Small Biz Tax Research Paints Startling Picture
Apr 7th, 2009 | By Dawn R. Rivers | Category: ResearchOverall, America’s small businesses have an effective tax rate of close to 20%, according to an analysis released last week by the SBA Office of Advocacy. The analysis, accurately if unexcitingly entitled Effective Federal Income Tax Rates Faced by Small Businesses in the United States, was performed by Quantria Strategies with funding from Advocacy. More specifically, sole proprietorships had effective tax rates of 13.3%; partnerships had effective tax rates of 23.6%; and S corporations had effective tax rates of 26.9%. These percentages are based on current tax rates, bearing in mind that most tax rates will increase in 2010 when the Bush tax cuts are set to expire.
The researchers also found that 58% of all small businesses have gross receipts of less than $25,000 and roughly the same percentage have net receipts of $10,000 or less. Approximately 85% of U.S. small businesses earn less than $30,000 in net receipts, and a stunning 92% of small firms have net earnings of less than $50,000. Interestingly, these low receipts do not appear to have garnered much attention from the lawmakers who really ought to be particularly interested in them. If I were Senator Mary Landrieu or Congresswoman Nydia Velázquez, I would be scheduling hearings to find out why the majority of small businesses seem to be struggling like this — especially if my political party had recently and noisily labeled itself the Saviors of the American Middle Class.
