This week the IRS released regulations on the new tax break for small businesses. Qualified Business Income Deduction The idea was that middle income business owners could deduct 20% of their income on their income tax returns. Middle income was defined as small businesses which sold goods that had incomes of less than $157,500 ($315,000 for a married couple) or $207,500 ($415,000 for a married couple) for those that provided services. There were strategies which people were getting ready to employ to take advantage of the new deduction. One was to break up businesses into smaller entities, so that these entities would be beneath the $157,500 or $207,000 limit. Another was for key employees to re-organize as private contractors. In that way, an attorney who is a private contractor making $150,000 per year would qualify for the credit. The IRS is alleging that these two activities are taking advantage of loopholes and wrote its new regulations to discourage these activities. This brings up two issues.
The first is that Congress is favoring one group of citizens over another. It is inexcusable that a person who calls themselves a business gets a 20% deduction but an employee does not. It is one more example of the absurdity and inherent unfairness of the Income Tax.
The second is that when people attempt to comply with the law, the IRS designates that legal behavior as a loophole. That shows the contempt which the IRS has for the people of the United States. The IRS believes that all income belongs to them.
The United States grew to a world power over a period of about 170 years without using an income tax as a primary means of revenue. It is time to go back to an income tax free United States.
