Mercury Rising 鳯女

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The Republicans phony love affair with “small business”

Posted by Charles II on November 12, 2010

If you don’t feel like reading it, basically the Republicans are willing to bankrupt the country to line the pockets of a very few lobbying firms, hedge funds, etc. which, because their partners pay income tax on their personal return are lumped in with genuine small businesses. What hypocrites.


Of the business owners who would pay higher taxes under Obama’s plan, those with the highest incomes cannot be called “small” business owners.

Republicans in Congress echo NFIB’s talking points by arguing that the very wealthiest business taxpayers are the ones who truly matter in the debate over taxes. Former CBO director Douglas Holtz-Eakin, while testifying before the Senate Finance Committee, said that he thought the relevant figure was the amount of business income going to those few taxpayers rich enough to pay higher income taxes under the President’s plan. The Joint Committee on Taxation (JCT) projects that next year taxpayers will report a trillion dollars of active business income, and about half of that will go to taxpayers who are in the top two brackets (the brackets for which President Obama and Democratic leaders propose to
allow rates to go back up to pre-Bush levels).

But the business taxpayers who are rich enough to pay higher taxes under Obama’s plan (3 or 5 percent, depending on which figure you use) can’t all be called “small” business owners. They are merely people whose business profits are reported on their personal income tax forms. (This distinguishes these businesses from corporations that pay the corporate income tax.) But the businesses can be huge hedge funds, law firms, newspaper companies or even best-selling authors. They’re not necessarily struggling and they are not necessarily the sort of business people who create very many jobs.

This becomes obvious when one considers data on total receipts of these “flow-through” businesses (so-called because the income is not taxed at the corporate level but at the individual level under the personal income tax), including S corporations, partnerships, and limited liability companies. Most of the total receipts from these businesses are generated by the small minority that have more than $10 million in receipts. This is not to say that large companies are not an important consideration for policymakers. But it’s important to note
those business owners who actually would pay higher taxes under the President’s proposal are not likely to be of the “mom and pop shop” variety.

In 2007 over 14,600 S corporations reported gross receipts in excess of $50 million, and their 81,700 shareholders would report income from the S corporations on their individual returns. Surely, no one would reasonably think of these taxpayers as “small” business owners. For the same year, in the technical and professional category, 567 S corporation returns showed more than $50 million in gross receipts, with the average gross receipts in that group being $135 million. Six of the top ten lobbying firms are organized as partnerships (and three of the other four are private corporations that may be S corporations for tax purposes), as are most law, accounting, and engineering practices. Hedge fund and private equity firms are, too. This income is reported on the returns on individual taxpayers, but no serious person would call them “small”
business owners.

One Response to “The Republicans phony love affair with “small business””

  1. Charles II said

    To commenter Gene: we don’t allow commercial posts even if we agree with the sentiments in the message.

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