By Jay Heflin - 10/19/10 05:30 PM EDT
The National Federation of Independent Business (NFIB) is urging its members to contact their congressional representatives and demand the extension of Bush-era tax cuts beyond their Dec. 31 expiration.
The organization states that 75 percent of small businesses are taxed
as individuals and will be negatively affected by the tax increase
scheduled to occur on Jan 1.
Democratic leaders have repeatedly promised that rate cuts for all but the top two brackets will be extended into next year, allowing most businesses to avoid a tax increase. The NFIB states their plan will still hit small businesses.
"Raising the tax rates on the top two income brackets also has a negative impact on small business job creation," it stated. "Based on an NFIB small business survey, the businesses most likely to face a tax increase by raising the top two rates are businesses employing between 20 and 250 employees. According to U.S. Census data, businesses with between 20 and 250 workers employ more than 25 percent of the total workforce."
If Congress fails to act on the tax cuts, marginal rate cuts will expire and cost taxpayers roughly $160 billion in 2011. Allowing rate cuts on the top two brackets to expire will cost approximately $40 billion next year. These taxpayers could also pay an additional $21 billion if Congress fails to remove phase-outs on personal exemptions and itemized deductions.
Tax breaks on capital gains and dividends will also cease to exist next year, costing taxpayers approximately $35 billion.
Congress is expected to debate the fate of the Bush tax cuts in the lame-duck session. Sources expect gridlock over the issue will either force Democratic leaders to allow a vote on extending all the tax cuts, or delay action on the issue until next year.