Our guest blogger is Michael Linden, Associate Director of Tax and Budget Policy at the Center for American Progress Action Fund.
This week the Washington Post ran a sensible editorial highlighting the hypocrisy of Republicans who oppose a $33 billion extension of unemployment benefits but strenuously support an extension of massive tax cuts for very rich people that would cost 20 times more. Specifically, the Post called out Senate Minority Whip Jon Kyl (R-AZ), who, in a recent interview, tied himself into rhetorical knots trying to justify the obvious contradiction. The Post rightly pointed out that such a stand speaks volumes, “about the GOP’s refusal to practice the fiscal responsibility it preaches.”
The Post also, almost as an aside, mocked Kyl’s reliance on, “the tired and unsubstantiated argument that the tax cuts for the wealthy must be extended because otherwise ‘you’re going to clobber small business.’” Today, in a letter to the Post, Kyl responded, and his response really illustrates how weak the Republican position is on the merits:
The Post also questioned my assertion that raising taxes on upper-income Americans would ‘clobber small businesses.’ But facts are stubborn things. Small businesses generated roughly 64 percent of net new jobs in the past 15 years. Of the almost 120 million private-sector workers in the United States, slightly more than half work for small businesses. So if we’re trying to promote economic policies that create jobs, why raise taxes on the job creators? The nonpartisan Joint Committee on Taxation noted this month that half of all income reported by individuals in the top two tax brackets is business income.
Kyl first offered two data points (unsourced, of course) to illustrate how crucial small businesses are to the economy. That’s fine, but it’s also entirely beside the point. Kyl offers no evidence that any of the businesses he referenced would be affected by the expiration of the Bush tax cuts at all, and chances are extremely high that they would not, as fewer than 2 percent of small businesses owners file in the top two income tax brackets.
Kyl then tries again by referencing this JCT report, which states that “half of all income reported by individuals in the top two brackets is business income.” But did you notice anything at all odd about that sentence? Did you notice that the word “business” is not preceded by the word “small?” Maybe it’s because the very next sentence from the very same JCT report that Kyl relies on says:
These figures for net positive business income do not imply that all of the income is from entities that might be considered ‘small.’ For example, in 2005, 12,862 S corporations and 6,658 partnerships had receipts of more than $50 million.
So, what we are really talking about here is extremely wealthy people who claim millions and millions of dollars in income as “business income” and have no relationship at all to actual small businesses. In fact, that very same JCT report states that only 3 percent of taxpayers with any net positive business income at all will be affected by the expiration of the Bush tax cuts for the wealthy. The Post rightly dismissed Kyl’s argument as “tired” and “unsubstantiated,” because, as his reliance on cherry-picked data makes clear, that’s exactly what it is.