Over and over again we hear Democrats claim that raising tax rates on the rich won‚??t dampen economic recovery.¬† They also claim it would only affect a fraction of small business owners.¬†In yesterday’s¬†debate, the president asserted, as he has often, that 97 percent of businesses who pay individual rates would not see a tax increase.
Well, judging from this¬†new study by Internal Revenue Service,¬†¬†allowing Bush-era tax rates for high earners to expire, the centerpiece of President Obama‚??s tax plan and a big part of his campaign rhetoric, would mean that 1 million companies would be hit with new taxes. According to the IRS, which goes to great lengths to define a small business, ¬†high-income earners make up 24 percent of all small businesses that have employees.
Other studies (and pundits) have grossly underestimated the impact that a tax hike on high earners might take on small business, discounting owners of small C corporations and others. Wealthy earners with small businesses account for 923,000 businesses with employees. There are many more in business for themselves.
“No matter how you slice it and dice it, it’s hard to avoid that this is a tax increase on a significant share of small business owners,” said Raymond Keating, chief economist of the Small Business & Entrepreneurship Council told CNNMoney.
Democrats also argue that a tax on “millionaires and billionaires” — or, what in the real world means anyone making more than $200,000 and married couples pulling in more than $250,000 — could ¬†actually spur growth. How, is still a mystery.