Fiscal Cliff Deal Impacts Small Businesses

By: Fay Li Email
By: Fay Li Email

Will Gross owns two Biggby Coffee stores in mid-Michigan.

"After I had success I opened another location two miles down the road," said Gross.

However, the new fiscal cliff deal has him re-evaluating business operations and future expansions.

"If I have two corporations and I'm making a quarter of a million dollars and I'm at a certain tax bracket, why would I want to invest?" Gross said.

Under the new fiscal cliff deal, individuals making more than $400,000 will be in a higher income tax bracket. Exemptions will phase out for those making $250,000 or more.

According to a new report from Anderson Economic Group, about 85,000 people in Michigan will pay higher taxer because of the new fiscal cliff deal. It's estimated that 19% of taxpayers in Michigan receive some business income.

The deal reached in Washington mainly affects top wage earners, though some small business owners also make the cut because their business is classified as a "pass through entity."

"The profits of the company are taxed under the individual income tax whether or not the owner decides to take the income out of the company," explained Alex Rosaen from Anderson Economic Group.

While more taxes is never a reason to cheer, economists say keep everything in perspective.

"The tax bracket only applies on the extra income above the threshhold, so if your income goes up you don't have to worry about whether you're going to have less money than if you hadn't earned the extra money," Rosaen said. is happy to provide a forum for commenting and discussion. Please respect and abide by the house rules:

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