Last week Mr. Walter Nicklin suggested that higher tax rates would encourage owners of LLCs and Sub S corporations to begin “channeling cash into creating new jobs” in lieu of distributions. Really?
To begin with, these entities are what the IRS calls “pass-through entities,” in that all of the profits and losses “pass through” to the members or shareholders who then report this on their individual personal tax returns. Hence, any distributions from these entities simply represent cash payments from income that was previously taxed.
My company, like most of our country’s small businesses, is a Sub S Corporation. I hire new employees only in response to greater demand for my goods and services. The notion that I would increase my payroll in response to higher tax rates is absurd. This is the same kind of left-world bunk that has led our nation to more than $16 trillion in debt.
The problem, Mr. Nicklin, is not that we are taxed too little – it is that our government spends way too much. President Reagan said it best: “Common sense told us that when you put a big tax on something, the people will produce less of it. So we cut the people’s tax rates, and the people produced more than ever before.”
Jeffrey E. Knight