In the recent time, the top officials of the government have repeatedly highlighted the significance to small business, of lowering the top income tax rate. The highlight on this theme was done in an address to those who operate small business, where it was asserted that millions of small businesses will gain from reduction of the top rate.

A press release from the Treasury Department issued subsequently, stated that over 17 million small business owners and sole proprietorships whose business profits are taxed vial the individual income tax rather than the corporate income tax, and that a good number of these over 17 million small business owners are taxed with the top rate, and would rather benefit from a reduction from it.

Some are of the opinion that small business owners would be far more likely to gain from an increase in the Earned Income Tax Credit – a Tax Credit meant for low and moderate income self-employed individuals and workers, than a lowering or reduction in the top rate.

Subsequently, for each small business owner who would not gain from reduction of the top income tax rate of approximately 40 %, about 15 small business owners are not likely to benefit from the Administration’s tax package.

For each small business owner who will be a beneficiary from the top rate reduction, about 12 small business owners will receive the Earned Income Tax Credit and are also likely to benefit from improvement accruing from it. Furthermore, 69 percent in total, of small business owners are either in the 16% tax bracket or are not subject to income tax since their income are very low. A reasonable number of these owners meet the criteria for the Earned Income Tax Credit; let’s say that one of every six small business owners with positive business income qualifies for the Earned Income Tax Credit.

Even as some small business owners would gain from a reduction in the top income tax rates, such owners are quite small in number. A greater number of such small business owners may not be benefit from the top rates reduction. Trying to suggest that majority of small business owners would be beneficiaries of top rate reduction is somewhat hypocritical.

That which applies to families in general is also true or applicable for small business owners also; a larger portion will not benefit from reductions in the top income tax rates since their incomes put them in the low or middle income ranges. Truly, enhancements in the Earned Income Tax Credit (EITC) and extension of the child credit to more lower-lower income earning families that have children would be beneficial to many more business owners in comparison the top tax rates reduction.

However, whichever program is beneficial to you as a business owner, do not hesitate to take advantage of it in order to reduce the amount of tax you pay on your business. Also seek for other lawful tax-friendly programs that can help you pay less tax on your business income.