President Obama’s “American Jobs Act” could end up killing jobs. To pay for the Jobs Bill, the administration’s proposed tax hike on the “rich” will end up raising taxes on small business owners, who we are relying on to bring our economy back. It is important to understand what his proposals really mean.
The administration has called for a tax hike on the rich. He defines “rich” as individuals making $200,000 a year or families making $250,000 a year. His plan includes limits on itemized deductions and will allow existing tax cuts to expire for those in this tax bracket. For small business owners, the impact of these changes depends on how your business is organized.
Many of these “rich” are entrepreneurs who pay taxes on their businesses through personal income tax rates. If you're the sole owner of a business operating as an LLC or a Subchapter S Corporation, then under Obama's plan, your income taxes would rise if your business’ net income – exceeds $250,000. For example, if your business has profits of more than $250,000, you will be hit with a higher tax bill.
Tax increases on small businesses will not grow our economy. The tax, spend and regulation approach has not turned things around. Every job in our economy relies on an entrepreneur who takes the risk to open a business. The federal government’s proper role is to encourage these individuals and to not bog them down with red tape and taxes. When our entrepreneurs thrive they will grow their businesses and create jobs.