This week, Republicans have solidified the notion that they will hold an extension of middle class tax cuts hostage unless $830 billion in tax cuts is also given to the richest two percent of households. To justify such a move, they’re relying on the phony argument that letting the Bush tax cuts for the richest two percent expire would disproportionately harm small businesses.
But a group of conservative Congressional Democrats are also making the same bogus argument. This week, a number of self-styled Blue Dogs sent a letter to Speaker of the House Nancy Pelosi (D-CA) saying that they opposed allowing the cuts for the wealthy to expire. One of the main drivers behind the effort — Rep. Jim Matheson (D-UT) — told the Washington Post’s Greg Sargent today that his rationale for making the push is to protect small businesses:
“I recognize $250,000 is a lot of money for an individual to make for an individual,” he said. “But we’re also talking about businesses. That’s not a lot of money for small businesses.” Asked how many people in his district fell into the above-$250,000 category, Matheson answered: “I don’t know the answer to that.”
Before getting to Matheson’s specific argument, let’s review: Fewer than two percent of small businesses and less than three percent of households with any business income at all would be affected if the Bush tax cuts for the rich expire.
Republicans concede that very few businesses would be affected, but then claim that half of small business income would be hit. But that statistic only matters if you’re concerned about a slight tax increase on Bechtel Corp., the Tribune Company, doctors, lawyers, and corporate CEO’s receiving a speaking fee on the side, all of whom fall under the GOP’s overly inclusive definition.
Matheson didn’t know how many households in his district would be affected if the Bush tax cuts for the rich expire, but according to the latest American Community Survey from the Census Bureau, the number is roughly 12,012. (The ACS survey cuts off at $200,000, not $250,000, so some of those 12,000 households would likely fall into the 28 percent marginal income tax bracket, and thus avoid a tax increase.)
The median household income in Matheson’s district is $55,000, while the median male full-time worker makes $46,000. Matheson’s favored extension would give a millionaire an annual tax cut of $128,832, or nearly three times what the median worker in his district earns in total.
Matheson is attempting to muddy the waters by making it sound like business revenues, not personal income, are what winds up on income tax filings. But that’s not how it works. As Matthew Yglesias has pointed out, “any small businessman who’s earning a middle class income isn’t paying in the top two brackets, just as any salaried employee who’s earning a middle class income isn’t paying in the top two brackets.” No matter how you slice it, extending the Bush tax cuts for the rich is spending $830 billion on the richest segment of the population.