Taxes Are Killing Small Businesses

No matter where you come from, what your job
is, or where you stand politically, you have to pay taxes. Uncle Sam needs taxpayer dollars to pay for
things like schools, fire fighters, and the military. There are all sorts of different taxes: income
taxes, payroll taxes and sales taxes just to name a few. But individuals aren’t the only ones who
pay taxes—businesses pay income taxes too. Businesses that are set up as corporations
pay taxes on their income at the US corporate tax rate of around 35 percent—one of the
highest in the developed world. Countries like Ireland and Switzerland have
corporate tax rates well under 25 percent, which can give companies based there a competitive
advantage. But there’s another taxed group that we’re
forgetting…small businesses. There are 29 million of them in the US and
they employ nearly 56 million people. That’s a total of 85 million people dependent
on the success of small businesses! Small businesses are most often set up as
sole proprietorships, partnerships or another designation called an S-corp. But the money they make isn’t taxed at the
corporate rate. The profits earned by these small businesses
are “passed through” to the owner and counted as individual income on their personal
tax return. That’s why you might hear small businesses
referred to as “Pass-throughs.” These entrepreneurs can pay tax rates as high
as 40 percent not including additional state and local taxes, that means many American
small businesses are being taxed at a higher rate than businesses anywhere in the world. Why should you care? Because high taxes hurt small businesses ability
to grow and expand, causing them to raise prices or even trim jobs to stay within their
budget constraints. Lowering taxes for small businesses or “pass-throughs”
results in the growth of small businesses —allowing them to provide more jobs and boost the economy for everyone. After all two thirds of all new jobs come
from small businesses and lowering taxes can have a big effect on the entire economy for
all Americans. So the next time you hear someone supporting
an increase in tax rates on businesses, remember that very important group of small business
owners and the 85 million people dependent on their success.

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