So, we have $13.7 trillion in debt and we want to borrow $700 billion more to give a 4.6% tax cut to wealthy folks? Why? Because these folks are small business owners who will create jobs and dump money back into the economy, right? Let’s examine these “small business owners” a bit closer. Just who are they and why do we need to borrow tons of money to support them?
Congressman Paul Ryan (R) WI, is the ranking Republican on the House Budget Committee and a go-to guy for budget and economic ideas in the GOP. Ryan claimed that “more than half of the people who pay these higher taxes are the small businesses of America.” That’s not true, but gosh, it sure makes a good soundbite.
What is clear, however, is that we’re not talking about all that many small businesses in the first place. The vast majority of individuals who report business income or losses are not making upwards of $200,000 a year. In fact, only 2 percent of all those reporting business income in 2009 will earn enough to fall in the top two brackets.
According to FactCheck.org, the Urban-Brookings Tax Policy Center projected that 663,608 taxpayers with business income, or business losses qualified for the top two tax brackets in 2009. Who qualifies as a “small business” along side your local corner cafe? Do you consider an oil refinery a small business? Well, yes they are according to the Small Business Administration, if they have 1,500 or fewer employees. How about your local “Guided Missile and Space Vehicle Propulsion Unit and Propulsion Unit Parts Manufacturing” plant? Well, they are a small business if they have 1,000 or fewer employees. A commercial bank can have up to $175 million in assets and the SBA thinks it’s a small business. Military weapons dealers can make up to $27 million per annum as a small business.
A large majority of “small business owners” actually have no employees other than themselves. In 2005, the nonpartisan Tax Policy Center found that of the 487,000 individuals who claimed business income on Schedule C, only 15% paid any wages. Sarah Palin has made more than $12 million since skipping out on her obligations as Governor of Alaska. She gets six figures for her speaking engagements. Is she a small business? Yes, she can make up to $7 million a year from her ghost-written books and qualify as a small business. Does Sarah Palin really need a tax break? Just how many jobs do you suppose she will create with several hundred thousand dollars in tax refunds? Dick Cheney? Yep, small business. In 2003, his wife reported $44,580 in business income from her consulting business. That qualifies the Cheneys as a small business. Dick Cheney’s net worth is estimated to be between $30 and $100 million. Are they out there creating jobs? How about Barack Obama? He has a book out; Of Thee I sing, A Letter to my Daughters. Small business? Sadly no. Obama donated the profits from his book to a scholarship program thereby losing his small business status.
A report by the U.S. Treasury Department estimates that “only 27 percent of all upper-income tax filers report business income that accounts for more than half of their wages. It’s likely that a small-business owner would make most of his or her income from the small business.“
The point is, the vast majority of the people on whom we would spend $700 billion of borrowed money are not small business owners and/or do not create jobs. By far, most of the people in the top tax brackets will invest the money we give them, likely in Asian companies, since that’s where the profit is now, or spend it on foreign-made cars and virtually none of it will make it back into the economy.