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Grassley’s Challenge: Prove That Letting Bush’s Tax Cuts For The Rich Expire Won’t Harm Small Business

By Pat Garofalo  

"Grassley’s Challenge: Prove That Letting Bush’s Tax Cuts For The Rich Expire Won’t Harm Small Business"

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As we’ve been extensively documenting recently, Republicans have created a sort of right-wing fantasy land when it comes to taxes, claiming that tax cuts pay for themselves and that extending them doesn’t count as federal spending. Senate Minority Leader Mitch McConnell (R-KY) even claimed that “there’s no evidence whatsoever that the Bush tax cuts actually diminished revenue,” even though there is an exhaustive amount of evidence showing just that.

Today, the Senate Finance Committee held a hearing to examine the issues surrounding the expiration of the Bush tax cuts, and particularly whether they should be allowed to expire for the wealthiest Americans like President Obama has proposed. The Finance Committee’s Ranking Member, Sen. Charles Grassley (R-IA) refused to go quite as far as his GOP brethren, saying “I’m not disputing the notion that extending these tax relief plans scores under the conventions of our budget process…So, in that sense, tax cuts are not free.”

However, Grassley nonetheless wants to preserve the Bush tax cuts for the wealthy (which will cost $678 billion while benefiting just the richest 2 percent of the country), and issued a challenge to those who want to let the rates expire:

On this side, we hear the small business people loud and clearly. They say they know their taxes are going up. They don’t know how high the rates will go. They are reluctant to commit to expanding their businesses in what they perceive to be a hostile and uncertain environment…To those who are pushing the higher marginal rates, I say the burden is on you to show that you are not harming our primary job creators, small business.

At least he didn’t say “there’s no evidence whatsoever” that allowing the tax cuts for the wealthy to expire will have a negligible effect on small business, right? Unfortunately for Grassley, his challenge is exceedingly surmountable, as he’s relying on the conservative trope that tons of small businesses face the highest tax brackets.

According to the Center on Budget and Policy Priorities, however, fewer than 2 percent of the small businesses in the country face either of the top two tax brackets, which are the ones in question, while 34 percent are in the lowest tax bracket. 14 percent of small businesses actually qualify for the Earned Income Tax Credit, which is only available to low-income working people.

Plus, “many of the roughly 650,000 filers with small-business income who face one of the top two tax rates are merely passive investors who have nothing to do with running the business”:

Under the Treasury definition [of small business], for example, the $84 of income President Bush received in 2001 from a passive investment in an oil and gas company made him a “small-business owner.” 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. The Treasury definition also counts as “small-business income” the fees that CEOs are paid for sitting on corporate boards.

So it would seem that the burden has shifted back to Grassley. I, for one, would like to hear why he thinks spending $678 billion to benefit the richest 2 percent of the country is a worthwhile endeavor.

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