As an Ex owner of several sub SS corps: The profits are taxed whether you take them or not. They are taxed whether they are real or not. they are taxed period. What do I mean by real? Realized would be a better term. Paid for inventory is counted as profit even though it is sitting in the warehouse because it is an asset
All “profits” at the end of every year are taxed - you are not allowed to keep a “business slush fund” at all. They flow through from the business to the company owners. Individuals pay taxes on their “salary” plus “profits” - anything that is not “expensed” as the cost of doing business (unlike a C-corp, where salaries are part of the cost of doing business).
Therefore, if you lower the individual tax rate on people making more money (small-business owners in S-corps) then they have more money “on hand” to hire more people.
In fact - although this person seems “stupid” it does show what I have been saying to all who will listen:
ROMNEY NEEDS TO DO A BETTER JOB OF EXPLAINING THIS.
Not every voter in the US has ever had an S-corp or an LLC, and they do not know he means when he says “small business owners are taxed as individuals.”
At the least he should say “small businesses are taxed as individuals - not as corporations, so lowering the tax rate on all incomes means you are lowering the tax rates on small business.”