The myth of a small-business tax hike

Not surprisingly, Republicans aren’t pleased with Senate Democrats proposing a 5.6% surtax on millionaires and billionaires. But that’s no excuse to lie.

Rep. Doug Lamborn (R-Colo.), for example, insisted, “There are a lot of so-called millionaires who are small businesses. They’re not a movie star, they’re not a Hollywood actor, they’re the dry cleaner on the corner.”

This is standard GOP rhetoric — we couldn’t possibly ask the very wealthy to pay a little more in taxes, because those poor small businesses with seven- and eight-figure incomes would be unduly harmed.

Republicans say this all the time, but repetition does not improve its accuracy. Kevin Drum helped set the record straight a couple of weeks ago.

Step 1: The biggest part of Obama’s plan is to let the Bush tax cuts for the rich expire. The Brookings Tax Policy Center took a look at this last year and estimated that only 1.9% of small businesses are in the two top brackets that would be affected by repeal of the Bush tax cuts. That’s a little better than the dozen small farms affected by the estate tax, but not by much.

Step 2: About half of that 1.9% aren’t really small business owners at all. They’re high-income investors who get part of their income from investments in small businesses. So we’re down to about 1% of small businesses that would be affected.

Step 3: The top brackets are just that: brackets. When the top rate goes up, it doesn’t affect your entire income, just the portion in the top bracket. So if the top rate goes back up from 35% to 39.6%, it only affects the portion of income above approximately $400,000. A small business owner making $500,000 would see an increase of about $5,000.

Kevin’s analysis was based on the White House plan eyeing tax increases on those making $250,000 or more. As of yesterday, the Democratic plan is eyeing tax increases affecting millionaires and billionaires exclusively, meaning that the number of small businesses affected the Dems’ approach would effectively be zero.

“There are a lot of so-called millionaires who are small businesses”? No serious person could possibly believe such nonsense.