President Obama's proposed tax hike on the top 2% of incomes will do next to nothing to close the gap in the US's budget deficits, now running more than $1 trillion per year. However, these taxes will have a major impact on small businesses, the nation's more prolific job creators.
Posted 11/14/2012 06:35 PM ET
President Obama's proposed tax hike on the top 2% of incomes will do next to nothing to close our chronic budget deficits, now running more than $1 trillion a year.
But it will have a major impact on one struggling part of our economy: small business.
In his Wednesday press conference, just before meeting with representatives of the nation's largest businesses, the president again claimed his plan to reduce the deficit and avoid the fiscal cliff would mean that "97% of small businesses are not going to see their taxes go up."
But this is, to put it politely, deceptive. By jacking up taxes on the most successful 3% of small businesses, Obama will destroy hundreds of thousands of jobs, shrink U.S. output and force companies to raise prices.
As usual, the data tell the story.
America has some 34.8 million small businesses, according to a recent Treasury Department study. Sounds like a lot, until you consider that 30 million of them employ no one other than the owner.
Of the remaining 4.8 million that do employ workers, 1.2 million have incomes above $200,000 — where Obama's tax hikes kick in.
Here's the rub: Those 1.2 million small businesses that will be hit by Obama's small-business tax are the nation's most prolific job creators, accounting for 54% of all private-sector positions — or 77.6 million in all.
And while they make up just 3% of all small businesses, they earn 91% — or $341 billion — of all profits reported by the small businesses with workers. "They are the most successful and therefore the biggest job creators," as the Heritage Foundation recently pointed out.
They also pay 44% of all federal business taxes.
Yet, the president's talking point about his tax increases affecting only "the rich" so they pay their "fair share" is repeated by the mainstream media as if it were true.
Maybe the media aren't aware of the Small Business Administration's estimate that, since the 1970s, small businesses have accounted for 66% of all net new jobs in the U.S.
By slamming small businesses, therefore, Obama's "tax on the rich" in fact turns out to be a tax on jobs, pure and simple.
This is confirmed by a study released in July by the consulting giant Ernst & Young.
It found that Obama's planned tax hikes on individuals earning more than $200,000 and families earning more than $250,000 will amount to a devastating tax hike on the small-business sector.
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