U.S. Treasury Secretary Timothy Geithner told the Senate Finance Committee Feb. 15 that Congress should “revisit” long- standing rules that give businesses a choice of paying taxes as a corporation or through a structure such as a partnership through which they can report business income on individual tax returns.
That’s right – double-taxation is coming here, if Timmae has his way.
Well, here’s my response Turbo: This is one small business that will close the afternoon you do that.
“It strikes me that Secretary Geithner’s proposal to potentially force businesses to be taxed as corporations runs contrary to the administration’s objectives,” he said. “Most small to mid-sized businesses in the U.S. are structured as pass-through entities in order to avoid double taxation.”
Exactly. That’s why Cuda is a single-member LLC. Double-taxation at a 35% rate is outrageous; it results in a total federal income tax rate of about 57%. Add the ~15% in FICA and Medicare to that and I have a marginal tax rate over 60%. I won’t work at all if I only get to keep 36% of my money.
Here’s the math:
$100,000 gross $15,000 FICA/Medicare $29,750 Corporate Income Tax (35%) $19,338 Personal Income Tax (35%) ======== $35,912 Actual Income left, or 36% of what you made
Get taxed twice? No, I won’t. I don’t have to produce. And if you drive the marginal federal income rate to 57%, I will choose to sit on my ass instead. It’s not worth working when I only get to keep 36% of what I earn. I will choose instead to earn zero and become a leech.
You already steal nearly half of my money; stealing even more will result in your getting zero and the economy getting zero.
As such your tax revenues will go down if you make this change.
Go ahead and do it Turbo – given that small business creates most of the jobs in this country, that change will cause the economy and federal revenues to collapse.