Will Obama raise taxes for the middle class?

[Aiemond]

halogamer1989 said:
One word answer---Definitely. He will increase the income taxes on businesses (although he is fond of confusing capital gains with income tax). He also, when voted into the Senate from Chicago promised to lower taxes for IL. Guess what... it did not happen. He cannot do everything he wants to do without a socialist state. He is for bank takeovers, agrees with Pelosi's plan on taking over failing biz, and making transportation a Fed program. Mafoo, you cannot promise this amount without biting the bullet somewhere. PM me if u have more--See my profile and you will know why...

Ok, so how is he raising taxes on small business?

 

First off, the most common argument is "Well, income is not profit. he may make 500k but only 50k is profit!" This is flat out wrong. Small business is not taxed on income. It can be if the owner takes no care into how he runs his busness though. But then again, normal people can pay more in taxes if they don't pay attention as well. Here are how small busniess is taxed.

 

from
http://www.nolo.com/article.cfm/objectId/FE1875A0-239D-48E5-B7D2565E0CB62159/catID/3FED35C1-7BBA-4468-901354F101CBEBE2/111/182/147/ART/

"You'll be taxed on all profits of the business -- that's total income minus expenses -- regardless of how much money you actually withdraw from the business. In other words, even if you leave money in the company's bank account at the end of the year (for instance, to cover future expenses or expand the business), you must pay taxes on that money.

You can deduct your business expenses just like any other business. You are allowed to expense (deduct) much of the money you spend in pursuit of profit, including operating expenses, product and advertising costs, travel expenses, and some of the cost of business-related meals and entertainment. You can also write off certain start-up costs and the cost of business equipment and other assets you purchase for your business."

Also, (http://www.nolo.com/article.cfm/objectID/B407A867-3EE5-410F-8718C78B2EF698D6/111/277/235/ART/)

"How tax savvy a businessperson you are has a great effect on how much money is in your pocket at the end of the year. You probably know that the tax code allows you to deduct costs of doing business from your gross income. What you are left with is your net business profit. This is the amount that gets taxed."

 

also,

"Internal Revenue Code § 162. 'Trade or business expenses.'

"(a) In general. There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business, including

"(1) a reasonable allowance for salaries or other compensation for personal services actually rendered;

"(2) traveling expenses (including amounts expended for meals and lodging other than amounts which are lavish or extravagant under the circumstances) while away from home in the pursuit of a trade or business; and

"(3) rentals or other payments required to be made as a condition to the continued use or possession, for purposes of the trade or business, of property to which the taxpayer has not taken or is not taking title or in which he has no equity."

"
this from the tax code.

 

So what we learn from this is that everything that is not profit can be deducted, thus lowering the income of the individual to profit only. THIS is what he will be taxed on and THIS is the bracket he will be in (combine with any other types of income of course, such as gambling income, if he has second job, etc, but this would be the same with or without obama). Anyone counting business income as personal income is INSANE because THEY are liable in all cases. This means if they get sued they are PERSONALLY responsible. By making it an llc or sole proprietership only the business section can be liable and personal finances cannot be taken by a plantiff.

 

Now, what the advantages of Obama's plan? First, the making work pay break that helps mitigate the employer tax. Second, you have increased funding for incubator. Read this site to see what incubators are: http://www.smallbusinessnotes.com/starting/busincubation.html

 

The advantages of incubators are basically that you have help from EXPERIENCED small business investors. They are popular and have a significant effect on starup success.

 

This is why, imo, the small business plan of obama is superior.