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“A lot of small businesses still have trouble getting the loans and capital they need to keep their doors open and hire new workers,” Obama said during his Saturday radio address.  “So we proposed steps to get them that help: eliminating capital gains taxes on investments; establishing a fund for small lenders to help small businesses; enhancing successful SBA programs that help them access the capital they need.

Small business needs more than capital gain reduction, increased expensing on equipment purchases or tax credits.  It is obvious that the Administrations current tax policies are not working.

Besides greater access to capital, US small business needs lower tax rates.  Not just lower corporate tax rates because not all small businesses are Corporations.  S Corporations, Partnerships, LLCs and Proprietorships pass their profits on to the personal tax return of the owners.  An overall reduction of business tax rates should consider business profits taxed by both Corporations and those passed through to form 1040.

There should also be a provision for small business profits put aside for future growth.  Many business owners who “have a good year” need to save part of the profit for future needs.  If this profit is exempted from current taxation, profitable small businesses could fund their own growth.  To balance the tax implications of such a provision, purchases made from this excluded profit might have a reduced basis or not be subject to accelerated depreciation.

Overall business tax rates must to be reduced.  John F. Kennedy said, “Every dollar released from taxation that is spent or invested will help create a new job and a new salary.  And these new jobs and new salaries can create other jobs and other salaries and more customers and more growth for an expanding American economy."  This statement is just as true today as it was in 1961.

Tags: Corporate Tax, John F. Kennedy, Obama, SBA, SBA Loans, Small Business Administration