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View Diary: Small business owners: Never mind taxes, don't cut entitlements (44 comments)

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  •  I am not an accountant, but, as I understand it, (0+ / 0-)

    that cash flow is not taxed unless it's held and not fed back into the business. If the small business owner is holding a chunk of money over the end of the tax year while building toward an expansion, it's likely to be taxed the same as if it were taken as income. Otherwise, money spent on expansion is a business expense, and deducted from taxes.
          That's why the whole "high tax rates will hurt job creation" argument never held water for most situations. Low tax rates actually make it more attractive to pull more money from the business. If the small business person has to pay higher taxes on income, it becomes more attractive to put money back into the business to build future value, rather than taking the short-term gain as present income.  
          Of course, that assumes that the potential for growth exists. That seems to be why so many large businesses are holding huge cash reserves or buying back stock: they don't see enough demand yet to justify expanding their present level of activity.

    -7.25, -6.26

    We are men of action; lies do not become us.

    by ER Doc on Mon Dec 03, 2012 at 11:57:27 PM PST

    [ Parent ]

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