Obama’s Tax Plan and Small Business

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Hello from Weston, CT, where we are proud to have elected or reelected a fine slate of Democratic candidates to Congress and major state offices:

There is a major misunderstanding of the proposal to end (not extend) the Bush tax cuts for top earners.  Media articles are not explaining what “$200,000 per individual or $250,000 per couple” means.  Republicans are exploiting the vagueness to scare small business owners.  The confusion is over the difference between AGI and taxable income.

We know that Michelle Bachmann is one of the most shameless liars to be elected to Congress.  However, some people listen to her.  Yesterday morning, Bachmann said to George Stephanopoulos that President Obama proposed to raise taxes on any small business with gross income of more than $250,000, including a carpet layer with two or three assistants. She says that would be a big job killer.

My understanding is that President Obama proposes to raise taxes on annual taxable income of more than $200,000 for an individual or $250,000 for a couple.  That’s not gross income.  For a business partnership or other unincorporated small business, salaries and other legitimate business expenses would be deducted before computing the taxable income.

There are very few small businesses with annual taxable income of more than $250,000, and the tax increase would be only 3% of the amount above $250,000.

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