Tales from the Trail

No small differences over Obama’s treatment of small business

February 26, 2009

U.S. budgets can really bring out the passion in people. So much so that it’s no wonder it’s hard for anyone to agree on how Washington should tax and spend.

OBAMA/BUDGETWhen it was released on Thursday, the budget President Barack Obama unveiled sparked a war of words all over the capital. The disagreements were so profound, it’s almost as if people were looking at two entirely different documents.

Take the impact of Obama’s budget on small businesses which, like many in the United States, are reeling from the deep economic recession.

“It is not just misguided, but dangerous to raise taxes on small businesses and families that can’t afford to pay,” warned Eric Cantor, the number-two Republican in the House of Representatives.

His fellow conservative, Representative Mike Pence agreed. “The administration’s budget raises taxes on almost every American. America’s hard-working small businesses, family farms…,” he said.

Obama’s budget calls for raising taxes on those with annual incomes over $250,000.

But Robert Greenstein, executive director of the liberal-leaning Center on Budget and Policy Priorities, said not so fast. 

“This budget is very good for small business. The claim that it hurts small business…is often repeated but inaccurate.”

Greenstein cited data that only nine percent of people with small businesses have incomes over $250,000 a year. And most of those people, he said, “are wealthy investors who invest in the businesses, not those who operate them.”

Instead of reeling from Obama’s budget proposals, Greenstein said small businesses will fall in love with it.

Among benefits he cited: around 90 percent of small business owners would benefit from Obama’s proposed middle-class tax cuts and they also would revel in the elimination of the capital gains tax for small businesses.

Greenstein also said small businesses would benefit from Obama’s plan to expand health insurance to those who cannot afford it.

For more Reuters political news, click here.

- Photo credit: Reuters/Stelios Varias (Copies of Obama’s budget outline.)

Comments
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Greenstein cited data that only nine percent of people with small businesses have incomes over $250,000 a year. And most of those people, he said, “are wealthy investors who invest in the businesses, not those who operate them.”

- If I was rich and had money to invest in small businesses I do believe I would be investing less if the government taxes me more. That sounds bad for a small business trying to raise capital to become a big business.

Posted by Bart | Report as abusive
 

I am a small business owner who makes (a lot) less than $250,000. Greenstein’s comments had me feeling good until he said, “…they also would revel in the elimination of the capital gains tax for small businesses.” SMALL BUSINESSES DO NOT PAY CAPITAL GAINS TAXES!! They are counting on the fact that you don’t know that.

Posted by Lisa | Report as abusive
 

I am a hard working mother who owns a business and is part owner of another business with my husband. We will just fall into this income catogory, mind you we are not the “wealthy investors” we are the hard working individuals who run and operate these businesses. Together our businesses employs 17 hard working individuals. We also pay for a nanny, to take care of our 2 small children so that we can go to work everyday to run these business . We do the right thing by pay our household employee’s taxes and health insurance out of our net income. This tax increase will only hurt our situation!

Posted by JPM | Report as abusive
 

That would depend entirely on the profitability and potential of the small business and the level of additional tax imposed. I like something that encourages innovation and profitability on the investor side as well as the operations side of the equation. The entire picture must be considered for an accurate rendering.

Posted by CJ | Report as abusive
 

Tax me more and my prices will go up. Only a fool would believe that if the large to mid sized business get taxed 4.5% more they will absorbe that increase and just settle for making less money!!! How do these liberal people think these “wealthy people” got where they are. By being stupid and lazy and accepting less. Wake up America, water will seek it’s level.

Posted by Stan Muller | Report as abusive
 

Greenstein stated that small businesses would see the elimination of capital gains taxes. What I have been hearing is a rather large increase in capitol gains. Who is correct?

 

Incredible!

So if you punish the people who might want to invest in a small business you won’t hurt the small business itself! Even Gary Locke would not say anything that stupid!

Posted by Robert Dean | Report as abusive
 

Before we get to the good or bad of this budget to small business, why are we accepting the divisive and unfair premise that only people or businesses making over $250,000 deserve to pay the way for everyone else?

Are we to become a government-dominated society of free-loaders who are trained to resent and punish the successful in exchange for freebies from on-high?

Obviously Obama’s idea of the American dream and an American success story is a government bureaucrat confiscating money from the successful few to re-distribute it to the presumably grateful many (whom he also hopes are voters).

This new government is sick and destructive. It is far too ideological, dishonest and not sufficiently serious about economic recovery.

Posted by DAK | Report as abusive
 

Greenstein implies that taxing investors of small businesses will not adversely affect small businesses or the nation’s employment picture. He is wrong and he demonstrates a lack of understanding that is inexcusible for someone in his position. The President recently nominated Gary Locke, former governor of Washington, for Commerce Secretary. Governor Locke demonstrated similar lack of understanding when he twice vetoed the repeal of the regressive Business and Occupations Tax; a tax on gross receipts of even the smallest of small businesses.

Posted by Robert Dean | Report as abusive
 

What a crock.
Sorry but, right now Washington has no clue.
Greensteins been in govt for 25 years….It would not surprise me if he’s never run a business.
Yet he thinks he’s able to know….that out here we will fall in love with this budget.

 

I’ve always aspired to become wealthy. In recent times I have been encouraged that I might achieve my dream. Last fall Obama said people who make $250K are wealthy. Last week that was revised to $209K. At this rate by fall I can make $130K and be wealthy, if I have a job.

Posted by Luda Kirk | Report as abusive
 

Obviously Mr. Greenstein, like Mr. Obama and his economic advisors have never owned or been directly involved with a small business. How am I to cover my receivables and inventory when I am now going to be taxed to such greater extent. I guess this will limit my ability to offer other small businesses credit for product they want from me. I pay the Health Insurance and benefits (401K contributions, etc.) for my employees. We have grown from 4 to 19 employees over the years, but this program will severly hamper not only our growth but the ability to keep all our employees. How can the President not grasp this situation?

 

This seems to put small businesses in a position of discontinuing growth. Who wants to make more or grow their business when the at the end of the day, less money comes into their pocket? This is the wrong message to send to business owners. There is absolutely no reason to strive to do better. Why put out your money and risk when this is what you get in return? Some believe 3 percent isn’t a big deal, but add that to the already high tax burden, and you have a hefty tax with the inability to pay it back. I don’t think that other alternatives have been adequately analyzed, and I think there is a form of “Group Think” going on with Obama’s entire staff. How can we get the ear of Obama to truly listen and understand the importance of small businesses.

Posted by Tracie | Report as abusive
 

If my taxes increase, I will be forced to halt any expansion and lay off people. I will not have any alternative. The ability for me to create jobs will be diminished as it will for many small businesses. I would like for someone to explain to me how this will get our economy back on track when small businesses create most of the jobs in this country.

I take no bail-out money, nor do I want it. It seems the reward of forsight and planning is taxes and poverty.

 

While I may receive $400 (not a big motivator) from the tax cuts that I have seen, the remaining provisions that have been discussed as helpful to small businesses will have no effect. I will not under the current economic climate be spending in excess of $100,000 much less $250,000 for equipment or expansion, so the increased 50% expensing of capital goods will have no effect. I actually showed a profit in the past years, so the extension to five years for mitigating losses doesn’t help. The measures under consideration that would have helped such as a payroll tax holiday were deleted from the bill. The continuing possibility that the healthcare reform might include provisions that REQUIRED small businesses to furnish health insurance or pay fines is enough to keep me from adding employees and stunts the growth of my business. No, this administrations economic measures will not help, and will hurt my business.

Posted by R | Report as abusive
 

It continues to amaze me how many small business people are snookered into Republican thinking about small business being hurt by a raise in taxes (back to what they were prior to 2002).

There are very few small business people out there who are in shouting distance of $250,000 in income. Particularly when one thinks about the deductions that small business people can take, that a regular employee can’t. In reality, there earnings would need to be higher than $250,000 to be hit by a higher tax.

Most small business people that I know are much more concerned about things such as health care and legislation that requires a lot more administrative work. We don’t have the large overhead that big companies do. Thus requiring a lot of paperwork by government (particularly state and local government), concerns us much more than what we may be taxed when we finally reach $250K.

Posted by Pete | Report as abusive
 

I don’t know what Mr. Greenstein is smoking when he says “Small business will fall in love with it”. This administration and it’s minions have their talking points already out there. How do you raise taxes in an economy as fragile as it is now, especially on small business? The Obama Administration is living in a fantasy land. All these so-called experts from Harvard, Yale and other Ivy League schools who cannot hold a job in the private sector, who learned economics out of a book and side with the Keyensian theory of economics will destroy this already beat up economy. But hey, it gives more power to the Washington elite, isn’t that the goal of Karl Marx and other Socialist elites????

Posted by TAR | Report as abusive
 

To be snookered would be to assume small business owners have a lot of faith in politians. I for one have very little, be they republican or democrat. The only way you can say the tax hike won’t hurt is if (a) You aren’t within shouting distance of $250,000 and don’t have any employees (otherwise you’d know any tax increase is a bad one) or (2) You are not a small business.
Anytime taxes go up, something or someone suffers and a government and it’s wastes go up. To put your faith in the government or polititians is absolutely silly. You should be trying to keep them out of your life and your wallet.

Posted by Lew | Report as abusive
 

This budget proposes that 24% of GDP be spent by federal bureaucrats (not counting the portion already being spent by state and local bureaucrats). Those spending decisions will be made on a political basis, not economic. The inevitable result is less economical allocation of those resources than if individuals and private sector businesses allocated those resources. That means less economic growth. The path to economic growth is increasing the private, economic, non-political allocation of resources.

Posted by Duncan | Report as abusive
 

Has none of the people in Washington every own a business? To be successful you must have a demand for your product and sell it at a fair price. Tell me again how raising taxes on us will help us do that? We will have to pass on the cost of the taxes in our products that will create less demand because of the higher prices, which means that I will have to get rid of people due to less demand, I have never seen a person making $50,000 a year hire more than one person to work for them yet I have seen someone earning $250,000 in a chapter S corp. create 60 jobs, invested most of that money back into the business and people, because I have done it. Come on, Obama talk to us people who know how to create jobs!

Posted by John Freiburger | Report as abusive
 

Yes, this is a crock. I’m a physical therapy practice owner and I am disgusted with the new administration’s policies.

I employ 15 people on the books and am hit by higher and higher costs for salaries, benefits (and I do pay out for good insurance coverage for those that qualify), and more government regulation. A higher business tax would only make the burden heavier.

The last 2 years as a PT clinic have not been very profitable. In fact 2007 was a significant loss. That’s the benefit of following government regulations on standards of care “to the T.”

Medicare pays up to a certain limit (below my cost), and has set rates of pay according to skill level required (the RBRVS system). Even though some treatments could be carried out by an aide in the office, MC requires that I use a Physical Therapist (now doctorate education level) or a licensed PT assistant. They pay according to skill level, but only allow the highest level of education for care.

In addition there is a cap per person on outpatient physical therapy each year, but the dirty secret is that it only applies to independent PT businesses. Anyone can cross the street to a PT practice owned by a hospital and have no cap whatsoever. How many ways can they discourage small businesses?

If health care reimbursement or unfair business regulations go any further, I will be forced to stop accepting medicare.

Posted by B. Herigstad | Report as abusive
 

I’ve made 50,000 a year and employeed 5 people at the same time. If you are making 250,000 per year you are doing okay. More importantly you’re smart, probably hard working and like it or not you are the solution to the problem. The talented productive people will still strive and still earn and still achieve even when unfairly burden by the inequites of the program. You are the solution to the problem and must still be the innovate leaders to counterbalance the greedy, the ignorant and the unfortunate. It has always been so and in times of great strife like these it is more so.

Posted by Lou | Report as abusive
 

As someone with experience in the public and private sector, I do not see a problem in the proposal for actual SMALL businesses — I worked in the government for about eight years, in private industry as an employee, an independent contractor, and now as a business owner/employer for well over ten years. Remember the $250K limit is on your personal taxable income not the gross income of the business. If you are over that limit, I posit that either you no longer have a SMALL business (e.g. having over 50 employees may disqualify your business from some SB contracts) or you may want talk to your accountant and attorney about the organizational type of your business. Finally, many small businesses and/or owners (depending on organizational type) that have a capital gain do pay that tax — if you think otherwise, the IRS will probably be paying you a visit.

Posted by William | Report as abusive
 

I am a small business (S Corp) with 4 fulltime employees and 3 contract workers. I pay income tax on more than $250,000 per year, but the actual money that I personally am able to use is much smaller than that. The money we have available after taxes has to stay in the business account to operate the company. The proposed increase in taxes will definitely affect someone in my position. The economy is also affecting my volume to the point I will have to lay-off at least one fulltime employee and reduce my contract workers by two. If things continue, then I may not be affected by the tax increase because the company income will be reduced. Obviously, if this happens my personal income will be reduced accordingly.
Another side effect will relate to health insurance. I currently pay for my employee’s health insurance but if our volume continues to drop I won’t be able to continue doing that. But of course, the federal government will take care of that with the increased tax burden.
This country is in a sorry state, thanks to politicians of both parties. Once these folks are elected to office they seem to forget who put them there.

Posted by David Peele | Report as abusive
 

I HAVE OWNED A SMALL BUSINESS FOR 17 YRS. (S-CORP) I HAVE NEVER HAD A CAPITAL GAIN OR PAID TAX ON ONE. UNLESS THE NEW ADMINISTRATION DECIDES TO GET THEIR COLLECTIVE HEADS OUT OF THEIR -SSES , WE WILL NEED TO HUNKER DOWN UNTIL THE MID TERM ELECTIONS WHEN THESE CLOWNS WILL BE SWEPT OUT- JUST LIKE 1994 . CROSS YOUR FINGERS

Posted by VINCE | Report as abusive
 

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