VMars, on 2012-October-17, 22:28, said:
But what I'm really confused by is wouldn't this be disastrous for businesses who file taxes as individuals (what the Republicans categorize as "small businesses")? I mean, if I had profits of $300,000, and costs of $150,000, I would be making a decent profit as a business. But I thought that I would file as if I made $300,000 and had $150,000 of deductions. Is that not true? Because if it's true, then this proposal is EXTREMELY anti-business. Of course, I could incorporate and file as a business, but this involves a big cost, and anyway I thought that the Republicans wanted to protect the individual-filer business.
I understand Romney to be talking about Schedule A deductions, not all business deductions (or folks would truly be screaming).
A typical small business owner who files individually completes Schedule C (Profit or Loss from Business) and Schedule SE (Self-Employment Tax). Business expenses and income appear on Schedule C, with the net being reported as income on Form 1040. Social security and medicare taxes from Schedule SE are reported as other taxes on Form 1040.
The problem with Romney's plan is that a 20% tax cut cannot be made revenue neutral by reducing Schedule A deductions. Forget about the $17,000 (or $25,000) cap on deductions. If you eliminate all of the Schedule A deductions for every taxpayer, you can only reduce the tax rate by 4% to keep it revenue neutral. And Romney refuses to explain how he plans to cover all of the missing revenue.
Couple that with the spending increases that Romney has promised and you get the Bush fiscal situation all over again. Only this time we haven't recovered yet from the Bush years, so we'd be starting from an even worse position.