Taxes Are Killing Small Businesses

Did you know that U.S. businesses are taxed at one of the highest rates in the developed world? How bad is it? And why should you care? Watch this short video to find out.

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Script:

No matter where you come from, what your job is, or where you stand politically, you have to pay taxes. Uncle Sam needs taxpayer dollars to pay for things like schools, fire fighters, and the military.

There are all sorts of different taxes: income taxes, payroll taxes and sales taxes just to name a few. But individuals aren’t the only ones who pay taxes—businesses pay income taxes too.

Businesses that are set up as corporations pay taxes on their income at the US corporate tax rate of around 35 percent—one of the highest in the developed world. Countries like Ireland and Switzerland have corporate tax rates well under 25 percent, which can give companies based there a competitive advantage.

But there’s another taxed group that we’re forgetting…small businesses. There are 29 million of them in the US and they employ nearly 56 million people. That’s a total of 85 million people dependent on the success of small businesses!

Small businesses are most often set up as sole proprietorships, partnerships or another designation called an S-corp. But the money they make isn’t taxed at the corporate rate. The profits earned by these small businesses are “passed through” to the owner and counted as individual income on their personal tax return. That’s why you might hear small businesses referred to as “Pass-throughs.”

These entrepreneurs can pay tax rates as high as 40 percent not including additional state and local taxes, that means many American small businesses are being taxed at a higher rate than businesses anywhere in the world.

Why should you care? Because high taxes hurt small businesses ability to grow and expand, causing them to raise prices or even trim jobs to stay within their budget constraints.

Lowering taxes for small businesses or “pass-throughs” results in the growth of small businesses—allowing them to provide more jobs and boost the economy for everyone. After all two thirds of all new jobs come from small businesses and lowering taxes can have a big effect on the entire economy for all Americans.

So the next time you hear someone supporting an increase in tax rates on businesses, remember that very important group of small business owners and the 85 million people dependent on their success.

[concernedcitizen]

I live in California, my employer is a small business owner selling fitness equipment on amazon. His company is an S corp, so all of his profits are 'pass through'. He pays 56% of his earnings in federal, state, payroll, social security, medicaid, and yes, obamacare tax (which is roughly 3%). When Obamacare is implemented, he is forced to cut his employees' hours from full time to part time, and let go a couple interns because he cannot afford the tax burden. Nobody wins, employers can't expand, workers lose job and hours, American economy shrinks.

[michaelyork]

40%??? How do they pay their bills and their employees, and still take care of

[DigESource]

Small Businesses should get the best tax breaks of all. That would BOOM our Economy!

[swampfaye]

And regulations... why can't I make pies in my kitchen and sell them? Why can't I cut my neighbors hair without a license? I can't even sell flowers I grow myself...

[newkingdm]

i am a small business owner and i feel like I'm being crippled by the taxes i have to pay to this crooked government.

[nellieou]

This is absolutely right. I'm selling my small business because I was paying nearly 40% tax rate. I wanted to invest in hiring employees and renting a larger space to make it grow but if I did so, Id be at a net loss after taxes. I prefer to sell it and only pay 25% capital gains tax, and start something new, sell, repeat...

[mh_golfer]

Small businesses shouldn't pay any income tax. The earnings individuals get from those businesses should be at normal income tax rates. They are the key to job growth and opportunities for individuals.

[luke]

Tax evasion would really help these companies to grow.

[ronaldspins]

Tax the rich really means Tax small businesses

[nicib]

Very good!
Cut spending!
Cut taxes!
Cut regulations!
#STANDWITHRAND

[jonnydelly]

A society will not tax itself into prosperity.

[AdultsSwim]

I'd rather see a reduction in spending before a reduction in taxes for anyone. Administration after administration keeps kicking the can down the road. Me, my kids, their children, and their children will be paying for the debt racked up by previous generations because they didn't hold their representatives to account. Someone needs to stand up and say this needs to be fixed NOW.

[alfredabraham]

Man I didn't know this! I always suspected that taxes were a significant burden for businesses of any kind but I never knew that small businesses could be taxed at a rate higher than that of corporations. That is crazy!

[generalhashimotodangerous]

I opened a small business two years ago and I closed it last year. That is in Germany.
I had to pay Income tax, business tax, IHK, BGHW, value added tax, shipping fees, lawyer, tax consultant, 5 companies I had to work with and the insurance. So in other words: Around 80% of everything I worked for was for others, not for myself.

[dantobarbarian]

Raise taxes even higher on big businesses and corporations but decrease taxes on small businesses. Problem solved!

[davidwvolz]

Let's not forget workers comp at 64% of payroll, payroll taxes, paycheck fees, permit fees, annual property taxes from the county on office furniture and equipment, plus I must purchase a business license yearly in every city I do a remodel. Welcome to California!

[revdraco]

Theft is never good for business - big *or* small.

[chelannaicker]

I had a small business as a graphic designer, working form home. I employed my brother and friends occaisonally when I got a big job. Unfortunately, the regulations, admin and taxes became so much work and expense, I closed my company down and went to work for another company.My brother and friends lost out on that potential income.

[maxradke]

Got my paycheck today only to see that over $700 of my gross $2, 500 income from that month went to federal income tax, that does not even include SS and several other taxes. If it was not for tax returns I would flip out and riot right now... I can only imagine how bad it is for small businesses.

[OopsFailedArt]

While I don't like it this is actually slightly misleading. The reason most small businesses will remain passthroughs is because owners at corporations still get taxed AGAIN at an individual rate on what's left over.

We call this double taxation. It's very damaging and the corporate structure is fairly undesirable as a result unless your business meets very specific criteria.

Still, we need to get taxes lowered. Even most democratic economists believe 33% is the highest that still increases the income.