The $250,000 magic number and small businesses - what is NEVER explained in Sound Bites
Unless you have moved up from a 20K a year job and now have $250,000 "income" the REAL implications of a tax hike for those making above $250,000 a year is going to be lost on 85%+ of all people in the USA.
A LOT of the tax code is based on GROSS INCOME you have - NOT your net or adjusted gross income.
You own a small business and you kid is 19 and in college and you make over 170K a year - NONE of their college expenses is deductable AT ALL. Nor are any work clothes, union dues, and myriad OTHER expenses that are incurred as part of you job - they are NOW all DISALLOWED by the tax code. Why? Because you had a GROSS INCOME over over $170,000. It DOES NOT MATTER if you employed two people and paid them $100,000 a year for work, and then used up $50,000 in other expenses and you ended up with only $20,000 profit - since you GROSSED that much the IRS / Government / Congress thinks you are RICH and now states what most people understand as deductible from to determine you tax bracket ARE GONE.
So as a person with a Schedule C or S that means you are taxed even more regardless if you actually made any net profit or not. You could end up paying in 45,000 in Federal taxes on that $250,000 right now and under his plan you would have to pay another $10,000 EVEN IF your expenses were 205,000 year after year - you would now owe taxes more than you could possible pay - which means you have to cut expenses which often means getting rid of people.
This is NOT ever made clear in any sound bites anywhere. This is why people are saying why President Obama plan would kill jobs because of the tax structure IMPOSED by Congress on PEOPLE and thus BUSINESSES.
posted by Tom Philo at 4:14 PM
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