In order to justify their blanket opposition to allowing the Bush tax cuts for the richest two percent of Americans to expire on schedule — as President Obama has proposed — Republicans have been trying to claim that they’re looking out for the interests of small business. “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,” charged Sen. Chuck Grassley (R-IA).
Of course, less than two percent of the small businesses in the country make enough money to file in either of the top two tax brackets, which are the ones in question here, so Republicans have had to find ever more creative statistics to try and prove their small business bona fides. Today, during an interview with Bloomberg News, Senate Minority Leader Mitch McConnell (R-KY) claimed that allowing these tax rates to reset to where they were under President Clinton would affect fifty percent of small business income in the country:
What they propose to do is raise taxes on the top two rates, which would capture about fifty percent of small business income and affect about 25 percent of the American workforce in the middle of a recession. We think it’s a terrible idea.
Now, McConnell doesn’t have the tightest grasp on economic statistics. After all, he said that there’s “no evidence whatsoever” that the Bush tax cuts decreased revenue when there is, in fact, an abundance of evidence showing just that. But still, McConnell either doesn’t understand the data he’s looking at or is willfully distorting it.
This claim, which has also been made by House Minority Leader John Boehner (R-OH), comes from a Joint Committee on Taxation report which states that 50 percent of business income is in the top two tax brackets. But the report in no way shows that this is from small businesses. In fact, it explicitly states “these figures for net positive business income do not imply that all of the income is from entities that might be considered ‘small.’”
That same report actually says that just three percent of people with any business income at all — from a business large or small — will be affected if the top two tax rates increase. That means that 97 percent of people who collect at least some of their income from a business will not see their taxes go up under the President’s plan.
Dylan Matthews dissected the IRS filings of small businesses and found that “the filers reporting small business income who would be affected by letting the tax cuts expire come disproportionately from the ranks of the super-rich.” In fact, the Tax Policy Center has found that the Bush tax cuts actually harmed small business, because they made the tax code friendlier to large corporations and increased the cost of capital (by generating huge deficits). So what cherry-picked stat will Republicans rely on next to try and hide their plan to spend $830 billion on a tax break for the super rich?