Obama Tax Proposal: What Does It Mean For Small Business?

Most of our clients are small business owners who invest their earnings in either their business, or for the future in personal retirement plans.  This kind of investment creates capital that makes theirs and other businesses grow.  This growth creates jobs for millions of people.

calculator-428294_1280Obama wants to change that relationship.

He would increase the top tax rate on capital gains and dividends to 28 percent from 23.8 percent. The rate was 15 percent when Obama took office in 2009, meaning that he’s proposing to almost double it over his two terms in office.

He would also impose capital-gains taxes on asset transfers at death, ending what the White House calls “the largest capital gains loophole.” Under current law, assets held until death are not subject to those levies, creating an incentive for wealthy people to hold onto them.

Heirs only have to pay capital-gains taxes when they sell and only on the value above what the assets were worth at death. The administration’s proposal on capital gains at death would exempt the first $200,000 in capital gains per couple plus $500,000 for a home, along with all personal property except for valuable art and collectibles. The rest would be treated for income-tax purposes as if it had been sold.

As a simplified example, consider a couple who died with $5 million in assets, including $2.5 million in stock with a basis of $500,000. Under current law, they could pass that to their children with no taxes. Under Obama’s plan, they could owe about $500,000.

I am not sure this is the change the American public signed up for.

Colin Grubb

CPA Certificate Number: 10765




2 Responses to Obama Tax Proposal: What Does It Mean For Small Business?
  1. Mark

    Why, I continue to ask myself, have the American people allowed this economic nonsense to continue? I really wish the average “Joe” would read & educate themselves just a little more on such matters.

    Mark W.

    • clearpathaccountants

      Education is the key to all things. Thanks for your comment Mark.

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