U.S. Senator Johnny Isakson, R-Ga., this week strongly criticized President Obama's proposal to extend the expiring tax cuts for one year only for those earning less than $250,000 a year, while allowing taxes to increase for hundreds of thousands of other individuals and small businesses.
According to the nonpartisan Joint Committee on Taxation, Obama's proposal would result in a tax increase on 53 percent of all "flow-though" business income, and the number of entities that would be subject to the tax increase is approximately 940,000.
The proposed tax increase on 53 percent of all flow-through business income is especially harmful to small businesses, because the vast majority of small businesses are organized as flow-through entities, such as partnerships, limited liability companies (LLCs), S Corporations, and sole proprietorships. These businesses are referred to as flow-through entities because the business income flows-through onto the business owner's individual tax returns.
"The president's recent tax proposal will make an uncertain future for taxpayers even more uncertain. This tax increase is a tax on what we need the most; that is, reinvestment of earnings to hire more people to build more businesses in America," said Isakson. "As someone who actually ran a company in the private-sector, I know that the president's proposal will have the exact opposite effect on the middle class that the president described. His proposal only adds to the problems American businesses are having. It is not a solution."
In May, Isakson signed a letter to Senate Majority Leader Harry Reid (D-Nev.) urging him to start working with Republicans to prevent these massive tax hikes. The Congressional Budget Office (CBO) found that if these tax hikes are not prevented that the economy could be pushed into another recession.