Small Business Owners Key in Payroll Tax Cut Debate

President Obama and Senate Democrats are on a full offensive to get Republicans to agree to extend the payroll tax deduction before it expires at the end of the year, while a new plan to carve out a bigger break for small businesses is taking center stage. This is a welcome break for small businesses who already have a huge job amount of work on their hands. However, Payroll software eases the burden placed on companies with limited resources.
Two senators have offered a possible bipartisan compromise that they hope could end the standoff.
If unresolved, the impasse would cost an American family making $50,000 a year about $1,000 in extra taxes in 2012, Obama said, emphasizing the point blatantly on the White House website with a countdown clock to the new year.
Republicans have opposed the Democratic push because they see a tax or “surcharge” on taxpayers making more than $1 million annually to pay for the payroll tax cut as stifling job creation and derailing any economic recovery.
Under the bipartisan plan from Senators Susan Collins, R-Maine, and Claire McCaskill, D-Missouri, the current payroll tax cut for employees would be extended and the employer’s share of the payroll tax would be reduced as well.
The plan would still offset the cost with a 2 percent surtax on income in excess of $1 million a year, but protect many small-business owners who report their business income on their personal tax returns.
“I feel strongly that we must ensure that small business owners who pay taxes through the individual income tax system are protected,” Collins said in a statement. “These are our nation’s job creators. That is why I have called for a ‘carve-out’ that would shield these important small businesses from tax increases that could make it more difficult for them to grow and add jobs.”
Collins is the only Republican to support the measure.
Meanwhile, the White House has a full-fledged offensive with the help of the U.S. Treasury, which has put out a paper on: “The Facts about Small Businesses and the Millionaire Surcharge.”
The proposed tax cuts can be fully paid “by asking the most fortunate Americans to pay a modest surcharge on incomes over $1 million,” said Jenni LeCompte is Assistant Secretary for Public Affairs, in her assessment on the Treasury’s website.
Contrary to Republican opposition, this surcharge would affect “only a very, very small number of small business owners,” LeCompte said.
Specifically, a recent discussion paper by Treasury’s Office of Tax Analysis found that only 1 percent of all small business owners have adjusted gross income of more than $1 million and would be affected by the surcharge.
“Not only will the remaining 99 percent of small business owners be protected from paying this surcharge, they will receive a net benefit from the employer-side payroll tax cuts,” LeCompte said.
The percentage of affected taxpayers who earn a significant share of their income from small businesses is also much smaller than the opponents of the Senate Democratic plan claim, she said.