Small businesses worry tax increases could slow growth - NBC12 - WWBT - Richmond, VA News On Your Side

Small businesses worry tax increases could slow growth

By Heather Sullivan - bio | email

RICHMOND, VA (WWBT) - Congress is back in session and considering what to do about tax cuts passed by former President Bush that will expire in January. Some Democrats say wealthier people should no longer get the cuts, but Republicans say that will slow down the economic recovery.

Rhoda Elliott, owner of Bill's Barbecue, says they've just been getting by through the bad economy. Like many small business owners, she worries that paying higher taxes will prevent her from growing her business and hiring more staff.

Said Elliott, "We have to cut somebody's pay, somebody's job, the quality of product that we serve in order to pay the taxes. And people are just walking on a tight rope."

If the tax cuts expire, the two highest tax rates would revert from 35 percent to 39.6 percent, and from 33 percent to 36 percent. Republicans want to continue the tax cuts for everyone.

President Obama and some Democrats also want to extend the tax cuts, but not for joint tax filers who make more $250,000 or individuals who make more than $200,000. This affects small businesses because they often pay taxes under the individual tax code rather than the corporate code.

Said Julia Hammond with the National Federation of Independent Business, "The net majority of jobs come from small businesses and now you're going to go after exactly the people that the President and members of Congress and even people here in Virginia talk about reviving our economy. You can't survive if you don't have the money to invest in infrastructure and hire employees."

But Democrats say this would only increase taxes for the richest 2 percent to 3 percent of Americans and help to pay down the national deficit. Explained President Barack Obama, "So if you make half a million dollars a year, you'd still get tax relief on the first half of your income."

Senator Debbie Stabenow, a Democrat representing Michigan, said, "We had 10 years of tax cuts for the wealthy. Where are the jobs?"

But small business owners argue that a much larger percentage of people will be affected and it will hurt job growth. Said Elliott, "They very well may cut their overall tax base by finally shutting the doors on somebody, they just choose to ignore the reality of the situation."

The end of the Bush tax cuts also calls for a reinstatement of the estate tax, which can also affect small businesses when they're passed down. President Obama is proposing a reduction of the estate tax from the one scheduled to be reinstated.

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