Of all the arguments Republicans offer to maintain Bush tax cuts for the wealthy, one stands out: The tax increase would be a blow to small business owners. This is misleading–but you can’t count on media to get this right.
The CBS Evening News had a segment last night (11/29/12) taking a look at the issue. On its face, there’s not much support for the Republican position: About 2.5 percent of small business owners–a somewhat loosely defined group–would see a tax hike on income above $250,000 (Tax Policy Center, 8/5/10). This is straightforward; so how do you make it less so? CBS did it by leading off with a business owner who claims he’s about to get socked. Wyatt Andrews reported:
Kevin Green owns two flower and gift shops in Alexandria, Virginia. He said raising taxes on the wealthy won’t just hurt him–it will hurt his workers and the economy…. Small business owners typically report business income on their personal taxes. In a good year, Green’s income will exceed $250,000, making him one of those taxpayers the president says should pay more–in his case, an estimated $8,000 more.
Remember, if this is all true, that means Green is in the tiny minority of business owners affected by the potential tax increase. Remember, these tax increases would apply to only the income above that $250,000 threshold. Green’s claim of an $8,000 increase means that he likely makes substantially more than $250,000. (According to this chart, he would seem to be in the above $500,000 income range.)
So how do you make 2.5 percent sound like a lot? You ditch that number in favor of a total number of affected business (precisely what ABC‘s Jonathan Karl did back in 2010). So viewers saw this:
Andrews notes that the White House argues that this “small business” category includes people like hedge fund owners–a far cry from the mom-and-pop shopkeeper that Republicans like to talk about. But then he pivots to the Republican counter-argument:
But when Republicans argue higher taxes mean slow down growth, they are thinking about businesses like Kevin Green’s.
Well, of course they are. Or at least they say that they are. But journalism should scrutinize these arguments, rather than just repeating them.
This is another attempt to muddy the water in a debate that should be fairly straightforward. This kind of story is a chance for media to do some factchecking. Or, alternatively, to help Republicans flesh out their talking points.
I’m almost more interested in how this guy is pulling that kind of income from “two flower and gift shops”. It seems much more likely that there’s a lot of information left out, and that those are only a part of his income.
Its not that hard to hit those numbers if that is your “gross income”. But even then, as the people say, those who do hit those numbers are still small.
http://useconomy.about.com/od/glossary/g/small_businesses.htm
But what exactly is a small business? It’s specifically defined by the Federal government, which is important to know if you are looking for small business Federal grant or loan. Companies that are the following sizes or smaller are considered small businesses according to the Small Business Administration (SBA):
Manufacturing and mining industries – 500 employees.
Wholesale trade – 100 employees.
Retail and service – $6 million.
Construction – $28.5 million.
Trade contractors – $12 million.
Agricultural – $0.75 million.
That has changed, when I was working for the Government writing contracts for the outside contractors, the Limit was basically $3.5 Million a year or less in Gross incomes, and less then 50 employees over all.
Seems we have all bought into the logic . . . if profits are taxed it hurts business.
The truth may be the opposite. If a business has to pay taxes on profits, one way of avoiding those taxes is to invest more in your business producing less profit to be taxed. If the taxes are insignificant then you take the profits and spend the untaxed profits any way your heart desires. In other words . . . if I have enough profit to live on, say $250K, and if I have the choice of investing in my business or paying taxes . . . I would invest in my business but . . .
I would rather have no taxes and have the profits for myself to spend on my business or on myself . . . so no or low taxes are a good political point.
Yes – a few million high-income households (business owners or not) will pay a little more taxes. How is that a problem?
Peter my taxes are going up….period!Argue that they are not all you want.And my dollar is going down.If you scratch a small business owner or anyone who employs others- we will refuse to take the hit.Your arguments aside I hope you got that.Did you get that?We will pass on increased cost to the consumer.Or let go employees to make up the difference.That goes for Obamacare….personal income tax……devaluation of the dollar due to the government printing money,or new stimulus etc.See corporations never pay an increase in taxes or loss of income.We simply pass it on.The pain that is.That is why you don’t get the hypocrisy.Obama knows his moves effect everyones pocketbook.He just fiens that it only effects the rich.A lot of people listen to his rhetoric and actually believe him.Look in the end you do what is best for business.If it is cheaper to pay the fine(obama care) than to ensure people then we will all dump them on the “free” government insurance.Everybody suffers because Obama has not a clue in hell how business works.Look at his proposals this week.No cuts in spending.No serious look at Medicare or any driving force of the deficit.New stimulus.Roll back Bush tax cuts for the rich….oh and tax the rich.That will all raise maybe enough to fund government for 8 and a half days.About a billion in extra revenue.Yet our deficit will be one trillion!Problem not solved.Not even looked at.Can kicked down the road.No budget possible.Over the cliffs we go.Obamas big promise kept.Fairness restored.HA!You need to start being honest with people.
I saw Joe Biden shopping at Kohls.I new they were big supporters so i was not to alarmed.Heard today Kohls took on debt to pay out their taxes to get ahead of the Obama tax hike.I guess Joe should be angry at that.Slipping his noose as it were.But no smiling Joe is as thick as thieves with this lot.Unions got a pass on Obama care.Congress too.President.80% of other companies being allowed to opt out are in Nancy Ps district.Nepotism. Fraud. Deceit.Backroom deals Chicago style.Taxes are going up.Everyway ,everyday for everyone. The top guy always kicks down.Foolish foolish silly children.That is todays Dem party
“I’m almost more interested in how this guy is pulling that kind of income from “two flower and gift shops”.
EASY … He puts his Gross Sales on Line 7 of the 1040 .. and from there he takes his deductions … which also means he is … I would say “stupid” but instead will say … “Not Very Tax Savvy”.
But I don’t believe either – I sense that to make the story “dramatic” – to sell newspapers or gain sympathy – either he or the media deliberately morph the details.
“Taxes are going up.Everyway ,everyday for everyone. The top guy always kicks down.Foolish foolish silly children. That is todays Dem party”
I Disagree Dude. Rather, that is today’s Every Political Party.
I am very annoyed at how all (including the so called Liberal Media) are reporting on the proposed increase.
What is the real shame in all of this is how they are trying to make these people look like victims. Really? I’m self employed – I know how deductions for self employed work. The guy “reporting” $250,000 net really cleared a heck of a lot more than that but our tax system allows all these deductions to those who itemize and file on a schedule C. The remainder of American who file a short form and regular income are picking up the tab for these people.
If all small business owners making taxable income over 250 thousand are responsible for half of all small biz jobs, then they are underpaying half of all small biz employees. No wonder the economy is stagnant. Shame on them!
Most Americans in 2010 paid far less in total taxes — federal, state and local — than they would have paid 30 years ago. According to an analysis by The New York Times, the combination of all income taxes, sales taxes and property taxes took a smaller share of their income than it took from households with the same inflation-adjusted income in 1980.
Households earning more than $200,000 benefited the most by receiving the largest percentage declines in total taxation as a share of income. Middle-income households benefited, too. More than 85 percent of households with earnings above $25,000 paid less in total taxes than comparable households in 1980.
Lower-income households, however, saw little to no benefit. Many pay no federal income taxes, but they do pay a range of other levies, like federal payroll taxes, state sales taxes and local property taxes. Only about half of taxpaying households with incomes below $25,000 paid less in 2010.
The uneven decline is a result of two trends. Congress cut federal taxation at every income level over the last 30 years, while state and local taxes increased for most Americans.
My wife and I quit corporate serfdom 20 years ago. We have been working for ourselves since. We are small business owners. We make nowhere near 250k. But if we did we would gladly pay higher taxes if they were being used to pay for the social safety net, education, infrastructure, clean environment, and helping the helpless.
At the present time our taxes are misdirected by the lawmakers to fatten the profiteers in the military security prison oil coal pharmaceutical insurance industrial complex. The Europeans pay a lot more taxes but they get a lot more in return and they know it. That’s why they gladly pay.
I resent having to “sponsor” mercenaries fighting for imperial quests in Afghanistan at the tune of $1M a year!
I think most Americans are aware on some level that their pockets are being picked. That is why they have a knee-jerk reaction to higher taxes. Until they realize that the government is “us” and it should be taken back from those self-serving hijackers to work for us, the status quo will persist. The media is to be blamed for obfuscating the truth about how our taxes are being spent and how things could be in a more ideal world.
The point being missed is that the consumers are the driving force behind the entire economic system. Who the heck is going to buy all of those flowers when they’re struggling to put gas in they’re car to get to work. Not everyone with incomes over $250k is a small business owner. Maybe there should be tax credits for small business owners when they hire new employees, and a little more when they hire Veterans… sounds like I might have heard that from President Obama.
Jeedbe thanx for that. “Costco” Can you tell how much I have shopped there?
From the article, “Small business owners typically report business income on their personal taxes.”
Setting aside that this practice should not even be legal, the bigger question is why would they do that? Why not report them separately so they don’t get hit as hard? I’ve never understood this argument.
When small business owners speak out on call-in programs like C-Span’s Journal or in letters to the editor about the “huge tax increases” they face, it seems apparent that many of them believe they are to be taxed on gross receipts rather than on the business net that becomes their personal income. Is there a right-wing effort to be seen in this phenomenon also?
Are we forgetting that the first $250,000 AGI will be benefiting if Congress agrees to extend the Bush tax cuts, except for those making more? I have read it averages to around $12,000 a year. That would be an approximate $144,000 tax benefit for the last twelve years the Bush tax cuts have been in place. Perhaps the “small” business has forgotten how this benefited them. What is quite apparent,,,businesses are not re-investing this “windfall” back into the business (generally) but the owners and any that are considered in the top fourth quintile of income are using this benefit to create more money not jobs…When the middle and lower classes of income see their wages (or income) increase, this will create the jobs as they demand more products and services.
Unions did not get a pass on The Affordable Health Care Act as someone posted here…It depends on the employers health care package, if any, and some provisions in the Affordable Health Care Act that exempt grandfathered plans, also those businesses/corporations that are self-insured.
@michael e..If a small business has less than fifty employees he does not have to provide health insurance to his employees and he is exempt from any penalty/tax. I am assuming you are a small business owner. If your business has twenty-five employees or less, you will receive a 35% tax credit on the premium if you decide to offer a health insurance package and that goes up to a 50% tax credit in 2014. They are also exempt from any penalty/tax. Perhaps as a business owner…at least a savy one…you should study what is in the Affordable Health Care Act. Perhaps what is wrong with this country is the greedy business/corporations that are in essence “shooting themselves in the foot” by passing on the cost of every increase in tax or business expense unable to realize that it is an agenda doomed to fail. it may take time..and we are witnessing it today..as unemployment increases and stagnating wages of the working class…not to mention those same companies willing to cut costs by hiring part-time to eliminate benefits…financially harming the very customers the business SHOULD be trying to attract. When the working/middle class cannot afford your product, though you may have wealth and will not be harmed…depending on how much wealth you have…it is contributing to the downfall of this country. Personally, I believe there are many small business owners that want to share the profits fairly knowing it is the laborers that contributed to the businesses well being and a fair boss gets more from their employees. These owners make sacrifices as do the workers when business is bad. The majority of U.S citizens want to work and provide for their families. What we are witnessing today is greedy capitalism that feels they owe no allegiance to their workers or the country. When you factored in what the banks and Wall Street have done to rob the working class, class warfare is exactly what is occurring and the working class is losing. Our only hope is President Obama as he tries to recoup our losses.
Virginia I think before we even get into it you should say what are your political beliefs.You sound like a socialist to me.Your understanding of a profit driven society is damn near nil.Your last line “our only hope is president Obama”is the stuff of madness.Our only hope comes from his employers.That is us.And we hope he stays the hell out of our business so we can conduct business.I need no lessons from a man who has never run a popsicle stand.Where is his own personal redistribution?He has never given anything to charity, painting him as a liar ,and a fraud.As far as will Obama care cost small business…….Just listen to the association of small business men of America.Not the spin your proposing.They are strongly against it.And in the end -they are the final word on the subject.Their is that liberal, elitist,academia based nutwork of people about the white house that believe their own rhetoric ,and ignore the experts(small business owners.
Got all that, Virginia? First the verdict, then the trial.
michael e: You said “Where is his own personal redistribution?He has never given anything to charity, ” Where the H did you get that from”. Oh I forgot you don’t read anything or listen to anything that doesn’t fit the lies you state. Before you state anything, look it up!
In 2010, for instance, the president’s taxable income was a little over $1.7 million, much of it from book sales. Line 19 of his itemized deductions shows that he gave $245,075 in gifts to charity.
That would be a rate of more than 14 percent, easily meeting Huckabee’s standard of a “dime out of a dollar.”
In 2009, the president’s taxable income was about $5.5 million. He listed $329,100 in charitable contributions on his tax return and also directed the Nobel Prize Committee to give his $1.4 million prize directly to 10 charities (which meant he could not take a tax deduction for donating the prize).
This adds up to a rate of 31.4 percent of taxable income, again easily surpassing Huckabee’s standard. (Update: a reader correctly notes the percentage would be 25.1 percent if you added Obama’s Nobel Prize money to his taxable income.)
If you use Google – you can find this out just as I did.
Learn to do your own research instead of relying on Fox News!
Even Milton Friedman showed that small business creating jobs is unprovable because of survival bias (J Eco Lit, Vol. 30, No. 4, pp. 2129-2132). Small business is all about sociopath atomists who want to break the law by being on their own so no one sees them, but they want their wives to work for the government just to get the benefits, like healthcare.