Why do politicians think that all the revenue collected by a small business is taken as Salary?
A small business has many choices available for how to account for the profit generated from their business. It so happens that with the historically low federal income tax rates available currently, the most advantageous model is often to take everything as salary.
But that is not the best way for the economy and jobs. Surely we would be better off as a country if it was more advantageous for a business to re-invest it’s profits into growing the business, hiring new employees and building new things as opposed to taking everything as personal income immediately.
And remember the term “small business” is not just used for what you and I would consider small businesses.
Having said all that depending on where you live, $250,000 of personal income is not rich anymore, and the breakpoint for taxes should be much higher, I’d suggest $500,000 or $1,000,000 would make more sense.
Of course adding more taxes on the salaried income on the richest makes very little financial difference to the total collected by the feds, but it will change how they account for profit on revenue. But all the ways that income can be made outside of salary are worthy of consideration (tax on capital gains, a tax on stock trades, foreign investments, tax on multiple properties etc).
In some countries great schemes exist for alleviating taxes for actions that support the countries economic or social goals. For example in Germany you don’t pay taxes on a mortgage if the property is well maintained and rented at reasonable rates. This encourages investment and helps everyone live in nicer houses.
In other places businesses get a huge tax break for creating products locally. Locally designed, locally sourced raw materials, locally sourced production, but not for local final stage production. This encourages the use of the countries full range of industry and doesn’t reward the old technique of making everything in China and brining it all together for local final assembly just to avoid taxes.
There are a million techniques to use taxation to drive up the economy, and still allow business owners to be just as rich as they are today (or even richer).
In a perfect world the amount of people working would be as high as possible, and all of them earning enough to pay taxes. And the rich would be encouraged by the tax code to grow their businesses in ways that grow the economy.
Personal taxes are just an avoidable inconvenience for the richest, and any change to federal tax rates will have minimal impact on them! Why is it an issue being discussed? Well if we were not discussing this we would be thinking about the deeper issues.
Personal taxes on the rich are just a distraction technique.
A fight that really doesn’t matter, but allows politicians to scream and shout and excite their bases without really changing anything that truly matters.
I dream of a world where politicians all work together for the benefit of the country they serve, and not fight each other for personal gain at the detriment of all the rest of us.