President Barack Obama‘s embrace of higher income tax rates has some business experts worried about the effect on entrepreneurship.
In addition to signaling a willingness to let George W. Bush-era tax cuts expire, Obama has also warmly embraced billionaire investor Warren Buffett‘s proposal to hike income taxes on individuals making more than $1 million a year.
“Certain investors might think twice if their at-risk capital was taxed at a higher rate,” said Ken Kanter, tax practice managing director at J.H. Cohn LLP. The Roseland-based CPA firm issued a tax briefing on the president’s plans Tuesday.
“If the Bush-era tax cuts sunset and taxes increase (on business owners and other individuals making more than $200,000 a year), those dollars would be taken directly out of their pockets, and would mean there’s less money available to invest back in their business,” Kanter said.
Buffett pays capital gains taxes that generally max out at 15 percent, but “our members pay income taxes at a 35 percent top rate,” said Laurie Ehlbeck, New Jersey state director for the National Federation of Independent Business. “Obama wants to address this disparity by raising income tax rates back to 39 percent. Obviously, that will hurt our members, because they pay income taxes, and it won’t hurt Buffett, because he doesn’t pay income taxes, he pays capital gains.”
New Jersey Business & Industry Association President Philip Kirschner also was critical of Obama’s tax plans.
“The president is prodding business owners to create more jobs, but he’s poking them in the eye with these proposals,” Kirschner said. “They make no sense, and will only serve to lessen the confidence that business owners need to take risks and to create more jobs. Buffett may be the oracle of Omaha when it comes to investing, but in this instance, he is totally wrong.”