Senate Republicans last night successfully blocked the Buffett Rule, a proposed tax on millionaires that the GOP says would unfairly hit America’s small businesses and job creators. “It represents a huge tax increase on job creators,” House Budget Committee Chairman Paul Ryan (R-WI) said on MSNBC last week. “About 80 percent of our businesses file their taxes as individuals, so they would get hit by this Buffett Rule. Everybody thinks we’re just going to tax the hedge fund manager and the movie star, what you’re getting is that successful small business.”
But claims like Ryan’s are wrong, according to data from the U.S. Treasury. In fact, the Buffett Rule would hit just 1 percent of America’s small businesses, CNN Money reports:
But federal data show that only 1% of small business owners have enough income to qualify for the Buffett Rule, according to the Treasury’s Office of Tax Analysis, which reviewed filings in 2007. The report, which was issued last year, examined 20 million tax returns — and only 273,000 would meet the Buffett Rule threshold.
Economists and tax experts don’t expect the landscape has changed drastically since that study was done. Most small firms are sole proprietorships, one-person operations like Rebel Luxe in Los Angeles.
The Buffett Rule would only hit households with incomes above $1 million that do not already pay a certain tax rate, a situation that is unlikely to apply to small businesses, because the vast majority of small business owners don’t earn $1 million a year and those that do are already taxed at normal income tax rates.
Rather, the rule, which would hit an estimated 217,000 households in 2015, would have a greater effect on individuals whose income is subject to lower capital gains and carried interest taxes, or those who use various loopholes to dramatically lower their tax rate. As the Treasury report shows, small businesses aren’t likely to be in that group, no matter what Republicans (and some Democrats) say.
The United States Chamber of Commerce also used the argument that the Buffett Rule would hurt businesses while telling senators that it would score the legislation in their annual “How They Voted” scorecard. “Raising taxes on higher earning taxpayers would hurt business owners on whom our economy depends to create jobs,” R. Bruce Josten, the executive vice president for Government Affairs, wrote in a letter to lawmakers. While pushing the false idea that the Buffett Rule would hurt businesses, the Chamber is also urging lawmakers to extend the Bush tax cuts for the rich, which expire at the end of this year.