Hofstra Debate - Obama WAAAYYY Off Base About 250k And Small Businesses
October 15, 2008
Obama is absolutely clueless about small businesses and how much they make. Nearly 95% of small businesses who have been in business more than a few years make over 250k a year. Just do the math... if a business has 5-10 employees, and they make between 35k and 50k a year, the business owner will need to make AT LEAST 250k JUST TO MEET PAYROLL!! Nevermind all the other expenses such as the lease on office or business space, supplies, electric/water/sewage service, etc... before they even get to profits. Check the SBA statistics on what they consider the definition of a small business, and you will find that he's talking about a heavy tax increase on these businesses. That also means... less money for expansion, and higher prices they have to pass on to consumers just to meet their obligations. In effect, this can mean less jobs or even layoffs to protect the business.
Obama speaks well... but if you can't see the fact that their is no intelligence behind the whistling 'S's in his "eloquent" speech... then you better get used to using the phrase "Do you want fries with that?" quite often in your future.
- CigarJunkie's blog
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Comments
#1 Answer... I think...
At the time of the above post, he was unclear on whether it was gross receipts, or net profits. If a business doesn't make money then they have nothing to worry about... but over all, some businesses operate on thin margins due to high overhead, etc. Small businesses such as bakeries, electricians, plumbers, construction (chime in anyone who has experience in the construction businesses or others, bakery I know first hand), have thin net profits... of course mileage may vary and some of these examples could have much higher profit margins for various reasons. The kicker here is that many growing businesses reinvest these profits into the enterprise in order to grow it further. When you tax additionally, that which is already taxable, you end up cutting into those profits or possibly eliminating them. If the business owner were smart about it, he'll pass the cost of this additional tax on to his customers(which he/she will most likely do). In competitive markets this could be a deal breaker for customers but invariably will result in higher prices... the other side of that coin is in competitive markets, those who have fatter margins may survive, and those in trouble are more likely to fold. This means lost jobs as well as higher prices.
Now having said all that, this number of 250k has fallen to 200k, and again to 150k (Biden made a comment about this figure), and now its down to 120k. So in short, if you have a business and you make money period.. you're hosed with new taxes. Unless you expense out all your profits as deductions... but don't hold your breath that what you can deduct as a business expense will remain so.
Of course you can only claim no profits for so long... its just we don't know if or how the rules will change governing businesses in order to maximize what the government can squeeze out of them.
#2 Question...
Please don't get me wrong in what I'm about to say. I was (and am) a staunch supporter of John McCain and the Republican party as a whole. However, I've seen a lot of differing opinions on this small business 250k matter. I did some research that turned up the following results - this "tax" that Obama wants is on business PROFITS only, NOT on gross receipts. I think even OBAMA recognizes that gross receipts over 250k are the norm for the vast majority of businesses. That said I think the "95%" that he's talking about is the "end-all profit after bills are paid" taxable income. Whether or not that is true I have NO idea. So, the profit that was going to be taken out of the business anyway gets taxed. Furthermore, if you profit 260k (for example) the tax would apply to the last 10k...not the whole 260k.
Please. Correct me if I'm wrong. I'd kinda like to be because this takes some thunder out of my storm.