Conservative Economists Claim Taxing The Rich Hurts Small Businesses; Small Businesses Disagree

Our guest blogger is Heather Boushey, Senior Economist at the Center for American Progress Action Fund.

Yesterday, Speaker of the House John Boehner (R-OH) gleefully unveiled a list of 88 economists, who warn “that raising taxes on small businesses would have a detrimental impact on the economy.” Their argument is that raising the marginal tax rate on income earned above $250,000 per year, as proposed by Democrats in Congress and the Obama administration, will lead small business owners to constrain hiring or lay-off workers.

Yet, these 88 economists are saying something that small businesses owners themselves do not. In a NPR radio piece from December, journalist Tamara Keith tried to find small business owners to go on the radio to talk about how a surtax on millionaires — that is, a tax increase on the wealthiest — would constrain small business hiring, the same argument made in the economists’ letter. As Keith noted in the segment:

NPR requested help from numerous Republican congressional offices, including House and Senate leadership. They were unable to produce a single millionaire job creator for us to interview. So we went to the business groups that have been lobbying against the surtax. Again, three days after putting in a request, none of them was able to find someone for us to talk to. A group called the Tax Relief Coalition said the problem was finding someone willing to talk about their personal taxes on national radio.

NPR then posted their request to Facebook and got a few responses. But, these voices said what small business owners have been saying throughout the recession and recovery, which is, to quote Ian Yankwitt, who owns Tortoise Investment Management, “It’s not in the top 20 things that we think about when we’re making a business hire.”


Granted, this specific radio segment was about the millionaire’s surtax. But, for years, small business owners have been telling leaders in Washington that the number one problem is sales. Only in recent months has that number come down. The reason small businesses aren’t hiring has not been taxes; according to them, it’s been the lack of demand, too few customers with cold hard cash in their pockets.

As ThinkProgress has noted over and over, allowing the Bush tax cuts on income in excess of $250,000 to expire would not hurt small businesses. Conservatives simply use small businesses as a sympathetic character as they argue in favor of continuing their failed supple-side policies.

In general, I think it’s fantastic when individuals in the economics profession use their expertise to weigh in on the most pressing issues of the day. However, I think that it is important to look at who is weighing in. Compare the letter Boehner circulated to the one , urging Congress to maintain — and even increase — investments in human capital and infrastructure, which will improve economic growth now and in the decades to come. Unlike Boehner’s, well over 300 economists, including Nobel Laureates and John Bates Clark award winners, signed that letter.