President’s latest tax proposal could raise taxes on franchise owners



President Obama’s latest proposal to extend the Bush tax cuts solely for those making less than $250,000 per year presents a new threat to franchise businesses and the jobs they create.  Since more than 80 percent of franchise businesses file their business income on their personal income tax return, they could be subject to a substantial tax increase under the President’s proposal.

According to the Wall Street Journal’s editorial page:

“Mr. Obama claims this will merely return rates to what “we were paying under Bill Clinton, It ignores his ObamaCare tax increase of 0.9% on top of the current 2.9% Medicare tax, plus a new 2.9% surcharge on investment income, including interest income.

Other small business advocates were equally unimpressed with the President’s latest proposal. In response, House Small Business Committee Chairman Sam Graves noted:

“Small businesses are facing an enormous amount of uncertainty and anxiety about upcoming tax policy, the President is bent on increasing taxes on the very people we need to invest in the private sector.”

Graves and the WSJ both cited a nonpartisan Joint Committee on Taxation report that estimates the President’s latest proposal would increase taxes on 53 percent of pass-through business income and about 940,000 small businesses.

“In a stagnant economy, it makes no sense to raise taxes on anyone, especially small businesses,” said Graves.

IFA believes the uncertainty created a one-off, piecemeal approach to tax policy hinders business planning by franchisors and franchisees, thereby discouraging investment and hiring.  While there are positive signs the franchise industry is poised for growth in 2012 following the recession, our projections are still as much as 50 percent below pre-recession levels. It is unfortunate the President’s latest tax proposal will do little to alleviate the deficit while further slowing the tepid pace of job creation.  IFA is in favor of extending all of the current tax cuts in order to create the incentives for hiring and stable business environment needed to grow our economy and favors a comprehensive approach to tax reform that tackles both corporate and individual rates.