PROVO — Small-business owner Brian Nichols doesn't consider himself rich, but he's among the Utahns who stand to lose big if tax cuts for Americans earning more than $250,000 aren't extended.
That's because like many small-business owners, the profits Nichols earns from three Cascade Collision Repair shops in Utah County are taxed as personal income.
But unlike those Utahns who take home paychecks totaling more than $250,000, he said most of that money goes right back into the family business that employs some 50 workers who repair 600 cars a month.
Nichols was recently told by his tax attorney, state Sen. John Valentine, R-Orem, he faces an additional tax bill of more than $50,000 if the tax cuts being debated by Congress end.
While President Barack Obama announced a bipartisan agreement late Monday to extend the tax cuts as well as unemployment benefits, there's still some uncertainty.
"It's a huge stress for us," Nichols said. "When we really don't really know what is going to happen with our money, with our taxes, we get to the point where we're afraid to spend."
He said he felt caught in the middle in the battle between Republicans and Democrats in Washington over whether someone declaring an income of $250,000 or more deserves a tax break.
"I don't feel rich at all," Nichols said. "Do I categorize myself as higher income? Absolutely not. Do I believe the government should get their act together and spend our money more wisely? Absolutely. That's what we've had to do as small businesses, and that's what we expect."
Just under 4,500 of the more than 181,000 small-business owners in Utah reported income of more than $250,000 in 2009, according to the Utah State Tax Commission. Those 4,500 taxpayers represent less than one-third of the Utahns earning more than $250,000.
Valentine said his Provo law firm represents about 250 small-business clients in the same situation as Nichols, earning what he called "phantom income" because it's money that largely goes right back into the business.
"We think of profit as income and profits are taxed as income," Valentine said. "But you can't take home the profit or the business will fail."
The only Democrat in Utah's congressional delegation, Rep. Jim Matheson, agreed with Republicans that all of the tax cuts should be extended because of the impact on the state's small businesses.
"A lot of people are unaware how small businesses are treated," Matheson said. "I think we ought to stand up for small businesses."
The agreement announced by Obama includes protecting tax cuts for the working poor and extending unemployment benefits for another 13 months for 2 million Americans.
Glenn Bailey, executive director of Crossroads Urban Center, supports continuing benefits for the poor and the unemployed because he believes it will help the economy. That's the same reason many back the tax cuts for wealthier Americans.
"At the low end, that money goes right back into the economy because people are living hand to mouth," the advocate for low-income Utahns said. "It's being spent. It's not being saved."
Bailey said small businesses are important to the economy and suggested an exception be carved out for their owners so other Americans with high incomes pay more taxes.
"The same people concerned about hobbling small business ought to be very concerned about increasing the tax burden on the people who have the least," he said.
- Hundreds search for missing Provo woman who...
- 'As great as hosting the Olympics': Utah's...
- Husband and wife of 74 years die hours apart...
- Former wrestlers charged, assistant coach...
- Former Romney finance chairman courting a...
- Ed and Elizabeth Smart make plea for help in...
- 22 songs Utahns love singing in the car
- Utah construction companies fined, ordered to...
- Utah GOP leaders going forward with new... 60
- Former Romney finance chairman courting... 56
- Doctor: Vaccines result in healthy... 45
- Former Davis High teacher admits to... 21
- Why is BYU honoring Robby George, and... 21
- Former wrestlers charged, assistant... 21
- Utah high school students unprepared... 15
- Poll: 'Undecided' tops Utah Republican... 15