Presidential Candidates Should Focus on Lowering Personal Income Tax Rates Not Corporate Taxes to Boost the Economy, Tax Attorney Study Shows

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With the majority of new jobs created by small businesses organized as LLCs and taxes as partnerships and not corporations, reducing personal income tax rates will have the most benefit on the economy, according to tax attorney report

Candidates Speak About Creating Jobs - Reducing Personal Income Tax Rates is the Answer

Since LLCs do not pay a corporate tax, reducing the corporate tax rate will generally not help small business owners, the largest job creators.

Adam Bergman, a tax attorney with the IRA Financial Group finalized a report which suggests that the most effective way of creating new jobs would be the reduction of the personal income tax rates and not the corporate tax rates as both presidential candidates have suggested.

With the election quickly approaching both President Obama and Governor Mitt Romney have put forth proposals for reducing corporate tax rates. Both candidates have made references to reducing the corporate tax rate to 28% and simultaneously eliminating various corporate deductions. The current U.S. corporate tax rate of 35 percent is one of the highest in the world, but the abundance of loopholes and deductions enable many businesses to pay far less than that — or nothing at all. Companies in the United States pay almost half the taxes that companies in other rich countries pay, compared with the size of the economy, according to the Organization for Economic Cooperation and Development. However, small businesses continue to create more jobs than larger corporations. According to many reports, small firms are the biggest job creators. Yet, the vital role small businesses play in economic growth is still overlooked. Together, these small firms consistently create 60 to 70 percent of new jobs, year after year, and employ more than half of the entire U.S. workforce at 27 million different places of business. With most small businesses organized as limited liability companies (“LLCs”) or S Corporations, both types of entities treated as a flow through entities for federal income tax purposes, reducing corporate tax rates would actually not help small businesses. “The majority of small businesses are set-up as LLCs or S Corporations, which are either treated as a disqualified person or a partnership for federal income tax purposes," stated Adam Bergman, Esq., a tax attorney with the IRA Financial Group. “A single member and multiple-member LLC is treated as a flow through entity for federal income tax purposes, which means the owners of the entity and not the entity itself pays tax on the income generated by the business," stated Mr. Bergman. “Accordingly, since LLCs do not pay a corporate tax, reducing the corporate tax rate will generally not help small business owners, the largest job creators, but will help larger businesses which are established as “C” Corporations, which pay a corporate tax,” stated Mr. Bergman.

“A plan for helping small businesses should include a proposal to reduce the personal income tax rate since small business owners are subject to personal income tax and do not pay corporate tax,” according to Mr. Bergman. “If the candidates wants to spur job growth, they should focus on reducing personal income tax rates which directly impact small business owners, which are the economy’s largest job providers," stated Mr. Bergman.

Adam Bergman is a senior tax attorney at the IRA Financial Group, LLC, the only attorney owned and operated Self-Directed IRA LLC and Solo 401(k) facilitator. Mr. Bergman is also the managing partner of the law firm The Bergman Law Group, LLC. In addition, Mr. Bergman is a recognized expert on IRAs and 401(k) Plans and is the founder of the BergmanIRAReport.com and the Bergman401KReport.com.

Mr. Bergman has been quoted in a number of major publications on the area of self-directed retirement plans. Mr. Bergman is also a frequent contributor to Forbes magazine and Forbes.com on the subject of retirement funds and tax law. Mr. Bergman has been interviewed on CBS News and has been quoted in Businessweek, Crain’s NY Business, Forbes, Dallas Morning News, Daily Business Review, Law.com, San Francisco Chronicle, U.S. Tax News, the Miami Herald, Bloomberg, Arizona Republic, San Antonio Express, Findlaw, Smart Money, USA Today, Houston Chronicle, Morningstar, and American Lawyer on the area of retirement funds and tax law.

Prior to joining the IRA Financial Group, LLC, Mr. Bergman worked as a tax and ERISA attorney at White & Case LLP, Dewey LeBoeuf LLP, and Thelen LLP, three of the most prominent corporate law firms in the world. He has advised thousands of clients on a wide range of tax and ERISA matters involving limited liability companies and retirement plans for over 12 years. Mr. Bergman received his B.A. (with distinction) from McGill University and his law degree (cum laude) from Syracuse University College of Law. Mr. Bergman also received his Masters of Taxation (LL.M.) from New York University School of Law.

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