Comment & Debate
William Gale. “Five myths about the Bush tax cuts.” Washington Post. August 1, 2010: “If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets — individuals earning more than about $170,000 a year and families earning more than about $210,000 a year. And just as most small businesses aren’t owned by people in the top income brackets, most people in the top income brackets don’t rely mainly on small-business income: According to the Tax Policy Center, such proceeds make up a majority of income for about 40 percent of households in the top income bracket and a third of households in the second-highest bracket. If the objective is to help small businesses, continuing the Bush tax cuts on high-income taxpayers isn’t the way to go — it would miss more than 98 percent of small-business owners and would primarily help people who don’t make most of their money off those businesses.”
Paul Krugman. “Now that’s rich.” New York Times. August 22, 2010: “So, for example, we’re told that it’s all about helping small business; but only a tiny fraction of small-business owners would receive any tax break at all. And how many small-business owners do you know making several million a year?”
“Editorial: Extending the Bush tax cuts.” News12 Augusta. August 16th, 2010: “Republicans point out that millions of Americans report small business expenses on their personal tax forms, which puts their income into the $200,000-plus danger zone, and thus, Obama’s plan discourages small business investment. Democrats respond that declaring small business deductions for tax purposes is not the same as owning or running a small business. While 36 million taxpayers reported “small business income” in 2009, only 6% of Americans earn more than half of their income from a business they own. We’re told that allowing the tax cuts to lapse will gouge neighborhood dry cleaners and donut-shop owners. But in reality, not everyone who files a Schedule C or F in April has a “business” as such. Taxpayers can declare income as “small business” if they do consulting or public speaking on the side, possess a “home office” or belong to a small law firm or medical partnership. Democrats point out that if tax cuts for the wealthy are allowed to lapse, only 2.5% of those who declare “small business” deductions will be taxed at the higher rate.”
Jay Newton. “Democrats to Propose Extending Bush’s Middle-Class Tax Cuts.” Time. July 21, 2010: “Democrats dispute the idea that mom-and-pop small businesses are making more than $200,000 a year. In fact, 94.5% of all “flow-through” entities (self-employed folks, who generally tend to be small businesses, though Tiger Woods also falls into this category) had receipts of under $100,000 in 2007, according to the Tax Policy Center. Likewise, less than 5% of the subchapter-S companies — small businesses that have less than 100 shareholders and pay individual income taxes — made more than $200,000 in 2007. That 5% packs quite a wallop, though, accounting for more than two-thirds of tax receipts in the top two brackets and representing the wealthiest hedge funds, law firms and lobbying outlets in America, all of which file individual or partnership income taxes, according to IRS statistics.”