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Tax policy, dumbed down for the campaign trail [Letter]

BusinessPersonal IncomeSmall BusinessesTaxationExecutive Branch

Two things jumped out at me in the article "Candidates for governor differ on economic plans" (May 10). One was the proposals by Republicans to lower taxes and state expenditures to increase over-all economic activity in the state and the statement by Jessica Cooper that "most small businesses pay income taxes, not corporate taxes." The first point stands out because there is evidence in states with Republican governors that this approach has not accomplished the stated goal and even hurt state economies, as for example those governed by Chris Christie (New Jersey) and Sam Brownback (Kansas). That is not to say I am for all taxes and expenditures, but certainly a meat-ax approach does not guarantee a positive outcome.

The second point is that most small businesses — the self employed, partnerships, etc., because they are not incorporated, pay personal income taxes not corporate taxes. In this regard, I would point out that the lowest and highest personal income tax rates in Maryland and Virginia are the same for both single persons and couples, but that in Maryland the highest rate kicks in at a much higher income level than does the highest rate in Virginia.

Finally, I believe that one cause of small businesses' complaints about tax rates is because unlike a wage earner, small businesses do not have automatic tax withholding from their income. If, to compensate for this, they do not of their own volition and self interest make estimated tax payments to the IRS during the year, they are saddled with a lump sum tax bill at the end of the year, which may even include a penalty because they had no, or insufficient taxes withheld from income during the year. This lack of personal tax knowledge and/or practice can easily lead to complaints about too high taxes, like those made by "Joe the Plumber" in the 2008 presidential campaign.

Bottom line, tax policy is complicated and thus the subject of much political populous rhetoric. Don't just believe politicians who spout statements about high taxes and reducing government expenditures without looking at the underlying facts.

Joseph Costa, Baltimore

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Copyright © 2014, The Baltimore Sun
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