Tweet(Who is running a small business.)
If you are taxed on your adjusted gross income, after business dedections, as it is done now - it is a considerable difference from being taxed on your small businesses' GROSS INCOME, which is something different entirely.
If you have $250,000 of gross income, and the cost of doing business that is tax deductible is $150,000... then you are taxed on your adjusted gross income (AGI) of $100,000. At a tax rate of 36%, that tax would be $36,000.
Now, as we understood it under BO's policy you get taxed the higher rate AND at the gross income level. (Meaning you could potentially be running a deficit and STILL be paying taxes on the highest revenue number.)
So again, you have $250,000 - but this time, you're going to be taxed 54% on it. (39%+15% social security tax)... so your tax would be $135,000... as it is 54% of $250,000... only you still have the $150,000 cost of doing business! And $115,000 leftover to take that out of (but of course, its the cost of doing business - so its gone already), so now - not only do you not have any income to PAY YOURSELF (because that isn't tax deductible/CODB), you're operating at a loss of $35,000.
If you're not paying yourself any income and you have to take a business loss - even though your taxes are showing revenue... you're either going to have to not pay your taxes, unload some of your overhead to offset the tax burden(read:downsize and/or layoff employees), or go out of business....
Alot of business owners I've talked to are leaning to just choosing number three before they have to deal with the headaches & heartaches of trying to figure out how much they're going to be taxed and trying to stifle growth to keep revenues lower... The next most popular option is that they obviously would have to downsize and offload some staff to be able to survive.
It is absolutely bonkers! after I talked to my boss about this. (Who is running a small business.)
If you are taxed on your adjusted gross income, after business dedections, as it is done now - it is a considerable difference from being taxed on your small businesses' GROSS INCOME, which is something different entirely.
If you have $250,000 of gross income, and the cost of doing business that is tax deductible is $150,000... then you are taxed on your adjusted gross income (AGI) of $100,000. At a tax rate of 36%, that tax would be $36,000.
Now, as we understood it under BO's policy you get taxed the higher rate AND at the gross income level. (Meaning you could potentially be running a deficit and STILL be paying taxes on the highest revenue number.)
So again, you have $250,000 - but this time, you're going to be taxed 54% on it. (39%+15% social security tax)... so your tax would be $135,000... as it is 54% of $250,000... only you still have the $150,000 cost of doing business! And $115,000 leftover to take that out of (but of course, its the cost of doing business - so its gone already), so now - not only do you not have any income to PAY YOURSELF (because that isn't tax deductible/CODB), you're operating at a loss of $35,000.
If you're not paying yourself any income and you have to take a business loss - even though your taxes are showing revenue... you're either going to have to not pay your taxes, unload some of your overhead to offset the tax burden(read:downsize and/or layoff employees), or go out of business....
Alot of business owners I've talked to are leaning to just choosing number three before they have to deal with the headaches & heartaches of trying to figure out how much they're going to be taxed and trying to stifle growth to keep revenues lower... The next most popular option is that they obviously would have to downsize and offload some staff to be able to survive.
It is absolutely bonkers!
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