Allowing tax cuts to expire for those over 250K will increase jobs.

[Bonhomme Richard]

I am talking about those small businesses that are S Corporations and we are also talking about small S Corp. businesses that are making profits. If the company isn't profitable all of this is moot because the owner shouldn't be paying themselves over 250K.
The way I see it if the marginal income tax increases for the owner of a S Corp they have two options.
1. Do nothing and suck it up.
2. Decrease your taxable income.
Number two is the direction most would take. They are going to put the maximum into retirement funds they are allowed and they will decrease the company profit by putting money back into the company. That would include buying assets (new machines, real estate, etc.) or taking the chance on a new employee. Either way they get to write it off as a company expenditure. Wherever they put the money it will stimulate the economy and maybe create jobs for new machine manufacturers, etc.
The bottom line is you want to decrease your taxable income and to do that you need to increase company expenses. At the end of the day the owner knows that increasing assets increases the value of the company and when time comes to sell they will see a deffered return because of those assets.
The logic, to me, seems to point to an increased stimulus if the lower tax rates are allowed to expire.

[rfranklin]

1. There's no evidence that the tax will change anything...

We have had booms and busts during the times that the income tax was much higher. The only way that income would discourage a business owner from going for another dollar would be if it was a 100% tax.

The entire income tax meme is a Republican propaganda ploy. "We won't create jobs unless you keep this outrageous tax break for us." Of course, they had six or seven years of tax break and created net zero jobs so where's the evidence?

[Bonhomme Richard]

2. A little background. I own a S Corporation. n/t

[Baalath]

3. In an S corp doesn't the profit not just the income go on your personal taxes?

[alc]

6. yes

in an s corp your company profit is added to your personal income. if there are multiple owners it is divided among them.

[Bonhomme Richard]

7. That is my point. Profit is considered personal income.

And the way to decrease profit for tax purposes is to put money into the business.

[alc]

8. I was wrong in my post below

[TBF]

4. Obama just passed an aid package for small business -

http://articles.latimes.com/2010/sep/16/news/la-pn-small-business-bill-20100917

And we know from 30 years of conservative rule that "trickle down" doesn't work. So, "allowing tax cuts to expire for those over 250K will increase jobs" is bogus. If your business can't afford for you to take a $250K salary then don't take it if you want to grow your business.

The rest of us are just trying to figure out how to survive month to month.

[alc]

5. are you a small business owner?

Does your spouse make $100K? Is your s-corp revenue consistent? or could it be $300k one year and $150k the next? If your expenses are $150k your family is over $250k the first year but you make $0 the next. You want to save some of the $150k the first year so you can meet payroll and cover expenses if the next year is down. How many years did it take to get the business to bring in $300k? Did you pay yourself anything during those years or did your family live off your spouse's pay? Did you start the business hoping to make money or just for fun? Would you do it again if you will make less money?

I've started a few s corps and worked for some others. I never made over $70k (salary + s corp profit) in mine but I did have up to 4 employees other than myself. Variable revenue makes it stressful as both the owner and employee. I've spent a few years of my life with no income and a few others making about 1/3 of what I could get somewhere else and had employees making over 2x what I paid myself including s corp profit. I liked what I was doing more than working for a big corp, but also dreamed of making 200k/300k or more.

At the very least I'd like to see s corps allowed to average income over 3-5 years. Then you can spend a few years making almost nothing and not get hit when you do make a lot. And variable revenues won't be such an issue any owners won't need to try to find a way to stay under the limit and can save more to cover employees' salary on down years. People with higher income do pay more even if they aren't paying a higher rate. I'm for progressive taxes (e.g. 0% for under 50k and a few other steps). I don't think it's logical for non-business owners to explain how tax rates will/won't affect business owners. I can't even explain that since there are a wide variety of small businesses. I can only describe my experiences.

[Bonhomme Richard]

9. Yes I am and you are correct about good/bad years.

I am in the middle of that right now. I am dumping the profit I made in good years to keep operating. It sucks but I like what I am doing and am developing a new product so there is a small light at the end of the tunnel...LOL, it has to work first. It's the nature of the beast but we have to remember why we set up as a S Corp and that is for the tax advantage compared to a C Corp.
Also, I pay myself a very, very modest salary, much less than your max because I set aside the profit in case of lean years...ie. now.