$5,000 Tax Credit for Small Businesses; After Spending 7,000 or More Per Employee?

Tax cuts sound like a good thing right? The problem is that this is NOT a real tax break. This is the government version of a coupon book with $2,000 in savings. Sure there are $2,000 worth of savings, but you have to spend $20,000 to get the savings. So, where's the problem? Well, if you can afford to spend $20,000 to "save" $2,000 then you don't need the discount. Check out the fact sheet from the White House.

This is simply a ploy to make it seem as if the administration is trying to help small businesses. Earlier this year Obama touted to eliminate Capital Gains Taxes for small businesses, which would be great except that small businesses generally do NO trading of capital assets.

First look at what constitutes a "capital asset." --> IRS Publication link.

Capital Asset

Most property you own and use for personal purposes, pleasure, or investment is a capital asset. For example, your house, furniture, car, stocks, and bonds are capital assets. A capital asset is any property held by you except the following.

* Stock in trade or other property included in inventory or held mainly for sale to customers. But see the Tip on this page.

* Accounts or notes receivable for services performed in the ordinary course of your trade or business or as an employee or from the sale of stock in trade or other property held mainly for sale to customers.

* Depreciable property used in your trade or business, even if it is fully depreciated.

* Real estate used in your trade or business.

* Copyrights, literary, musical, or artistic compositions, letters or memoranda, or similar property (a) created by your personal efforts; (b) prepared or produced for you (in the case of letters, memoranda, or similar property); or (c) that you received from someone who created them or for whom they were created, as mentioned in (a) or (b), in a way (such as by gift) that entitled you to the basis of previous owner. But see Tip on this page.

* U.S. Government publications, including the Congressional Record, that you received from the Government, other than by purchase at the normal sales price, or that you got from someone who had received it in a similar way, if your basis is determined by reference to the previous owner's basis.

* Certain commodities derivative financial instruments held by a dealer. See section 1221(a)(6).

* Certain hedging transactions entered into in the normal course of your trade or business. See section 1221(a)(7).

* Supplies regularly used in your trade or business.

Basically, if capital assets are a part of your business they are not considered taxable anyway.

Obama is all about cutting taxes, in areas where those particular taxes DO NOT apply. This is a completely dishonest way to claim and help the economy.

Real tax cuts are without an element of direct government control. Why can't this administration keep their hands out of the inner workings of business?

Real tax cuts for small businesses, if enacted at the beginning of Obama's presidency, would have greatly helped the economy. Real tax cuts still can help! A tax reduction for small businesses, with no strings attached, would spur more long term growth. Instead we have the Obama administration trying to throw a bone to businesses as long as they jump through the correct hoops. We have the government "attempting" (but not really) to subsidize job growth.

I've got a brilliant idea! ...How about the government cut taxes on small businesses and just stay the hell away so they can make their own decisions on hiring and wages.

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