How taxing the wealthy affects small businesses

(CBS News) Here is a closer look now at one of the key sticking points in those negotiations over the federal budget: President Obama's insistence that any deal includes higher tax rates for high-income earners.

So how would that affect small businesses?

Kevin Green owns two flower and gift shops in Alexandria, Virginia. He said raising taxes on the wealthy won't just hurt him -- it will hurt his workers and the economy.

"All you do is reduce the capital available for investment and employment," he said.

Small business owners typically report business income on their personal taxes. In a good year, Green's income will exceed $250,000, making him one of those taxpayers the president says should pay more -- in his case, an estimated $8,000 more.

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Asked about the economic downside of having to pay $8,000 more from him, Green said: "I don't have $8,000 to spend on those employees or that inventory or the business that draws customers."

By congressional estimates, there are some 941,000 high-income small businesses. The president says that number includes truly rich small firms like hedge funds. But when Republicans argue higher taxes mean slow down growth, they are thinking about businesses like Kevin Green's.

"It'll hurt small businesses, it'll hurt our economy," said House Speaker John Boehner. "It's why this is not the right approach."

But there are other high-end small business owners who don't think a tax hike of around 3 percent will make much difference.

Joe Ragan, who sells roasted coffee and supplies to thousands of offices around Washington, said he will add or subtract workers based on sales, not on taxes.

Asked if that his tax increase would that make any difference in the number of people he hired, Ragan said no.

"I don't want to take a position here that says I'm not affected by this -- I certainly am. But I'm affected by the opportunities that are presented to me, not by the fact that I'm going to make 3 percent less on that opportunity."

In the fiscal cliff negotiations, Republicans still argue that higher taxes will hurt small business jobs. Democrats say this debate is over -- that raising taxes on the wealthiest Americans of all kinds was decisively approved by the voters in the election.

  • Wyatt Andrews

    Wyatt Andrews is a CBS News National Correspondent based in Washington D.C. He is responsible for tracking trends in politics, health care, energy, the environment and foreign affairs.