Friday, July 20, 2012
Center on Budget and Policy Priorities: Allowing High-Income Bush Tax Cuts to Expire Would Affect Few Small Businesses:
Allowing the top two marginal tax rates to return to pre-2001 levels as scheduled next year would affect very few small businesses, a recent Treasury Department study found. The study shows that only 2.5% of small business owners face the top two rates. ... [A]n extension of the high-income Bush tax cuts would, in essence, constitute a massive tax cut for very wealthy individuals who overwhelmingly aren’t small business operators. ...
The arguments against allowing the high-end tax cuts to expire on schedule echo those made against President Clinton’s proposed 1993 tax increases, which set marginal rates at the levels to which they are set to return when the Bush rate cuts expire. Critics claimed at the time that those tax increases would seriously harm economic growth and even send the economy back into recession. As it turned out, job creation and economic growth proved significantly stronger following the 1993 tax increases than following the 2001 Bush tax cuts. Further, small businesses generated jobs at twice the rate during the Clinton years than they did under the Bush tax code (see Figure 1).