On November 29, Fox & Friends repeatedly suggested that most small businesses will be affected by the extension of the Bush tax cuts, despite the fact that an overwhelming majority of small business would be unaffected by the expiration of the tax cuts for the rich.
Fox & Friends guests repeatedly suggest expiration of Bush tax cuts will largely affect small businesses
Alex Cortes: Bush tax cuts for wealthy will "hit 50 percent of all small business income." On the November 29 edition of Fox News' Fox & Friends, Alex Cortes of the Restore the Dream Foundation asserted that the portion of the Bush tax cuts that affect those making more than $250,000 a year "aren't just tax cuts for the so-called wealthy. It'll hit 50 percent of all small business income."
Payne: Letting tax cuts on rich expire will "attack small businesses." Later during the program, Fox & Friends guest Charles Payne suggested that the Democrats' plan to let the tax cuts expire for the wealthiest Americans, which is estimated to save $700 billion over 10 years, would disproportionately affect small businesses. Payne stated: "The $700 billion number that they throw out, over 10 years as far as the deficit, I see it the exact opposite. If we attack small businesses, and we hike their taxes January 1, that means less hiring." Payne later asserted that letting the tax cuts expire would be the "largest tax hike in the history of this country."
Vast majority of small businesses would not be affected by allowing Bush tax cuts for the wealthiest expire
As Media Matters has repeatedly pointed out, at least 97 percent of small businesses would not pay higher taxes if the Bush tax cuts for those making more than $250,000 were allowed to expire. According to the Tax Policy Center's (TPC) table of 2007 tax returns that reported business income, 481,000 of those returns, or 2 percent, were in the top two income brackets. And according to PolitiFact, the Joint Committee on Taxation (JCT) has projected that in 2011, "Only 3 percent of all taxpayers who reported having positive business income will see their taxes go up under the proposed Democratic initiative" of letting the Bush tax cuts for the wealthy expire. [Tax Policy Center, 4/27/07; PolitiFact, 8/4/10]
Businesses that are affected by top Bush tax cuts are not necessarily "small"
The so-called "small businesses" that will supposedly have 50 percent of "small business income" affected are not necessarily "small businesses." As Media Matters has noted, the apparent sources for the claim that 50 percent of "small business income" would be affected by letting the Bush tax cuts for the wealthiest Americans expire, Tax Policy Center and the Joint Committee on Taxation, also noted that that the businesses reporting income that would be affected are not necessarily what most people consider "small businesses" and would include law partnerships, accountants, consultants, real-estate investors, actors, professional athletes, and authors like President Obama. [Joint Tax Policy Committee, 7/12/10; Tax Policy Center, 8/4/10]
JCT: "These figures for net positive business income do not imply that all of the income is from entities that might be considered 'small.' " A July 12 analysis of Obama's FY2011 Budget Proposals by the JCT stated that "three percent of all taxpayers with net positive business income" would see higher taxes under Obama's plan, adding that "[t]hese figures for net positive business income do not imply that all of the income is from entities that might be considered 'small'." [Joint Tax Policy Committee, 7/12/10]
TPC: "We don't know how many of these businesses are really small." On August 4, the Tax Policy Center blog stated that 2.5 percent of taxpayers who report business income on their individual tax returns would pay higher rates under Obama's plan and that "we don't know how many of these businesses are really small." [Tax Policy Center, 8/4/10]
CBPP: Much "business income" does not go to "what most Americans think of when they hear the term 'small business.' " In an August 3 post, Chuck Marr and Gillian Brunet of the Center on Budget and Policy Priorities (CBPP) wrote that extending the tax cuts for high-income taxpayers "would do little for small business because only the top 3 percent of people with any business income, let alone income from a small business, would benefit." The post further stated that "large amounts of 'business income' go to concerns like large corporate law practices, accounting firms, and wealthy people who invest in financial and real estate partnerships. These are not what most Americans think of when they hear the term 'small business.' [Center on Budget and Policy Priorities, 8/3/10]
CBO: Extending tax cuts for wealthy "does not create much incentive ... to hire more workers"; is poor stimulus
CBO: Extending tax cuts "does not create much incentive ... to hire more workers." CBO director Douglas Elmendorf stated in February written testimony that "[d]eferring the scheduled increases in tax rates in 2011 would help some businesses" but that "increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products." [Elmendorf's written testimony to the Joint Economic Committee, February, 2010 [[2/10]] ]
Economists: Extending the tax cuts that benefit only the wealthy is poor stimulus.
- Howard Gleckman, Tax Policy Center: "... higher income households are more likely to bank the cash than spend it. As a result, tax cuts for these high-earners will do relatively little to boost the economy in the short run." [Tax Policy Center, 10/31/10
- Congressional Budget Office: As stimulus, allowing only the top tax cuts to expire "would be more cost-effective" than extending all of the cuts "because the higher-income households that would be excluded would probably save a larger fraction of their increase in after-tax income." [CBO, 1/2010]
- Paul Krugman: "[I]t's hard to think of a less cost-effective way to help the economy." [New York Times, 8/22/10]
CBO scored "[d]eferring the scheduled increases in tax rates" as the lowest-scoring policy proposal to stimulate economy. In a January 14 report on "Policies for Increasing Economic Growth and Employment in 2010 and 2011," CBO stated:
[P]olicies that would temporarily increase the after-tax income of people with relatively high income, such as an across-the-board reduction in income taxes or an increase in the exemption amount for the AMT, would have smaller effects [than other options] because such tax cuts would probably not affect the recipients' spending significantly. [CBO, 1/14/10]