Taxes – Part 2


In Part 1, I addressed taxes.  In this part I will speak to “small business.”

The second item on the Repubs “Pledge to America” is

– Allow small businesses to take a tax deduction equal to 20 percent of their income

This would sound, well, maybe, half good untll we find out how the “small” part of small business is defined.  From Countdown with Keith Olbermann on 22 Sep 10.

Some firms with billions in revenues get to pay less tax than traditional corporations

A number of companies with multi-billion dollar revenues have been registered as small businesses for tax purposes, according to a report.

Among them were the “biggest companies in the world and the richest people in this country” Keith Olbermann said in a special report on his msnbc cable show Wednesday night titled, “Small Business in Name Only.”

The term “small business” was an “utter misnomer,” he claimed.

Because IRS tax returns are not public record, the names of companies were ascertained from public documents such as court records or the companies’ postings:

Among the examples given on “Countdown with Keith Olbermann” were:

  • Enterprise Products Partners, L.P., a pipeline company with 2009 revenues of $25 billion.
  • Kohlberg Kravis Roberts & Co., a Wall Street firm with $445 million in revenue in 2009.
  • Price Waterhouse Coopers, an accounting firm with $26 billion in revenue in 2009.
  • Koch Industries, a conglomerate of partnerships with 70,000 employees.
  • The Hillman Company, an investment founded by billionaire philanthropist/industrialist Henry Hillman.
  • Venn Strategies, Inc., whose chief operating officer is Brian Reardon, a former special assistant to former President George W. Bush.
  • Ferrellgas, a propane and propane accessories business, with $2 billion in revenues in 2009 and 1 million customers.
  • CoorsTek, a ceramics manufacturer founded by Adolph Coors, with 2009 revenue of $549 million.
  • Dead River Co., with $500 million in revenue and 1,200 employees.
  • McIlhenney Co., the Tabasco maker, with $250 million in revenue in 2007.

Not mentioned in the above list is Bechtel, the largest construction company in the world, only because their income is unknown.

Continuing

Owners of such businesses would benefit from continuation of Bush era tax cuts due to expire at the end of this year.

Rather than paying corporate taxes, the firms operate as S Corporations, sole proprietorships or partnerships, including limited liability companies that put LLC instead of Inc. at the end of their names.

All are considered pass-through structures, in which company profits are passed directly to individual owners, who then pay taxes.

Traditional corporations pay taxes on profits and pass along dividends to individuals, who pay taxes on the dividends.

Olbermann explained the rules for classification as a small business.

“It’s not the income that’s small, it’s not the number of employees that’s small, it’s just the total number of owners that’s small,” Olbermann said.

In the case of S corporations, the total number of owners can be 100, he said.

The word “small” as in Small Business is defined as any company with less that 100 owners.  They are mostly Sub-chapter S, pass-thru operations where the net profits are passed through to the partners, who are then expected to pay the taxes.

So, the term “small business” is really a way to make the voting public think this is going to benefit the small ‘Mom & Pop’ store over on East Main St and to get the public to write their Congress Critters.

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