $1 million should not pay lower taxes than the middle class."
Where to start?
First, let's get it straight as to what the breakdown is in terms of who pays federal taxes.
The Congressional Budget Office's most recent analysis on this was released in April 2009 (2006 data). Check out the key details:
• In terms of shares of individual income taxes, the top 1% of income earners (the super rich, as Buffett likes to call them) paid 39.1% of federal income taxes; the top 5% paid 60.9%; the top 10% paid 72.8%; the top 20% paid 86.3%; and the top 40% paid 99.2%. In contrast, the middle 20%, with average pretax income of $60,700, paid just 4.4% on individual income taxes, and the bottom 40% actually came in at -3.6%, getting money back through the EITC.
• As for shares of total federal taxes, the top 1% paid 28.3% of the total liability; the top 5% paid 44.7%; the top 10% forked over 55.4%; the top 20% paid 69.3%; and the top 40% covered 85.8% of all federal taxes. In contrast, the middle 20% paid 9.1% of federal taxes; and the bottom 40% paid 4.9%.
• What about their effective tax rates, which seems to be Buffett's issue? Well, as for effective individual income tax rates, the rate for the top 1% of income earners was 19%; the rate for the top 5% was 17.5%; for the top 10%, it was 16%; the top 20% faced a rate of 14.1%; the fourth quintile a 6.0% rate; the middle quintile 3.0%; and the second and lowest quintiles had effective rates of -0.8% and -6.6%, respectively.
• As for total federal taxes, the effective tax rate on the top 1% of earners was 31.2%; the top 5% paid a rate of 29.0%; the top 10% had a rate of 27.5%; the top 20 percent a rate of 25.8%; the fourth quintile was at 17.6%; the middle quintile at 14.2%; and the second and bottom quintiles came in with effective rates of 10.2% and 4.3%, respectively.
So, it is undeniable that the Buffett/Obama assumptions about who pays taxes and what their rates are simply do not hold up when looking at the overall data.
For good measure, it must be understood that Buffett is comparing apples and oranges, as much of the income earned by higher incomes turn out to be capital gains, dividends and other investment income.
In a recent column, Ralph R. Reiland, an associate professor of economics and the B. Kenneth Simon professor of free enterprise at Robert Morris University, pointed out: "An honest portrayal would acknowledge that dividends and capital gains are double taxed, first as corporate profits at the highest corporate income tax rate in the industrialized world, 35 percent, and then again as individual income when dividends are distributed or stock is sold. The total tax rate on capital gains is ‘closer to 45 percent than 15 percent' stated a Wall Street Journal editorial on September 20. In fact, the tax hit on capital gains is higher than the Journal states because capital gains are not indexed for inflation, producing taxes that are levied on illusory gains. The stock seller is taxed not only on real gains in purchasing power, but also on phantom gains attributable to inflation."
Finally, Buffett proclaimed in his op-ed, "I have worked with investors for 60 years and I have yet to see anyone - not even when capital gains rates were 39.9 percent in 1976-77 - shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off."
To say that the return on an investment - which obviously is directly affected by the tax rate - does not affect investment decisions is misleading and preposterous. The tax rate does not determine everything, obviously, but it most certainly influences investment decisions, especially when considering the risk involved in starting up, building and investing in businesses. It also matters when having a choice of investments that are taxed at different rates - such as tax-free returns on safe, government bonds, for example, versus taxed investments in risky entrepreneurial ventures.
Finally, there is the simple matter of where would resources be used more effectively for the economy. Are we really supposed to believe that economic growth and job creation would be enhanced by taking resources out of the private sector - away from astute investors such as Buffett - and handed over to politicians to spend on their politically favored projects? Again, that's just preposterous.
In the end, the so-called "Buffett Rule" is silly economics being peddled by a wealthy investor and a President who let their political ideologies inform their preferences on tax policy.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.
Tuesday, September 27, 2011
Obama's Tax Hikes: No Mercy for Entrepreneurs
President Barack Obama says he wants to help entrepreneurs grow their firms and create jobs. But where's the proof? According to the Small Business & Entrepreneurship Council (SBE Council), his relentless pursuit of tax increases is wearing down the national psyche of small business owners. The President's specific proposals take direct aim at the entrepreneur's access to capital or their own resources to grow, invest, hire or pay down debt. Weak business revenues compounded by a tough environment for accessing capital are squeezing small firms. The last thing they need, or want to hear, is that Washington will be taking more of their reinvestment capital, or making it less attractive for investors to finance U.S. companies.
"President Obama's tax proposals are not only misguided, they are momentum killers. You can't expect small business owners to take extraordinary risks and move forward with expansion plans while Washington continuously threatens to take more of the money they earn. These resources are typically plowed back into their businesses. Whether it's a tax increase on personal income, capital gains, carried interest and now limiting the tax deductions that upper-middle class and high-earning entrepreneurs can take, these tax policy threats are suffocating confidence. The awful economy is proof of that," said SBE Council President & CEO Karen Kerrigan.
The White House has touted its federal government loan programs, and targeted and temporary tax relief to help small businesses, but these initiatives are not nearly enough to help entrepreneurs prosper in the challenging economic environment. The President's weak initiatives aimed toward helping small businesses are unfortunately matched with punishing tax increases on firms that are in the best position to add jobs and invest if they only had Washington's support. On top of raising taxes on upper-middle income and high-earning small business owners, President Obama has also proposed capping itemized deductions at the 28 percent personal income tax rate, which is yet another tax increase on many small business owners.
Raymond J. Keating, SBE Council chief economist, observed: "Understanding that most businesses pay the personal income tax, that the bulk of 'upper-income' earners are entrepreneurs, and that much of these higher incomes are earned by small businesses, President Obama's proposal to limit tax deductions amounts to a big tax increase on the entrepreneurial sector of our economy. Quite simply, this would mean fewer resources available for entrepreneurs to invest in building their businesses, innovating and creating jobs. No amount of political rhetoric or spinning the numbers can change this fundamental economic reality."
SBE Council is calling on President Obama to stop the politicking and class warfare, and start leading. Workers, small business owners, families and the unemployed are hurting. The country and economy is in a distressed state, and many people have no hope.
"The President has been provided numerous opportunities to fashion bipartisan consensus around tax reform, spending issues, trade agreements and other issues to help stabilize and grow the economy. Yet, he continues to revert to small political discourse and class warfare. Unfortunately, the country is suffering because of his unwillingness or inability to provide leadership," said Kerrigan.
"President Obama's tax proposals are not only misguided, they are momentum killers. You can't expect small business owners to take extraordinary risks and move forward with expansion plans while Washington continuously threatens to take more of the money they earn. These resources are typically plowed back into their businesses. Whether it's a tax increase on personal income, capital gains, carried interest and now limiting the tax deductions that upper-middle class and high-earning entrepreneurs can take, these tax policy threats are suffocating confidence. The awful economy is proof of that," said SBE Council President & CEO Karen Kerrigan.
The White House has touted its federal government loan programs, and targeted and temporary tax relief to help small businesses, but these initiatives are not nearly enough to help entrepreneurs prosper in the challenging economic environment. The President's weak initiatives aimed toward helping small businesses are unfortunately matched with punishing tax increases on firms that are in the best position to add jobs and invest if they only had Washington's support. On top of raising taxes on upper-middle income and high-earning small business owners, President Obama has also proposed capping itemized deductions at the 28 percent personal income tax rate, which is yet another tax increase on many small business owners.
Raymond J. Keating, SBE Council chief economist, observed: "Understanding that most businesses pay the personal income tax, that the bulk of 'upper-income' earners are entrepreneurs, and that much of these higher incomes are earned by small businesses, President Obama's proposal to limit tax deductions amounts to a big tax increase on the entrepreneurial sector of our economy. Quite simply, this would mean fewer resources available for entrepreneurs to invest in building their businesses, innovating and creating jobs. No amount of political rhetoric or spinning the numbers can change this fundamental economic reality."
SBE Council is calling on President Obama to stop the politicking and class warfare, and start leading. Workers, small business owners, families and the unemployed are hurting. The country and economy is in a distressed state, and many people have no hope.
"The President has been provided numerous opportunities to fashion bipartisan consensus around tax reform, spending issues, trade agreements and other issues to help stabilize and grow the economy. Yet, he continues to revert to small political discourse and class warfare. Unfortunately, the country is suffering because of his unwillingness or inability to provide leadership," said Kerrigan.
Friday, November 19, 2010
New Video Series: "The Story of Business"
SBE Council and The Public Notice released a video series today featuring four entrepreneurs who share their stories about how government actions are impacting their ability to compete and grow their businesses. The first video -- "Moving Forward in Uncertain Times" -- features Wes Garner, President of Great Lakes Calcium in Green Bay Wisconsin.
The content of this video series is compelling, and tells the story about government policy gone awry and how it undermines entrepreneurial activity, job creation and getting our economy back on a competitive, growing path.
Karen Kerrigan, President & CEO
The content of this video series is compelling, and tells the story about government policy gone awry and how it undermines entrepreneurial activity, job creation and getting our economy back on a competitive, growing path.
Karen Kerrigan, President & CEO
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