Henry Vilas wrote:Conservatives complain that a small raise in the federal income tax on amounts earned above $250,000 will hinder small business growth. I ask how? If the small business owner wants his/her company to expand, I doubt if they would take much more than a quarter million in profits out of that business for personal income. Instead they would reinvest those profits in the business so it can grow.
Am I missing something here?
Yes, which makes your argument even more valid.
Reinvestment into the company with the IRS Code Section 168 and 179 depreciation rule makes reinvestment in a profitable company deductible in the year of reinvestment. So I don't have to pay taxes on it.
$500,000 profit from my business.
Scenario 1: $250,000 in W-2, $250,000 in earings. Individual tax ~$170,000
Scenarion 2: I reinvest $250,000 into my business. As their CPA I would suggest $150,000 in W-2, $100,000 in earnings. Individual tax ~ $68,000
So by reinvesting $250,000 into my business I save ~ $100,000 in taxes.