The U.S. Congress and President Obama created the ?fiscal cliff? last year as they negotiated ways to lift the federal debt ceiling. The cliff causes two things to happen at midnight on December 31, 2012. First, a range of temporary tax cuts will expire as the Budget Control Act of 2011 goes into full effect. For American small businesses, this will mean the end of several key tax breaks and the imposition of new taxes. Secondly, mandatory budget cuts will be imposed at the federal level. The result has the U.S. economy ? and, with it, U.S. businesses ? hurdling towards its own cliff.
Employees
On Wednesday Nov 7th a nonprofit advocacy group released a survey completed by small business owners about the fiscal cliff. Almost 75% of them are worried about how the payroll tax increase will affect their employees. With the economy the way it is many employees have stretched their paychecks to the limit and addition expenses will really put them in a bind.
Other than how the fiscal cliff will affect their employees? finances, business owners are worried about the impact that will transfer to their business through their employees. For example one of the areas will be education. If grants and scholarships are cut there will be less opportunity for employees to improve their skills and knowledge through education.
Taxation
When given the choice of raising taxes on the top 2% or drastic spending cuts the majority of the small business owners support the tax hike. Part of this is surely attributed to the fact that many small business owners aren?t in the top 2%. But most of them are also concerned about the effect of the spending cuts.
Many small business owners support raising the capital gains tax which is capped at 15%. Again this may be due to the fact that many small business owners? income isn?t structured as capital gains.
Many of the tax cuts set to expire were created directly for small businesses or will affect the middle class. Many owners are certainly a large percentage of their customers are middle class.
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Source: http://mcmillaninsight.com/blog/2012/11/the-fiscal-cliffs-effect-on-small-business-owners/
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