Miami Herald Logo

At the fiscal cliff, it’s big business vs. small | Miami Herald

×
  • E-edition
  • Home
    • Site Information
    • Contact Us
    • About Us
    • Herald Store
    • RSS Feeds
    • Special Sections
    • Advertise
    • Advertise with Us
    • Media Kit
    • Mobile
    • Mobile Apps & eReaders
    • Newsletters
    • Social
    • Facebook
    • Twitter
    • Google+
    • Instagram
    • YouTube

    • Sections
    • News
    • South Florida
    • Miami-Dade
    • Broward
    • Florida Keys
    • Florida
    • Politics
    • Weird News
    • Weather
    • National & World
    • Colombia
    • National
    • World
    • Americas
    • Cuba
    • Guantánamo
    • Haiti
    • Venezuela
    • Local Issues
    • Crime
    • Education
    • Environment
    • Health Care
    • In Depth
    • Issues & Ideas
    • Traffic
    • Sections
    • Sports
    • Blogs & Columnists
    • Pro & College
    • Miami Dolphins
    • Miami Heat
    • Miami Marlins
    • Florida Panthers
    • College Sports
    • University of Miami
    • Florida International
    • University of Florida
    • Florida State University
    • More Sports
    • High School Sports
    • Auto Racing
    • Fighting
    • Golf
    • Horse Racing
    • Outdoors
    • Soccer
    • Tennis
    • Youth Sports
    • Other Sports
    • Politics
    • Elections
    • The Florida Influencer Series
    • Sections
    • Business
    • Business Monday
    • Banking
    • International Business
    • National Business
    • Personal Finance
    • Real Estate News
    • Small Business
    • Technology
    • Tourism & Cruises
    • Workplace
    • Business Plan Challenge
    • Blogs & Columnists
    • Cindy Krischer Goodman
    • The Starting Gate
    • Work/Life Balancing Act
    • Movers
    • Sections
    • Living
    • Advice
    • Fashion
    • Food & Drink
    • Health & Fitness
    • Home & Garden
    • Pets
    • Recipes
    • Travel
    • Wine
    • Blogs & Columnists
    • Dave Barry
    • Ana Veciana-Suarez
    • Flashback Miami
    • More Living
    • LGBTQ South Florida
    • Palette Magazine
    • Indulge Magazine
    • South Florida Album
    • Broward Album
    • Sections
    • Entertainment
    • Books
    • Comics
    • Games & Puzzles
    • Horoscopes
    • Movies
    • Music & Nightlife
    • People
    • Performing Arts
    • Restaurants
    • TV
    • Visual Arts
    • Blogs & Columnists
    • Jose Lambiet
    • Lesley Abravanel
    • More Entertainment
    • Events Calendar
    • Miami.com
    • Contests & Promotions
    • Sections
    • All Opinion
    • Editorials
    • Op-Ed
    • Editorial Cartoons
    • Jim Morin
    • Letters to the Editor
    • From Our Inbox
    • Speak Up
    • Submit a Letter
    • Meet the Editorial Board
    • Influencers Opinion
    • Blogs & Columnists
    • Blog Directory
    • Columnist Directory
    • Andres Oppenheimer
    • Carl Hiaasen
    • Leonard Pitts Jr.
    • Fabiola Santiago
    • Obituaries
    • Obituaries in the News
    • Place an Obituary

    • Place an ad
    • All Classifieds
    • Announcements
    • Apartments
    • Auctions/Sales
    • Automotive
    • Commercial Real Estate
    • Employment
    • Garage Sales
    • Legals
    • Merchandise
    • Obituaries
    • Pets
    • Public Notices
    • Real Estate
    • Services
  • Public Notices
  • Cars
  • Jobs
  • Moonlighting
  • Real Estate
  • Mobile & Apps

  • el Nuevo Herald
  • Miami.com
  • Indulge

Politics

At the fiscal cliff, it’s big business vs. small

By Kevin G. Hall

    ORDER REPRINT →

December 08, 2012 12:59 PM

Democrats and Republicans aren’t the only ones divided over how to fix the nation’s fiscal problems. Big business and small business have very different views on whether changes to personal income taxes or corporate taxes should be part of the fix.

Groups that represent American businesses are in a bind. Some of their members declare their business income through their personal income taxes, and they are staring at the possibility of higher tax rates on the top tiers of personal income. Yet big corporations would be unaffected by higher tax rates since they pay corporate income taxes, not personal. They’re rooting for a lowering of the corporate tax rate.

Simply put, what’s good for some businesses is not necessarily good for others.

“There is no difference, really. They want the same thing — lower rates, certainty, simplification and sound transition rules,” insisted Bruce Josten, vice president of the U.S. Chamber of Commerce and the influential group’s top lobbyist.

Sign Up and Save

Get six months of free digital access to the Miami Herald

SUBSCRIBE WITH GOOGLE

#ReadLocal

The National Association of Manufacturers takes a similar public tack, preferring for now to avoid talk of competing visions among its members.

“It’s hard to talk about a hypothetical,” said Dorothy Coleman, vice president of tax policy for the association. “Right now we are very much focused on going to the Hill and spreading our members’ concerns.”

Manufacturers want Congress to avoid the so-called fiscal cliff of expiring tax measures and pending spending cuts, which if left unchanged this month could send the economy skidding downward.

“We’re going to lose jobs, we’re going to probably go into a double-dip recession, and it’s going to set us back about 10 years,” Coleman warned.

The most immediate threat for many businesses is allowing the Bush-era tax cuts on personal income to expire at the end of December. President Barack Obama wants to extend them for everyone but the top 2 percent of earners. That might be good for middle-class Americans, but it could hurt many of the roughly 4.5 million business owners who are so-called S corporations, whose business earnings are declared as personal income on their 1040 tax forms like most people.

The term comes from a 1958 revamp of the tax code adding a subchapter S that created a new category for businesses with specific criteria such as a limited number of shareholders in the company. They’re sometimes called pass-through entities because their business income flows to their personal income, where it’s taxed at the individual income tax rate rather than a corporate rate.

An even larger number of businesses also are considered pass-through entities, including sole proprietorships, partnerships and limited liability companies, also called LLCs. The most successful ones potentially face tax rates higher than the current 35 percent corporate rate, if the personal income tax rates go up.

In a Nov. 27 letter to congressional leaders from both parties that spells out the competing interests, 42 trade associations whose members mostly declare their business earnings through their personal taxes pleaded for lawmakers to avoid pitting them against corporate interests.

“There is no economic or political justification for reform that lowers marginal tax rates on corporations while raising either marginal or effective tax rates on the 95 percent of businesses structured as pass-through entities,” said the trade associations, whose members range from grocers to truckers to general contractors.

Effective tax rates are what individuals or companies pay after all their deductions and credits. The marginal tax rates are what the government progressively takes by tax bracket.

For example, an individual taxpayer pays no income tax on the first $8,700 of income, 15 percent of income from $8,701 to $35,350; 25 percent of income from $35,351 to $85,650; 28 percent of income from $85,651 to $178,650; 33 percent of income from $178,651 to $388,350; and at 35 percent for everything above.

Obama proposes to raise the top two rates for individual income above $200,000 and family income above $250,000. That would mean higher taxes for an estimated 30 million businesses that pass their business earnings through their personal income taxes.

The president says this protects middle-class Americans. It’s a distinction Alan Simpson, co-chairman of the National Commission on Fiscal Responsibility and Reform, finds puzzling.

“If you tell a guy on the street that nobody under $200,000 or $250,000 is going to be hit because they’re the middle class, that guy will laugh you right out of your house. There is an absurdity about this throughout,” Simpson, a former Republican senator from Wyoming, told McClatchy.

For big corporations whose shares are traded on the New York Stock Exchange, and who donate heartily to political campaigns, there’s ambivalence about the tax plight of smaller firms. They’re rooting for a deal that averts the fiscal cliff with a temporary measure that promises a comprehensive overhaul of the tax code next year.

In that event, corporations hope to knock down the current corporate tax rate, higher than in most developed nations, to a rate somewhere around 25 percent or 28 percent. In theory, they’d agree to give up myriad tax loopholes in exchange for a lower rate, but already many are scrambling to try to lock in their existing preferential treatment.

Big banks that underwrite mortgages fear a deal that caps or ends the tax deductions homeowners have enjoyed on mortgage interest. Similarly, equipment manufacturers worry about any deal that slows the ability of their buyers to depreciate assets. And abrupt changes to tax rules could hurt companies that have made long-term investments under the current tax laws.

“You cannot flick a light switch on and off and say. ‘Take this,’ ” said Josten, noting that there are anywhere between $5.5 trillion and $7 trillion in depreciable assets outstanding — everything from fleet vehicles to tractors to office buildings.

  Comments  

Videos

Bernie Sanders set the agenda. But can he win on it?

Congress members tour Homestead Temporary Shelter for Unaccompanied Migrant Children

View More Video

Trending Stories

Patriots owner Robert Kraft is among the hundreds charged in Florida sex traffic sting

February 22, 2019 12:23 PM

Trump threatens to deport Venezuelan military officials’ families that have fled to Miami

February 22, 2019 07:21 PM

It’s about to get easier for legal immigrants in Miami to get their papers. Faster, too.

February 22, 2019 03:14 PM

Government preparing to be sued in 2023, when the Keys stop issuing building permits

February 23, 2019 07:00 AM

Maduro’s opponents brave tear gas in push to deliver aid

February 23, 2019 05:23 PM

Read Next

North Korea confirms leader Kim Jong Un on train to summit

Business

North Korea confirms leader Kim Jong Un on train to summit

By DAKE KANG Associated Press

    ORDER REPRINT →

February 23, 2019 07:33 PM

North Korean state media has confirmed that leader Kim Jong Un is on a train to Vietnam for his second summit with President Donald Trump.

KEEP READING

Sign Up and Save

#ReadLocal

Get six months of free digital access to the Miami Herald

SUBSCRIBE WITH GOOGLE

MORE POLITICS

Prosecutors paint dark portrait of manipulative R. Kelly

Latest News

Prosecutors paint dark portrait of manipulative R. Kelly

February 23, 2019 07:21 PM
The Latest: Avenatti: Notion victims are lying ‘outrageous’

People

The Latest: Avenatti: Notion victims are lying ‘outrageous’

February 23, 2019 05:36 PM
The Latest: Nigerian army says 6 ‘hoodlums’ killed

Nation & World

The Latest: Nigerian army says 6 ‘hoodlums’ killed

February 23, 2019 04:46 PM
Women take Catholic bishops to task at Vatican abuse summit

Nation & World

Women take Catholic bishops to task at Vatican abuse summit

February 23, 2019 02:19 PM
Government preparing to be sued in 2023, when the Keys stop issuing building permits

Florida Keys

Government preparing to be sued in 2023, when the Keys stop issuing building permits

February 23, 2019 07:00 AM
Brown pledges to be most pro-union 2020 candidate if he runs

National Politics

Brown pledges to be most pro-union 2020 candidate if he runs

February 23, 2019 07:48 PM
Take Us With You

Real-time updates and all local stories you want right in the palm of your hand.

Icon for mobile apps

Miami Herald App

View Newsletters

Subscriptions
  • Start a Subscription
  • Customer Service
  • eEdition
  • Vacation Hold
  • Pay Your Bill
  • Rewards
Learn More
  • About Us
  • Contact Us
  • Newsletters
  • News in Education
  • Public Insight Network
  • Reader Panel
Advertising
  • Place a Classified
  • Media Kit
  • Commercial Printing
  • Public Notices
Copyright
Commenting Policy
Privacy Policy
Terms of Service


Back to Story