We already know that the raising of marginal tax rates at the $250K level will, in fact, impact only 3% of so-called “small businesses.” We know that, after some folks did some investigation into the claim that the vast majority of small businesses would be affected and discovered, in fact, that was not true.
The GOP turned around and said, “Well, those 3% make 50% of the small business income.” Which made it sound a lot more threatening. Until someone wondered … how could 3% of small businesses be making 50% of small business income? Sure, the GOP is accustomed to defending a tiny fraction of the population getting an ever-increasing share of the income and wealth pies. But aren’t small businesses the sort of Mom ‘n’ Pop Main Street sort of things?
Um … not so much.
By the definition used, the “small businesses” that the Republicans (and some Democrats) are fighting so hard to defend include:
- Bechtel Corp.
- PricewaterhouseCoopers
- Tribune Corp
- Kohlberg, Kravis and Roberts (a takeover firm that reported $54 billion in assets managed worldwide last year).
- Hedge fund firms, like that owned by the dreaded George Soros.
- Authors, actors, athletes
- Other major partnerships, law firms, LLCs, and other “S Corporations.”
These are privately held businesses that avoid normal corporate taxes by having their income filed by individuals. These “pass-through” entities report profits on the individual tax returns of their owners, managers or shareholders.
Many of these are not what most folks would consider small. Many others are not Main Street job engines (at least, not jobs that are going to pick up the economy any time soon). Many of them have few to no employees. And since the tax on these sorts of businesses is on Net income, not Gross income, even firms that are above that limit can manage their woeful tax burden through capital investment and the like.
And, of course, we’re talking about marginal tax rates. I.e., only everything over $250K is subject to the higher rate.
Now, one can have a rational discussion about whether George Soros and Bechtel Corp. and KKR and PwC ought to pay a higher marginal tax rate. One can argue whether this will impact their hiring practices, will hurt or help the economy and the deficit and unemployment. But such a discussion can only be rational if we know what we’re actually talking about, and kick to the curb the Main Street Mom ‘n’ Pop image the GOP is disingenously wrapping around itself in.