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Small Businesses Grew Twice As Fast Under Clinton Tax Rates

By Travis Waldron on November 9, 2012 at 5:15 pm

"Small Businesses Grew Twice As Fast Under Clinton Tax Rates"

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Republicans have long opposed the expiration of the high-income Bush tax cuts, those that hit incomes over $250,000, because they claim it will be a tax hike on America’s small businesses. House Speaker John Boehner (R-OH) said as much today in highlighting his opposition to the expiration. “Raising taxes on small businesses will kill jobs in America,” Boehner said. “It is as simple as that.”

Economic evidence, however, contradicts that view. Under President Clinton, the top marginal tax rate was 39.6 percent, where it would return if the high-income Bush tax cuts expire at the end of the year. But small businesses grew twice as fast during Clinton’s time in office than they did when President Bush occupied the White House, as this chart from the Center on Budget and Policy Priorities shows:

Boehner has repeatedly highlighted a flawed study stating that the expiration of those tax cuts would kill 700,000 jobs and hit a substantial number of small businesses, even as non-partisan reports from the Congressional Budget Office and Congressional Research Service show that the expiration would have little effect on economic growth, and the Joint Committee on Taxation found that only 3 percent of small businesses would be hit by the increase.

And, as CBPP notes, there are numerous problems with Boehner’s argument. A “small business” would have to earn substantially more than $250,000 a year to actually feel an impact of the higher tax rates, meaning it likely isn’t that small anyway. Many of them, meanwhile, are “pass through entities,” businesses that operate as investment vehicles or for other reasons and are “not engaged in business activity as it is traditionally understood.” According to a Treasury Dept. study cited by CBPP, just 7.6 percent of the income taxed at the top two income tax rates comes from actual small business income.

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