Personal taxes versus business taxes

Look, I understand that Bob Shieffer is getting on in years and is now a tired, weak fellow who can no longer think rapidly on his feet, but he got completely rolled by Senate Minority Leader Mitch McConnell here (Note that McConnell is still Minority Leader, the 2010 mid-term election did not result in the Republicans taking over the Senate).

McConnell kept speaking of small businesses and kept indirectly suggesting that small businesses would pay a bigger excise tax, i.e., a tax on things like:

  • Environmental taxes.
  • Communications and air transportation taxes.
  • Fuel taxes.
  • Tax on the first retail sale of heavy trucks, trailers, and tractors.
  • Manufacturers taxes on the sale or use of a variety of different articles

In other words, taxes that have nothing to do with personal income. But the subject of Shieffer’s interview was personal income taxes. Shieffer was talking about taxes on the income that people personally make, he was not talking about taxes on the money that a business makes.

Is there an overlap? Are there people who work in a small business who make over $250,000 a year? Yes, but it’s a pretty small one. It refers to people like doctors who run small, specialized practices, investment people who don’t employ a lot of other people, etc.

A mom-and-pop hardware store that pulls in over $250,000 a year is completely irrelevant to the Shieffer-McConnell discussion as most of that income goes right back into keeping up the inventory. The remainder that goes to the mom & dad team is usually in the $30,000 to $40,000, maybe the $50,000 range. It’s only that latter amount that gets counted as personal income because a business takes in all of its money as business income. The owner pays him/herself by taking out a portion of that income and segregating it off as their personal salary. If the business does poorly, the owner doesn’t get tot take anything out and hopefully, the owner has it in the business plan that there’s enough cash on hand or investments that can be cashed out to keep going until business picks up.

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