Obama’s plan calls for raising taxes on the top 5%, otherwise known as employers, and give a tax break to the other 95%. This will let the “middle class” keep more of their money and bring prosperity to all. Here’s how it will actually work.

Bill has a nut company. He is quite successful and grosses $500,000 a year in profits.

He has 5 people under his employment earning $30,000 a year and he draws a modest $50,000 salary for himself. His tax responsibility currently comes to $170,000. This leaves him $130,000 to put back into growing and expanding his business. In a couple of years he hopes to branch out and increase the size of his workforce and give those he already employs more compensation.

Obama is elected President. He introduces his tax increase. Now he went from a net profit of $130K to $50K overnight. He is left with two choices to keep on target with his goal of expansion. Raise his prices or layoff part of his current staff. If he chooses the former, he can no longer compete with the multi-national ACME nut company who is able to spread their increases over a greater supply causing Bill to eventually lose some business.

He chooses to let one of his staff go and only raise his prices to a competitive level. He sees this as only temporary, but now Obama has passed his healthcare plan and he is now stuck with an even higher expense for his employees. He had planned on making healthcare a part of his expansion, but the tax hike wiped out his ability to do so. He now has to layoff another worker to cover this expense. So, you might ask? It’s only 2 people. Multiply that by the 1 million or so small businesses that are striving to survive and keep their workforce and suddenly it is not so small is it?

By the way, if you liked Bill’s product, too bad. He is out of business. He couldn’t expand and as a result was not able to keep his workers happy (they worked harder with no chance of a raise and left). You will have to “shell” out the same money for ACME even though they are no where near as good “I can live with that.” you say, as you pop a couple more in your mouth before heading into an unexpected meeting with your boss. He needs to discuss your future…