But in terms of personal income taxes, I just can't see it.
That was the point of the Bonus Question in my first post.
Small businesses create the most jobs. And most small businesses are sole proprietorships, not corporations, not partnerships, and not LLCs. So cutting personal taxes cuts tax on the small businesses that are the real engine of the economy.
If taxes were cut on, say, S corporations (small corporations) and LLCs, which tend to be small, then small-time entrepreneurs would probably wise up and incorporate.
That would have several benefits. First, you could target tax cuts to the small entrepreneurs. Second, you would encourage them to improve their business practices -- operating as a sole proprietorship is risky, and these days, with the ubiquity of legal software at the corner store, anybody can incorporate themself, although they may not make their S corporation election timely, and then they're in a mess.
And the incorporation fees would go to the state governments.
Win-win-win, on the aggregate.
My guess is that the people who are too small to incorporate or form an LLC mostly get paid cash under the table anyway.
By the way, cutting business taxes gives the smaller fish an incentive to go legit rather than stay underground.
(In case you were wondering, I do have my own small business. As did my father, my mother, both grandmothers, both grandfathers, and a slew of other relatives. My guess is that this is not unusual, my husband's father and mother also had small businesses, as did their parents.) |
