The real truth about the new tax credits should excite anyone who has a business in North Carolina. During these tough economic times, it’s nice to receive a break every now and then. Ninety-eight percent of the tax cut goes to small businesses making less than $1 million a year. It is very simple to understand and very disturbing that journalists don’t seem to get the gist of the law.
Here’s how the tax credit works: if you file a personal tax return with earned income from a small business or profession, the first $50,000 is exempt from North Carolina income tax. That’s it. It’s that simple – you get to keep up to $3,500 of your own money.
So who gets this tax break? It’s a long list: real estate agents, home repair contractors, the driver who owns his own truck, the mom who sells Mary Kay or Tupperware, barbers and stylists who rent a chair in a salon, the owner of the salon, independent insurance agents, landscapers, financial planners, etc. Need I go on? It’s simple – the tax break goes to anyone who works for himself or herself and files a Schedule C for earned income.
According to the nonpartisan Fiscal Research Division at the North Carolina General Assembly, individuals who make less than $50,000 will receive 32 percent of the benefit of this tax cut. Fifty-seven percent of the benefit goes to small businesses with incomes of $100,000 or less. Please note that $100,000 is not how much the owner receives in pay, but how much the entire business earns. This means that if profits are reinvested in the business, they are included as taxable income.
Here’s the real rub with liberals: a few millionaires, yes those nasty millionaires, will also qualify for this tax cut. However, according to the Fiscal Research staff, they will qualify to receive only two percent of the benefit. That’s right – TWO percent. Curiously (or maybe not), you will not see any mention by Progress North Carolina that just two percent of the benefit goes to millionaires. So don’t be fooled when the liberal Chicken Littles make it sound like the tax break is a free money giveaway for the country club crowd, rather than the benefit it really is to small business owners!
For those of us who supported the tax cut, we are hopeful that many of the individuals qualifying from the bottom 32 percent (those earning less than $50,000 a year) will someday move into the top two percent with the millionaires! We want all business owners to know that we care about them and understand how tough it is out there in our struggling economy. The more of their own money that small business owners can keep, the more they can invest, grow their businesses and hire more workers. Isn’t this what capitalism is all about?
Thom Goolsby is an attorney, law professor and state senator. He serves as an active member on the Senate Commerce and Finance Committees.