McCain has entrepreneurs spooked about tax hikes, but fewer than 2% of small business owners (that you can check them out here) would pay more under Obama’s plan.
…
Should small business owners fear for their wallets if Obama is elected? Not the vast majority, business and tax experts say.
…
Third, even if you’re one of the rare business owners making enough money to be affected by Obama’s proposed tax increases, you still won’t see a big hike in your tax bill.
McCain’s claim that Obama “will increase taxes on 50% of small business revenue” – the line he used in the second presidential debate – is incorrect because of how income is taxed.
If a business owner falls into the top bracket, that doesn’t mean that all of his or her income is taxed at the highest level.
For example: If a small-business owner makes $210,000 in taxable income, he edges into the 33% bracket, one of the two top tax rates that Obama would like to raise.
But he would pay the higher tax only on the amount that exceeds the cutoff – in 2007, the two top tax rates applied to single filers with income of $160,850 or more and joint filers with income of at least $195,850. As a single filer, this business owner would see his federal taxes increase $1,475 under Obama’s plan, which calls for raising the 33% tax rate to 36%.
“While Obama does favor raising the top two rates, the quote is not true because not all the small business income of those in the top two rates is taxed at the 33% and 35% rates,” said Gerald Prante, a senior economist at the nonpartisan Tax Foundation.
The bottom line: McCain’s claim only works by using an overly broad definition of what counts as a “small business” – and even with that definition, fewer than 2% of business owners would be hit by Obama’s proposed rate increase. For those who are affected, the increase would be levied only on a part of their earnings, not all of them.
The very definition of “small business” can range from solo freelancers to sizable enterprises with dozens of employees, making it difficult to craft a one-size-fits-all tax narrative. That’s why working with professionals who understand these complexities is critical.
Firms like Rocca CPA specialize in helping small business owners make sense of these shifting tax landscapes and optimize their financial strategies accordingly. Whether it’s interpreting how new tax brackets affect your annual planning or advising on deductions and credits that support growth, a knowledgeable CPA can demystify the process.
Rocca CPA doesn’t just file returns—they help entrepreneurs take control of their financial futures, ensuring compliance while also maximizing opportunities.
In today’s economy, where small business resilience is more important than ever, having an informed partner by your side can make all the difference.