Contrary to your editorial (“Snowe, Collins should back Medicaid funding,” June 18), Sens. Olympia Snowe and Susan Collins should be commended for working to improve pending tax legislation before giving it their support.

The editorial failed to mention that the so-called “tax extenders” bill includes a troublesome provision that would raise taxes on many small businesses in Maine and the country.

The House-passed legislation proposed to raise taxes on certain S-corporation businesses, including small architectural and engineering firms.

Firm owners pay themselves a salary, subject to income and payroll taxes. S-corps also make distribution payments to shareholders that are similar to dividend payments from C-corporations. Dividend distributions are subject to ordinary income tax rates but not to payroll taxes. The proposed legislation would, for the first time, impose payroll taxes on dividend distributions to S corp owners who are also employees. The ability of business owners to retain dividend distributions and reinvest them will be harmed with an additional 15.3 percent tax on them, affecting our ability to hire new employees, buy new equipment or otherwise reinvest in the firm. The Senate bill targets small firms, least able to take this hit in the tough economic climate.

Sen. Snowe, a senior member of both the Senate Small Business Committee and the Finance Committee, has been particularly critical of this flawed tax change and has worked diligently to remove it from the bill.

Small businesses are often the major engines of job creation and innovation in this country. Let’s not adopt policies that will stifle the very businesses we count on to lead us to recovery.

The editorial staff is encouraged to read the legislation before passing judgment. Sens. Snowe and Collins clearly did, and deserve our thanks for it.


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