Small Businesses Need Tax Certainty, Not Higher Taxes

Many small businesses file their taxes as individuals, but job creators need their tax rate to reflect their true wealth so they aren't forced to pay too much.

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Close up photo of 1040 tax form.

John Kane is a North Carolina leader of the Job Creators Alliance. He is also chairman and CEO of Kane Realty Corporation, a leading East Coast property development company.

These are tough times. Millions of Americans—23 million, to be more precise—are struggling with unemployment or underemployment. This is probably why the economy and unemployment are the "Most Important Problems" ranked No. 1 and No. 2 for Americans. And during this election season, we've heard a lot about these issues. Politicians love to extol the virtues of small business and praise the entrepreneurs who take risks to create jobs.

Yet, in an act of either sheer political posturing or willful suspension of disbelief, there are those in our political class who would like to raise taxes on the very small business owners that are recognized as the solution to our nation's job crisis.

[See a collection of political cartoons on the economy.]

If there was ever a time that raising taxes on anyone—much less on job creators and small business owners—was a profoundly bad idea, it is now. With our anemic economic recovery sputtering along and business confidence weighed down by uncertainty, our nation's entrepreneurs need encouragement, not higher taxes.

On a hopeful note, both President Barack Obama and Mitt Romney agree that corporate taxes are too high in this country—and both have promised to work to bring rates down to make sure that America remains competitive in the global marketplace. However, one area that businesses (and those looking for full-time work) would undoubtedly welcome more bipartisan agreement is the idea of providing tax certainty to small businesses by not raising taxes on job creators.

The reality is that small business owners most often report their businesses' earnings as personal income. These companies are most often "subchapter S-Corporations" or LLCs where the business income "passes through" to the individual. These "pass throughs" are structured this way to avoid being taxed twice. Business owners set aside most of their taxable income to keep their business going and to invest for future growth. On paper, they may appear wealthy, but in reality, they are anything but.

[See a slide show of Mort Zuckerman's 5 Ways to Create More Jobs.]

This is no small issue. More than 75 percent of small businesses file as individuals and 54 percent of all private sector employees—roughly 69 million people—currently work for these types of "pass through" businesses. So when politicians talk about raising taxes "only on the wealthy" to help bring more revenue to the federal government, their proposal may sound good in theory, but consider this: higher taxes means more money taken away from these small businesses that would otherwise be invested back into the business, maintain the jobs they currently provide, or hire more workers. Ironically, less jobs overall would mean less taxpayers, which actually mean less revenue for the federal government.

Instead of targeting the actual job creators in our communities, the politicians in Washington should be focused on passing progrowth policies that will get our economy moving again and will put people back to work.

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