TheBlaze last week told you about Grover Norquist’s Americans for Tax Reform, a lobbying group dedicated to fighting all forms of tax increases, and their list of the top five worst taxes The Patient Protection and Affordable Care Act (i.e. “Obamacare”) will impose in 2013.
The same group has just released another list, this time detailing what, they say, are the top five worst tax hikes small business owners will face if President Obama is reelected.
Here they are [all block quotes via American’s Ryan Ellisand John Kartch]:
Income tax increase
A pillar of President Obama’s re-election campaign is a hike in the top two marginal income tax rates. By and large, small employers pay their small business taxes using individual tax rates. If individual tax rates are raised, so are small business tax rates. The top income tax rate is scheduled to rise from 35 percent in 2012 to 39.6 percent in 2013. According to IRS data, a clear majority of all small business profits face taxation at this top marginal income tax rate. For all intents and purposes, the top income tax rate IS the small business tax rate in America today.
President Obama and congressional Democrats claim they are raising taxes on “millionaires and billionaires” but are actually targeting successful small companies. A new study by Ernst and Young projects that this tax rate hike will kill 710,000 small business jobs.
Death Tax Increase
The death tax in 2012 has a top rate of 35 percent, and a “standard deduction” of $5 million ($10 million in the case of a married couple or surviving spouse). President Obama’s plan proposes raising the rate to 45 percent and slashing the exemption to $3.5 million.
When a family business owner dies, it’s up to the surviving family members to pay the death tax to the government. Needless to say, many successful, job-creating small businesses simply won’t survive this process. Such families will have little choice but to sell the business (and lay off all the employees) in order to pay the IRS. Or they will have to pay a small fortune to lawyers, accountants, and the life insurance industry to avoid this fate.
‘Obamacare’ self-employment tax rate increase
Currently, successful small business owners face a self-employment tax of 2.9 percent. Thanks to Obamacare’s 2013 hike in this tax rate, this will rise to 3.8 percent. All told, the combination of the income tax hike and the self-employment tax hike will raise the marginal income tax rate on small business profits from about 38 percent today to about 43 percent in 2013. That extra five percentage points might not sound like a lot, but most small employers have very thin profit margins. A company with $1 million in profits facing a higher tax rate of 5 percentage points will be saddled with another $50,000 in taxes.
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All photos courtesy the AP.