Taxes on small businesses when the income is taxed at the owner's rate: Would increasing the personal income tax rate (which impacts Schedule C businesses) discourage those businesses from hiring? (And are those businesses responsible for employing a significant number of employees?)
A very good analysis at the link below. A caution, though, if I lost you at "Schedule C" you may need a tax refresher to plow through it.
The conclusion: Barack Obama's tax increase will impact around 500,000 individual business owners (people who are not eligible for corporate tax rates but who actually have employees) whose income, after expenses, exceeds $200,000. Those individual business owners employ around 652,000 employees.
If an owner is considering hiring an employee, the owner is already poised to take an income hit in the amount of that salary (taxes, benefits, etc.) of the potential hire. Paradoxically, a tax increase decreases the income impact of hiring an employee and may make hiring an employee cheaper than if the tax rates are left as is.
Hiring an employee, as a Schedule C employer, works the same way charitable deductions do with respect to your own taxes if you itemize deductions. Whatever you pay your employee directly reduces your income - saving the you (the employer) taxes. If taxe rates are higher, reducing the your income by the cost of an employee saves you more in taxes. Effectively the money spent on the employee at a 39.5% tax rate only costs you 60.5 cents on the dollar (becuase of the reduction in personal income taxes that would otherwise have been paid had you just pocketed the money). Without a tax increase (Romney's plan) that same employee would cost you 65 or 67 cents on the dollar.
There are, of course, other considerations - but - considering the impact of the increased tax rate alone if you are at the point of considering hiring an employee, increasing personal taxes might just nudge you toward hiring, rather than against.