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Obama Reopens the Fiscal Cliff Tax Debate for Small Businesses

In renewing his campaign for corporate tax reform, President Obama has reopened a fierce debate over the effect certain tax changes would have on small businesses.

During a speech last week, the president unveiled his latest plan to revive the economy, including a proposal to lower the tax rate for corporations. Currently at 35 percent, the rate is one of the highest in the world, and bringing it down to a more globally competitive level has been a priority for Republicans.

Obama proposed dropping it to 28 percent, and in exchange, he asked conservatives to agree to spend more on economic stimulus projects — a compromise that has not changed much since he offered it to avert the so-called fiscal cliff late last year.

Immediately following the speech, a number of small business groups criticized the administration for continuing to push for corporate-only tax reform without lowering rates for individuals. A number of them noted that most small firms are structured as pass-through entities, meaning their owners pay taxes as part of their personal taxes; most of them, therefore, would not benefit from tax reform that only reduces rates for corporations.

“A corporate-only approach to tax reform will ensure that small business shoulders a much greater tax burden than mega-corporations that have been gaming the system for years,” Dan Danner, president of the National Federation of Independent Business, said in a statement.

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