In economics, small businesses play a very significant role by providing jobs and fueling trade and commerce, the distribution of goods and performance of some services. Hence, many governments have instituted tax relief laws, plans and reforms designed to help small business flourish.
These benefits are often implemented via reduced income taxes, lower property taxes, and taxes on capital gains and dividends. Small businesses that are mostly limited partnerships or sole proprietorships find their tax burdens greatly lessened by even small percentage reductions on their taxes.
For example, at least 2 % have been sliced off the 27, 30, 35 percent tax brackets - the last being the highest tax now imposable on any small business - instead of the former 38.5%. Likewise, more items have been included in the 10% and 15% tax categories, so there are fewer items taxable under the higher brackets. The so-called death tax – when one transfers the business to other family members - has been repealed until Year 2011, and this means a small business owner need not pay tax when his offspring succeeds him.
Furthermore, the reduction of tax on dividends and capital gains minimizes the effect of double taxation of the same income at the corporate and individual levels. First, the business income is taxed and then, when this is divided among investors, the same income is gain taxed via the individual income tax. This has been eliminated by new tax reforms.
Tax relief is vital to small businesses because it helps to get the businesses through the critical phases of their development, at the initial stages, and when they attempt to expand and grow.
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