South By North Strategies, Ltd.

A comprehensive new report by the N.C. Budget and Tax Center looks at how potential changes to the federal tax code might affect different groups of North Carolina taxpayers.

One interesting finding pertains to the potential impact on the state’s small businesses.

Only three percent of taxpayers reporting any business income, let alone small-business income, would see any benefit from extending the Bush tax cuts for the wealthiest taxpayers. In North Carolina, fewer than 4 percent of taxpayers claiming any business income earned more than $200,000 in 2008, and even fewer would see their taxes increase under President Obama’s plan.14 Whereas fewer than one in thirty small-business owners nationwide would see any benefit from extending the Bush tax cuts for the wealthy, the vast majority of small businesses would benefit from boosting demand for their goods and services by further extending unemployment benefits and providing aid to states and local governments to avert additional layoffs of teachers, police officers and other public employees.
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Allowing the Bush tax cuts for the wealthiest taxpayers to expire on time would generate enough federal revenue (approximately $40 billion in 2011) to aid small businesses directly by reducing their share of payroll taxes.16 Such a measure would, like extending unemployment insurance benefits or fiscal relief to states, benefit many more businesses—and do a better job of boosting the economy—than even a temporary extension of the Bush Tax cuts for high-income earners.