This morning on Fox News, Chris Wallace gave some advice to conservative politicians who oppose Barack Obama’s proposal to let the Bush tax cuts for the wealthy expire and limit deductions for tax filers in the top two income tax brackets:
I think you do it in terms of what’s best for everybody, and if you’re removing the incentives and profits, and a lot of the people that make over $250,000 a year are small business owners and small businesses, as we all know, are the prime generators of jobs. So I think the better argument for Republicans is going to be this is going to hurt the economy, the generation of jobs, this is going to result in layoffs and say for Joe Six-pack out there. It’s not just the taxes of the rich guy, your livelihood is in jeopardy.
Actually, Mr. Wallace, it is overwhelmingly “just the taxes of the rich guy.” Here are the facts:
Less than 2% of “small businesses” would be affected by Obama’s tax change:
According to an analysis by the Center on Budget and Policy Priorities, only 1.9% of filers with small business income file in the top two income brackets. Even among those 1.9% of filers, many of those individuals don’t have employees, are otherwise employed, and earn their income through passive investments.
A “small business” is very often an employed rich individual declaring business income:
As Len Burman and Eric Toder of the Tax Policy Center explained in October, “Members of corporate boards, for example, report their compensation for that service on schedule C of their individual tax return. Partners in many law firms, accounting firms, medical practices, and Wall Street hedge funds also report business income rather than wages, as do people who receive rents or royalties from investments in real estate and oil and gas partnerships.”
Most “small businesses” don’t create jobs:
America has 6 million businesses with employees, and 20 million businesses without employees, most of these filing business income on their individual tax form. As the AP explains, “most small businesses don’t create jobs. They tend to be lawyers, accountants and other professionals who earn some of their money from partnerships or otherwise organize themselves as a business entity.”
Rich people declaring business income are more likely to be “passive investors”:
The richer an individual declaring “small business income” is, the more likely they’re just declaring a passive investment, like real estate speculation or owning a portion of an oil and gas company. As the CBPP found, “about 35 percent of “small-business owners” with incomes above $200,000, and about 58 percent of “small-business owners” with incomes over $1 million, received some or all of their business income in the form of passive investments.”
Wallace warned that conservatives didn’t want to get caught defending “the people who make over $250,000 per year.” Unfortunately, by launching a full-throated defense of rich people declaring business income, including members of corporate boards, partners in hedge funds, and real estate speculators, that’s exactly what they’d be doing.