Taxes, Taxes, Taxes - How They are Unfair for Private Business Owners and What You Can do About Them.

I think there is a truism among most private business owners. Most owners don’t feel our tax system is fair towards small, private businesses in this country. Most businesses are pass-throughs which means they are taxed at the individual tax rates of the business owners.

While regular corporations have a low tax rate of 21%, which might become 25 or 28%, it’s still far lower than what you’re paying at the highest marginal federal rate. This last sentence full of jargon means that your top, individual tax rate is 36% while your brethren in large corporations, which are almost always C Corps pay a rate that’s nearly 50% less than you.

This difference in taxes is incredibly unfair. I believe this exists because your representatives in Congress, be they Republicans or Democrats, don’t understand how small business works and the tax regimen the vast majority use. That tax regimen is you’re taxed at your individual rates, and large companies are not.

The Biden Administration wants to raise the individual tax rate on those making over $400,000 per year to 39.6%. Nowhere have I read that there will be an accommodation for pass-through entities such as Subchapter S Corps, partnerships, or sole proprietorships.

There is now a new proposal to tax the billionaires of the world and make sure they pay at least a 20% tax. I think this is likely a good idea. The issue with this is, it won't raise enough taxes and we'll be back to the high earner conversation.

The difference between high earners and you

Someone who has a job and makes $400,000 or more per year would have a relatively insignificant problem paying the extra taxes. It likely won’t be a problem for their lifestyle. They just would have a little left as excess capital to save.

A private business owner would have to figure out how to cut back on business growth, payroll for their employees, retirement plans for the company, or put a growth plan on hold. The reason is simple, a $400,000 profit for a private company is nice, and the owner doesn’t get to put all of that money in their pocket. They have to pay principal loan repayments and buy equipment or hire more people for a growing company. The extra taxes will force owners to take a hard look before adding additional expenses to their company.

What can you do about this?

Instead of just complaining, I have a suggestion for you. Why don’t you pick up the phone and make an appointment to see your legislators? While there, you’ll have time to educate them about the difference between top earners and the money you earn and how you use it in your company.

I’ve lobbied the government for years as a private citizen-both at the Federal and State level. There is one thing I can tell you from personal experience, your voice matters, and your legislators want to hear what you say. That is as long as you do it respectfully with a well-thought-out argument.

Your well-thought-out argument is easy. It’s simple. You just have to tell your story about how the profits you make are taxed and make a difference in how many people you hire and the benefits you provide.

Here’s what I want you to do.

Getting into the political game is easy. You just have to follow these simple steps:

1.?Figure out what you want to say to your legislators. Write it down and practice.

2.?Make an appointment to see your legislators both at the State and Federal levels.

3.?Have a conversation with your legislators about the difference between you and employees who are high earners.

When you take some time to see your legislators, you’ll be surprised about what happens. I have two stories I would be glad to tell you in person about big wins I’ve had by taking the advice I’ve outlined here. Just click here and set a time for us to talk.