I’m a not an economist nor a CPA. However, I do have quite a bit of a background in accounting, business management and operating a small business. So when I see some of the President’s tax and economic policies that may take place – it has me concerned.
Overall, I’m pretty sure quite a bit of us do not want to pay a huge amount in taxes. Whether it be monthly, quarterly or annually. I’ve been looking at past debates during the 2020 presidential election and I do not agree with taxes increasing overall. I honestly prefer more money in our pockets – doesn’t matter what spectrum we belong into under the Progressive Tax system that our Federal Government has in this country. Wouldn’t you agree, that you wish to have more cash “on hand” – in your pockets when you get your pay bi-weekly or monthly? I see it as common sense.
What sound person would not want to have more cash in their hands to do whatever with it, when they get paid? Use it to do whatever they’d like to: purchase clothes, travel to have that humbling experience around the country or abroad, support other business industries, donate to a charity they are interested in, or help out local businesses and communities in their areas, etc.
Here’s my take on some of the above mentioned. Some of it sounds similar to Biden’s proposal, but the underlying fact is INCREASE IN TAX. This goes back to my blog a few weeks ago about the “Laffer Curve“. Very informative video as well about the break down of the Laffer Curve.
So they want to eliminate former President Trump’s corporate tax decrease (was at 21%) and raise back up to 28% or 35% – who knows which one they’ll agree on. Here’s my thoughts on this increase in Corporate Tax… It affects ALL businesses – big or small – who is incorporated (C-Corporations).
Some of you who are not in the field of business or owning a business there are essentially 5 buckets of businesses. In the simplest way I can describe:
1 – Sole Proprietorship – you are the business and you are PERSONALLY liable for all of your business – from your money, to people you hire, to assets you buy to help operate this business.
2 – Limited Liability Company (LLC)
3 – S-Corporation – this entity will be personally liable for the assets, people you hire, money you’ve put it – but you are still the owner – but as a corporate officer.
4 – Partnership – you and your friends get together and form a business – But this partnership is an entity as it’s own and will be liable for anything – similar to S-Corporation. You nor your friends who are the partners are not personally liable – the partnership is.
5 – C-Corporation – this entity, similar to S-Corporation; however, C-Corporation is a taxable entity – under Federal Government. The liability is similar to S-Corporation, to where the C-Corporation entity will be personally liable for the assets, people you hire, money you’ve put it – but you are still the owner – but as a corporate officer.
Overall, small business – as some people may not understand – can EASILY BE ANY of the 5 above types of entities.
Anyone can be a small business – as indicated in the IRS’ website noted above and by the image noted.
Where am I getting at with this? Well, if you are a “small business” and also operating a corporation, a profitable one, then under the proposed tax plan with the new President – your corporate tax will increase. The adverse affect would be, for you as a business owner, you’ll be paying higher taxes and have less disposable income (free cash on hand) to use it towards your business. Should you decide to hire more people, expand or upgrade your technology? You may have to put a hold on it then if your corporate taxes increase as a small business owner.
You may not realize that your neighbor, for example, owns an auto repair shop and is the mechanic as well. He may operate his business as a corporation for all we know. He, too, can be affected by this corporate tax increase proposed. From my perspective – the devil is within the details – and not many people realize to look at it that way. Only see that increase in these taxes will ONLY impact the 1% or the “big business”. Not sorry – but no.
Granted the Wall Street Journal link above is an opinion piece – but how they worded the title of the article is hilarious.
In the above link, the Wall Street Journal has worded this article from the beginning “A Biden Tax-Hike Break for Small Business… Congress should raise the top corporate rate to 28%, but only for the most profitable companies…” Well no sh*t Sherlock. Only way you’ll pay taxes is if you have a net profit on your business (e.g. PROFITABLE)! You cannot pay taxes if your business incurs a loss. It’s like trying to divide a number by 0 – you cannot!