During the fiscal cliff debate, a key point of contention was the impact that higher income tax rates would have on small-business owners. The argument presented was that higher taxes leave less money available for investment, which in turn leads to lower growth, yielding smaller profits and less income to tax. More taxes, especially on small businesses, would therefore hurt everyone financially.
Jed Horovitz, owner of Internet Video Archive, firmly disagrees with this point of view. According to Horovitz, higher taxes motivate small-business owners to spend and invest more. With his business generating around $2 million in revenues and his income right around the $450,000 to $500,000 range, Horovitz estimates that the income tax increases agreed as part of the fiscal cliff deal will only amount to a few thousands dollars—hardly enough to make a meaningful difference in his decision making.
Even if the tax impact were great, Horoviz says, it would motivate him to invest more in his business. Since taxable income is based on the difference between what you take in and what you spend, spending more lowers your taxable income and sets the stage for future growth.
Read the full article at The New York Times.
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