Today, the Washington Post ran an article entitled “Small Businesses Brace for Tax Battle: Under Obama Plan, Some Entrepreneurs’ Bills Would Soar.” The article tells the story of Gail Johnson, who runs a chain of pre-schools and after-school programs and is supposedly going to be so hard-hit by President Barack Obama’s proposed tax increases that she will “consider scaling back operations.”
The Post proceeds to quote Bruce Josten of the Chamber of Commerce and Sen. Charles Grassley (R-IA), who both claimed that Obama’s tax increases are going to cripple business. But in a story with 29 paragraphs — which appeared on the front page of the paper, above the fold — only one paragraph was dedicated to pointing out that the overwhelming majority of small business owners will see their taxes reduced under Obama’s plan. As Dean Baker wrote:
The piece centers on an extremely atypical small business owner who claims that her taxes would increase by more than 19 percent under President Obama’s tax proposals. This person’s situation would describe that of less than 1 percent of all small business owners so it is difficult to understand why such a person would be prominently featured in an article on President Obama’s tax plans.
The Post also dismisses its own lone mention of how few businesses will be affected by stating “whatever the figure, Republicans argue that those who fall into the upper brackets tend to be firms with the greatest capacity for job creation.” The Post fails to note that Republicans who argue this are incorrect.
Here’s the real story. Obama has proposed raising the tax rate on the top two income tax brackets back to the level at which they were under President Clinton, and as the Center on Budget and Policy Priorities pointed out, “only 1.9 percent of filers with any small-business income are projected to face either of the top two income tax rates in 2009.” In fact, of people who file most of their income from their own business, “more than half have income below $30,000 and 80 percent make less than $100,000.”
Meanwhile, in a typical year the businesswoman portrayed in the article, along with her husband, makes more than half a million dollars. This places them in the 0.7 percent of households that file in the top two income tax brackets. While no one likes paying higher taxes, this is not a household that is barely scraping by, assuming that the half million is in net income (since that, and not business revenue, is what gets taxed).
So as Matthew Yglesias 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.” Someone should remind the Washington Post of that fact.
Brad DeLong has more.