The current version of the “Buffett Rule”, as proposed by the Obama Administration today, would create a minimum tax of 30% on individuals with income over $1 million. The long term capital gain tax rate is 15% (for most individuals). This is the rate paid on most of the income that a business owner receives when they sell their business. If the proposed “Buffett Rule” becomes law, this would be an effective doubling of taxes paid upon the sale of a businesses over $1 million.
This should be a wake-up call for all small and medium-sized business owners. While there is no guaranty the “Buffett Rule” will become law this year, even if it doesn’t, it will certainly continue to be brought up as a “solution” to raise more revenue for a federal government that can’t pay its bills. Someone once said, “It’s not what you make…it’s what you keep.” Properly timing your sale can mean keeping more of your hard-earned money.