Some of you may want to throw tomatoes at me for saying this, but I'm glad as hell that the three year Multnomah Co.'s personal income tax of 1.25% is over. For those of you who run an S-Corp or an LLC and operate your small bidnesses along with living in the county, well, you know what I'm talking about.
To make a long story short, those of us who who file taxes under S-Corps and LLC's don't get taxed on company profits at the corporate level when we pay the feds and the state. Instead we fill out what is called a schedule K-1, which passes on those reported profits to the companies' shareholders who then have to report them on their 1040s. Most S-Corp and LLC shareholders are typically family members who work in the business or are a single owner. As bidness owners of these entities we also compensate ourselves through payroll, dividends, and or other types of compensation. No matter what the compensation form, it all ends up on our 1040s and individual state tax forms.
In Multnomah County the business tax works the same way, but instead of reporting it on a personal tax form it all gets shoved back onto a business form which is taxed at 1.45%. When the Mult. Co. individual income tax was introduced in '03 for three years, those of us who were paying 1.45% to the county on compensation to ourselves as shareholders along with K-1 reportings ended up paying another 1.25% on those exact same amounts as individuals. The same government entity, in this case the county, taxed us twice on the same money.
Readers of this blog know that I'm a progressive liberal. In other words, I understand that we have to pay taxes, as painful as they may be, in order to have a functioning, civilized society. But sometimes I think small business owners, many of whom struggle to pay themselves something that would qualify as a middle class income, get the short end of the stick. It's tempting to buy into the anti-tax rhetoric out there. I'll refrain from that, but I can certainly understand why many small bidness owners tend to vote for Republicans who promise to cut their taxes.