Small Business Hit By Tax Hike on 'The Rich'? NYT Says It's Just a Myth

The front of Saturday's Business Day featured David Kocieniewski's "Tax Increase Would Hit Few Small Businesses," a typical Times dismissal of the hit that small businesses would take if the Bush tax cuts for "the rich" were repealed by Congress. He forwarded President Obama's disingenuous concerns about increasing the deficit (never mind that retaining the middle-class tax cuts will cost the Treasury far more money), as if the big-spending Obama administration has credibility on deficit reduction in the first place.

As Congress and President Obama wrestle over whether to let the Bush tax cuts expire for the wealthiest Americans, one of the most heated aspects of the debate, in Washington and in neighborhoods across the country, is how a tax increase would affect small businesses.

Mr. Obama wants to extend the cuts for most taxpayers. But he proposes eliminating them for the top 2 percent of wage earners, whose taxes would rise. Opponents of the plan warn that a tax increase would batter hundreds of thousands of small businesses - from Silicon Valley start-ups to mom-and-pop convenience stores - and prevent them from creating the jobs that might lift the sagging economy.

"It's a body blow to the small-business community," said Grover Norquist, president of the conservative advocacy group Americans for Tax Reform.

Despite that emotional appeal, Internal Revenue Service statistics indicate that only 3 percent of small businesses would be subject to the higher tax, and many studies of previous tax increases suggest that it would have minimal impact on hiring.

By contrast, actually talked to a panel of economists, and they had a different view: "...most economists agree: Keep them where they are. One option, to let the tax cuts passed during the Bush administration expire for only the richest 3% of taxpayers while renewing them for everyone else, is popular among Democrats and the choice of the Obama administration. But a majority of a panel of leading economists surveyed by said that the tax cuts should be renewed for everyone."

The Times tried to bust up the apparent myth of the plucky small businessman.

But the way the I.R.S. classifies small businesses is vastly different from the public perception of the neighborhood dry cleaner or the small tool-and-die shop. A report released by the Joint Tax Committee in July found that many of the tax returns categorized as small businesses were actually filed by wealthy taxpayers who earned business income through limited partnerships or S corporations to allow their firms to avoid paying corporate taxes.

The Times failed to challenge Obama on this hypocrisy:

With an eye on the deficit, Mr. Obama has said that the country cannot afford the $700 billion it would cost to extend the tax breaks for the wealthiest Americans over the next decade. House Speaker Nancy Pelosi has said she supports Mr. Obama's proposal, but it is unclear whether she has enough support in her caucus for the measure.

Did Obama have his eye on the deficit when he pushed through budget-busting health "reform"? Obama's concern for the deficit looks even more convenient when one considers that the middle-class tax cuts will cost the Treasury far more revenue that the tax breaks at the top, as editor Nick Gillespie demonstrated at the website for the libertarian Reason magazine.

Folks such as Alan Greenspan want all the Bush tax cuts to expire, a move which the CBO estimates would generate $3.9 trillion over the next decade. The Obama administration and Nancy Pelosi bitch and moan about the need to increase revenue but want to keep all the Bush rates, except for those affecting individuals making over $200,000 and households making more than $250,000 a year. The CBO estimates that just dinging top income earners would pull in about $700 billion over the next decade.