Monday, March 9, 2009

Media Missing in Action: Small Business and Obama's Awful Tax Increase

Well, Republicans have been screaming for days about how Obama's tax increase on those earning over $250,000 will kill small business.

It turns out that only 3% of the small businesses in this country would be affected. (Thank you Peter Orszag for this rather important fact that none of our useless media ever bothered to ferret out.)

When faced with that fact, a Republican changed tactics. Yes, that's true. But that 3% employs 50+% of all small business employees. So?

And, remember, we're talking about turning back the top marginal tax rate to where it was in 2000. Less than a 4% increase.

But we are supposed to believe that a 4% tax increase on 3% of the small businesses in this country will cause these business people to ... what? Shut down their businesses? No, I don't think so. Refuse to expand or hire new employees? That's kind of hard to see, too. Don't most businesses expand when there is increased demand for their products? So unless a tax increase is confiscatory - costs the company more than it can earn through expansion - I find it truly difficult to imagine this outcome either. (Any of you small business people earning more than $250,000, please let me know if I am wrong.)

This reminds me of an argument that I haven't heard in a couple of decades:that the progressive income tax on individuals will cause them not to seek promotions. Because promotions come with salary increases, usually, and some salary increases come with increased taxes. Now, I have never known anybody to turn down a promotion because of an associated tax increase. Again, if the increase totally wipes out the salary increase, I suppose a person might refuse the promotion - but being primates, I suspect most of us would still go for the promotion.

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