Taxing The Economy

The Washington Post had a story yesterday that highlights some of the "rich" that are getting targeted by the Obama Administration and the Minnesota DFL.

Gail Johnson doesn't think of herself as wealthy. The former pediatric nurse has spent 20 years building a chain of preschools and after-school programs that accommodate sick children so working parents can keep their jobs.

But, like most small-business owners, Johnson reports her profit on her personal tax return. In a typical year, she and her husband make more than $500,000, according to her accountant, a figure that throws them squarely into the ranks of the richest Americans -- and makes them a prime target for the Obama administration's tax policy.

Since last year's campaign, President Obama has vowed repeatedly not to increase taxes for families making less than $250,000 a year. That pledge, while politically popular, has left him with just two primary sources of funding for his ambitious social agenda: about 3 million high-earning families and the nation's businesses.

Johnson, with her company, falls into both categories. If Obama's tax plans are enacted, her accountant estimates that her federal tax bill -- typically, around $120,000 a year -- would rise by at least $23,000, a 19 percent increase.

So Ms. Johnson, whose company takes care of sick children so that their working parents can go to work, pays approximately 20% of her annual income in taxes and the Obama Administration is raising that by an additional 19%. Anyone wonder how many people she will have to lay off in order to meet that payment? More importantly how many other jobs are going to go away....

Across the nation, many business owners are watching anxiously as the president undertakes expensive initiatives to overhaul health care and expand educational opportunities, while also reining in runaway budget deficits. (ed - yeah that is why the deficit projections for the Obama tax plans have the deficit DWARFING anything coming from President Bush) Already, Obama has proposed an extra $1.3 trillion in taxes for business and high earners over the next decade. They include new limits on the ability of corporations to automatically defer U.S. taxes on income earned overseas, repeal of a form of inventory accounting that tends to reduce business taxes, and a mandate that investment partnerships pay the regular income tax rate instead of the lower capital gains rate.

Republicans are doing what they can to save these jobs.....

Republicans and business groups argue that Obama's plan to tax the rich would strike some of the nation's most productive businesses. Though certain very large companies must organize as separate entities that are taxed twice -- on profits and shareholder dividends -- most smaller businesses opt to be taxed only once by reporting their profits on the personal tax returns of their shareholders.

Most of these businesses make much less than $200,000 a year, though the precise figure is in dispute. Treasury Secretary Timothy F. Geithner has said the tax increase would affect about 2 percent of taxpayers with small-business income. An analysis by the Bush Treasury Department found that 7 percent of filers with business profit were in the top brackets in 2006. More recently, the nonpartisan Joint Committee on Taxation, which evaluates tax policy for Congress, projected that 3 percent of filers with business profits -- about 750,000 taxpayers -- were likely to face higher taxes in 2011 under Obama's proposal.

Whatever the figure, Republicans argue that those who fall into the upper brackets tend to be firms with the greatest capacity for job creation. In a 2007 survey, the National Federation of Independent Business found that about 15 percent of small-business owners -- and half of those with at least 20 employees -- said they expected their household income to exceed $200,000. In the Washington region, Census figures show one in seven families earn more than $200,000 a year.

But then again some could argue that if they had not been such prolific spenders themselves when they had control of the House and the White House we might not be in the deficit boat we are in now. I'm just sayin' guys.....

Ms.Johnson, explains what this kinds of increased costs will do to her business.

Johnson said such an increase would force her to consider scaling back operations.

"You can try to pass it on to consumers. But if you raise tuition, you put pressure on family budgets," she said. "For us, we're caught between the devil and the deep blue sea."

For the MN Legislatures DFL Leadership - "scaling back operations" is code for LAYING WORKERS OFF and SPENDING LESS! Ms. Johnson is painfully aware of the one thing that Congress, the President and many State Legislatures (like Minnesota's) are apparently oblivious about....that passing on the additional costs in THIS ECONOMY is not going to work and that in order to meet expenses, cutbacks must be made! And Ms.Johnson is not the only employer considering "scaling back".

Other business owners are also nervous. Jim Murphy, president of EST Analytical in Fairfield, Ohio, which sells analytical instruments to environmental testing labs and pharmaceuticals, said his company is struggling in the sluggish economy. But if profit returns to pre-recession levels -- about $455,000 -- Murphy said his accountant estimates that Obama's proposals could add $60,000 to his $120,000 tax bill.

"The misconception is that guys like me take [our profits] and put it into our pockets," said Murphy, who employs 47 people. "But the money the company earns in a given year is used to buy additional inventory so we can grow and hire." A 50 percent tax increase, he said, would be "really painful."

As someone who grew up with an entrepeneur for a parent I can concur - everything they get back in profit goes back into the business! That is how you grow a small business!

There may be a need for "shared sacrific" of that there is no doubt. However, when it is the taxpayer that is the only one sacrificing - well there is nothing "shared" about it. The government needs to do what every other business out there is doing...cutting back...doing without (or with much much less). Then and only then can they talk about a 'shared" sacrifice and then maybe we should talk about raising taxes more and more.