The truth about Obama's small business tax increase

Discussion in 'Congress' started by DavidS, Oct 13, 2008.

  1. DavidS
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    DavidS Anti-Tea Party Member

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    Recently, John McCain said that Obama will increase the taxes of small businesses everywhere. That is true. There are many small businesses that make more than $250,000 in net profit.

    That means if your small business makes $500 million a year and you can write off $499,754,999 worth of taxes (believe me, it can be done) then you will not see a tax increase. It is important that people see this and see that Obama will only raise taxes for companies that have $250,000 or more in net profit. A simple raise to an employee or yourself can eliminate this tax increase. 90% of small companies will not see a tax increase from Obama.

    Obama will also eliminate the capital gains tax for small businesses. This means if someone buys 10,000 shares of my company at $5 a share and then they sell those 10,000 shares when the price hits $20 a share, the investors aren't taxed on the net profit from the investment. That's huge!

    Finally, Obama proposes giving small businesses a tax credit of 50% of the amount of money they pay for healthcare for themselves and their employees. Health insurance right now is not tax deductable and I spent about $50,000 last year in healthcare costs for my company. That's a $25,000 tax credit that I'm getting under Obama that I'm not getting under McCain who only provides individuals with a $5,000 tax credit if they get their own healthcare - this is in no way helps small companies grow.

    John McCain would help fortune 500 companies who already are making hundreds of million dollars a year in profit by lowering C-Corp (not S-Corp like all small businsses are) taxes. This won't stimulate job creation and won't help the economy recover quicker.

    The important thing for everyone to remember is that companies making more than $250,000 in NET PROFIT, not GROSS REVENUE see a tax increase.
     
  2. bigdaddygtr
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    bigdaddygtr Senior Member

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    :iagree:

    Finally, the truth
     
  3. Valerie
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    Valerie Gold Member

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    I never understood what he meant by cutting the capital gains tax for small business. Businesses pay tax on their net revenue and it is not treated as a capital gain. In the example you sited, it is the investor who would avoid paying a capital gain tax, not the business owner. I think Obama misspoke, because I remember that he did actually say that.
     
  4. DavidS
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    DavidS Anti-Tea Party Member

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    If the investor doesn't have to pay tax on their investment, they're more likely to invest more money into the company, which can spur job creation.
     
  5. Valerie
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    Valerie Gold Member

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    Yes, but investors are private citizens holding shares in a public company. The capital gains tax cut in that case is to the individual investor, not the business.

    Don't get me wrong, I'm just trying to clarify the meaning of the terms. What you are talking about, and what Obama referred to, is NOT a tax cut for the capital gains on small businesses, it makes no sense.

    By the way, an individual investor who has a capital gain as a result of a stock transaction is going to spend the money on a new roof for his house, or a new car, or a vacation, not into the public company whose shares he just sold. The business he sold stock in is not HIS business.

    Also, companies that go public and sell shares on the stock market aren't exactly small either. So, I really think Obama misspoke when he said that he would cut the capital gains tax for small businesses, and it seems quite evident that a lot of people don't even understand what that even means.
     
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  6. xsited1
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    xsited1 Agent P

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    That is correct. Obama either misspoke or did not understand that his plan does not cut the capital gains tax for small businesses.
     
  7. Skull Pilot
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    Skull Pilot Platinum Member

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    Possibly but most small businesses do not keep large amounts of cash in the corporation. cash either goes to payroll or improvements so really the 250K net is a non issue. It just sounds good to the public.

    Chances are some of that money will be used to increase the business owners pay and he'll just get whacked for a higher tax bill so again the tax gets paid here. there really is no break.

    I think you're not reading that right. BHO will not charge you business cap gains so if some property owned by the business appreciates, your business will avoid a long or short term cap gains tax on that. It has absolutely nothing to do with individual investors capital gains taxes due from stock appreciation. In fact BHO wants to RAISE individual cap gains taxes.

    If you pay for your employees insurance or part of it, it is deductible as a business expense.

    Most small business start out as S corps but as soon as the business is profitable, an S corp should be converted to a C corp. The reason for the S corp status is so that small business owners can reflect business losses on their individual personal tax returns. If a S corp is profitable, the income passes through to the individual owners and is taxed at the individual's tax rate. the only way to lower taxes on an S corp is to change it to a C corp since all S corp income is taxed at the individual rates of the owners. When you do change status, you lose the ability to claim business losses on your personal income tax but if your business is profitable losing a personal business loss deduction is more than offset by a lower tax rate.

    If you're doing it right, you should never have a problem showing less than a 250K profit. And isn't net profit a redundant term?
     
  8. Skull Pilot
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    Skull Pilot Platinum Member

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    Capital gains taxes refer to assets that appreciate in value not on income. there are long term and short term capital gains which as the names indicate have to do with how long you hold an asset. Long term cap gains rates are lower.

    For example. If you buy stock for one dollar and in 20 years it's worth one million and you sell it. You would be charged a long term capital gains tax on 999,999 as the one dollar purchase price was your basis.
     
  9. editec
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    editec Mr. Forgot-it-All

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    No. It is a necessary accounting phrase used to differentiate from it gross profit

     
  10. DavidS
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    DavidS Anti-Tea Party Member

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    I'm not sure what context you're referring to.
     

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