Reagan Budget Director Slams GOP for 'Theology' Of Tax Cuts

[JohnSmith2007 353]

You don't agree with the statistic that less than 2% of small business income tax returns fall into the category of income for which the Bush era tax breaks shouldn't be extended? That's not as much an opinion as it's data. What's there to agree or disagree with? We can talk about whether this is 2% or 3% or 5% but nowhere is there any evidence that most small bsinesses would have their taxes raised back to 2000 levels. The GOP making it a talking point that the top 2% of income earners are mostly small businesses does not make it so in the real world.

Dems don't like business? Then why is it that thus far only business has actually recovered making record profits while John and Jane America are still strucggling to come back from this recession? All this while Dems are in charge. Odd...

No, I don't believe that 2% of small business owners fall into the 250K and up bracket. That just isn't true.

I should modify my statement about dems and business. The dems don't like small business. It is because they tend to vote rep. Big business on the other hand is a ####### that will support whoever they think will give them a pass. Right now, the dems are the pimps of big business. John and Jane America is struggling because small business is struggling. The tax hike will kill them off all together and make the dems very happy.

[JohnSmith2007 353]

Just how many small business owners are in that top tax bracket?

The media keeps citing an old statistic claiming that 97 percent of small business owners don't fall into either of the top two tax rates. Is that number based on faulty logic?

By Tim Kane September 4, 2010

In 2004, William Gale penned a one-page piece for TaxNotes arguing, "Roughly 97 percent of small businesses would not be affected at all by increases in the top two tax rates."

That line has been repeated frequently in light of the upcoming expiration of high-bracket tax cuts.

Kevin Hassett and Alan Viard in today's WSJ counter the logic, essentially correcting Gale's overinterpretation. It may be true that 97 of tax returns with small biz income are not in the top tax brackets, but that is not the same as 97 percent of small businesses. Gale should know better.

The 3% figure, which is computed from IRS data, is based on simply counting the number of returns with any pass-through business income. So, if somebody makes a little money selling products on eBay and reports that income on Schedule C of their tax return, they are counted as a small business. The fact that there are millions of people in the lower tax brackets with small amounts of business income may be interesting for some purposes, but it is irrelevant for the assessment of the economic impact of the tax hikes.

The numbers are clear. According to IRS data, fully 48% of the net income of sole proprietorships, partnerships, and S corporations reported on tax returns went to households with incomes above $200,000 in 2007.



This shouldn't be a political issue, but too many folks are in denial that high income taxes on the "rich" are big burdens on entrepreneurs.

http://www.csmonitor.com/Business/Growthology/2010/0904/Just-how-many-small-business-owners-are-in-that-top-tax-bracket

[Mr. Big Dog 10,747]

No, I don't believe that 2% of small business owners fall into the 250K and up bracket. That just isn't true.

Then what is the share? What's the percentage that is true?

[wshc 46]

As the CBO notes, most Bush tax cut dollars go to higher-income households, and these top earners don't spend as much of their income as lower earners.

Really? Where do they keep that money then? Is it under their beds maybe. Maybe they bury it in their yards. Maybe they put it in to a savings account. That would be terrible if they let a bank work with that money. That would produce economic activity. We can't let that happen.

And businesses doing well are such a bad thing. I remember that once I was at a company and they were not doing too well, so everyday was a test to see if we got layed off or not. At one company I worked at, they were doing well and we felt like we had job security. But we can't have business's doing well, they don't know how to spend THEIR money as well as the Government. Again, the example being USCIS - are you getting good service for the buck?

Businesses are not letting go of their money now because of the uncertainty the current government has created. President Reagan had true leadership and he made people feel like setting the economics of capitalism free. Today, if you even want to earn a better living to buy better shoes for your kids you are demonized as an evil greedy businessman of one kind or another.

Your SPD/Democratic brainwashing is really showing through.

[JohnSmith2007 353]

The share, sir, is about 48%. Raise taxes on that 48% and small business will suffer. Since a majority of the employers are small business then expect the unemployment rate to skyrocket if the taxes are raised.

The Small Business Tax Hike and the 97% Fallacy

The president's plan to raise top marginal rates is holding back the very people who should be leading the economic recovery..

By KEVIN A. HASSETT

AND ALAN D. VIARD

When Congress returns from its summer recess, members will face a pivotal decision about the expiring Bush tax cuts. President Barack Obama has called for their permanent extension for singles with incomes below $200,000 and married couples with incomes below $250,000, but has proposed that most of the tax cuts for households with higher incomes be allowed to expire.

To buttress this position, the president and his supporters have repeatedly asserted that the expiration of these cuts will have little impact, because they affect only a tiny fraction of the wealthiest Americans, people who "can afford it."

Recently, for example, Vice President Joe Biden harshly rejected House Minority Leader John Boehner's assertion that the hikes would harm small businesses, saying that "he has created this myth that a tax cut for millionaires is actually a tax cut for small business. There aren't 3% of small businesses in America that would qualify for that tax cut." House Speaker Nancy Pelosi flipped the number around, saying that the planned tax increases would exempt "98% of American families and about 97% of small businesses."

The impact is far more severe than Mrs. Pelosi and Mr. Biden suggest. In fact, the sound bite about 3% of small businesses, which has been picked up by numerous pundits, is one of the more misleading statements in the long history of economic propaganda.

The 3% figure, which is computed from IRS data, is based on simply counting the number of returns with any pass-through business income. So, if somebody makes a little money selling products on eBay and reports that income on Schedule C of their tax return, they are counted as a small business. The fact that there are millions of people in the lower tax brackets with small amounts of business income may be interesting for some purposes, but it is irrelevant for the assessment of the economic impact of the tax hikes.

The numbers are clear. According to IRS data, fully 48% of the net income of sole proprietorships, partnerships, and S corporations reported on tax returns went to households with incomes above $200,000 in 2007. That's the number to look at, not the 3%. Would Mrs. Pelosi and Mr. Biden deny that the more successful firms owned by individuals in the top income-tax bracket are disproportionately responsible for investment and job creation?

It's clear that business income for large and small firms will be hit by the higher tax rates. And in point of fact, firms of all sizes contribute to the nation's prosperity. So it's a mistake to focus only on the impact of increased tax rates on small business. But will the higher rates actually cause a significant reduction in business activity?

Economic research supports a large impact. A pair of papers by economists Robert Carroll, Douglas Holtz-Eakin, Harvey Rosen and Mark Rider that were published in 1998 and 2000 by the National Bureau of Economic Research analyzed tax return data and uncovered high responsiveness of sole proprietors' business activity to tax rates. Their estimates imply that increasing the top rate to 40.8% from 35% (an official rate of 39.6% plus another 1.2 percentage points from the restoration of a stealth provision that phases out deductions), as in Mr. Obama's plan, would reduce gross receipts by more than 7% for sole proprietors subject to the higher rate.

These results imply a similar effect on proprietors' investment expenditures. A paper published by R. Glenn Hubbard of Columbia University and William M. Gentry of Williams College in the American Economic Review in 2000 also found that increasing progressivity of the tax code discourages entrepreneurs from starting new businesses.

Because marginal tax rate increases impede long-run growth, they should be avoided in good times and bad. But now is a particularly inopportune time to raise rates, as small businesses are still struggling from the recession. According to the ADP National Employment Report for July, goods-producing small businesses have reduced their total payroll employment by 117,000 jobs since January of this year, and they were still posting declines in July.

Taxes appear to be part of the story. When the National Federation of Independent Business asked small business owners in June to list the most important problem they faced, 20% named taxes, making that the second most cited concern after weak sales. The expectation of tax increases, such as those in Mr. Obama's plan, is on the minds of the people who should be leading the recovery.

The administration defends its desire to increase taxes by citing concerns about the deficit. Treasury Secretary Timothy Geithner recently asserted that "borrowing to finance tax cuts for the top 2% would be a $700 billion fiscal mistake."

The administration is right to view the deficit as a serious issue, but this sudden commitment to fiscal responsibility is bizarrely inconsistent. The administration professes deep concern about the $700 billion revenue loss from extending the tax cuts at the top, but apparently views the revenue loss of nearly $2 trillion from extending the tax cuts for the middle class as too inconsequential to mention. Nor has the administration's concern about the deficit driven it to reduce federal spending.

For those who are determined to tax the rich at all costs, and are therefore willing to accept the claims of the Obama administration without scrutiny, the tax hikes may well make sense. But the evidence is clear that lifting the top rates will hamper the business investment upon which our nation's prosperity depends. That affects all Americans, not just 3%.

Mr. Hassett is director of economic policy studies and a senior fellow at the American Enterprise Institute, where Mr. Viard is a resident scholar.

http://online.wsj.com/article/SB10001424052748703959704575454061524326290.html?mod=WSJ_Opinion_LEADTop

[Mr. Big Dog 10,747]

Yes, the 50% that the GOP swings around. That figure does include the President himself, by the way, and many authors, actors, athletes, hedge fund firms and major law partnerships who are either not exactly employing any people in their "small businesses" or aren't exactly "small". The nonpartisan Congressional Research Serivce has dismissed the GOP claim of the high-end tax cuts hurting half of small businesses and largely agreed with the administration's take on the issue.

Besides, a business hires and expands if it has and is expecting increasing demand for it's products not because of a change in the marginal tax rate. Any employee they hire and any investment they make in expanding their business takes away from their taxable income in the first place. Top marginal tax rates don't even matter in that consideration.

If lower high-end tax breaks are effective stimulus for job creation, then why were a mere 300K jobs created annually during the period that these tax cuts were in place (not looking at the recession where jobs were shed by the millions despite those breaks) while more than 1.7MM jobs were created annually prior to those tax cuts? There is just no evidence of this trickle-down economics actually working. Try pouring gasoline onto the hood of your car and see how much of that actually makes it (i.e. trickles down) into your engine allowing you to drive. Good luck with that experiment - it's going to work just as well as the voo-doo economics that you are so sold on.

[JohnSmith2007 353]

Yes, the 50% that the GOP swings around. That figure does include the President himself, by the way, and many authors, actors, athletes, hedge fund firms and major law partnerships who are either not exactly employing any people in their "small businesses" or aren't exactly "small". The nonpartisan Congressional Research Serivce has dismissed the GOP claim of the high-end tax cuts hurting half of small businesses and largely agreed with the administration's take on the issue.

Besides, a business hires and expands if it has and is expecting increasing demand for it's products not because of a change in the marginal tax rate. Any employee they hire and any investment they make in expanding their business takes away from their taxable income in the first place. Top marginal tax rates don't even matter in that consideration.

If lower high-end tax breaks are effective stimulus for job creation, then why were a mere 300K jobs created annually during the period that these tax cuts were in place (not looking at the recession where jobs were shed by the millions despite those breaks) while more than 1.7MM jobs were created annually prior to those tax cuts? There is just no evidence of this trickle-down economics actually working. Try pouring gasoline onto the hood of your car and see how much of that actually makes it (i.e. trickles down) into your engine allowing you to drive. Good luck with that experiment - it's going to work just as well as the voo-doo economics that you are so sold on.

Nice backtrack. Expected. I proved my point that 48% of small business owners fall into the 250K bracket and you smoothly move to class warfare. To cite the CBO is a real laugh. They never get anything right. Its like a computer, garbage in, garbage out. They just take numbers given to them and crank out the result the instigators wanted. Give them different numbers and they get a different result. If you place your faith in that useless group then I can understand why you believe the partisan garbage you put forth here.

The stimulus did absolutely nothing. It didn't create jobs and it didn't help the economy. Trickle down worked when Reagan did it. That is indisputable. What Obama and the dems did (with the help of the dumbazz reps) had little to no effect. Yeah, I know, now you will post some doom and gloom story about how bad things would be without the stimulus but it will also be based on supposition and theory. The only thing that matters is results. Trickle down saved us from the Carter recession. Keynesian economics is a total failure.

[Mr. Big Dog 10,747]

Nice backtrack. Expected. I proved my point that 48% of small business owners fall into the 250K bracket and you smoothly move to class warfare. To cite the CBO is a real laugh. They never get anything right. Its like a computer, garbage in, garbage out. They just take numbers given to them and crank out the result the instigators wanted. Give them different numbers and they get a different result. If you place your faith in that useless group then I can understand why you believe the partisan garbage you put forth here.

The stimulus did absolutely nothing. It didn't create jobs and it didn't help the economy. Trickle down worked when Reagan did it. That is indisputable. What Obama and the dems did (with the help of the dumbazz reps) had little to no effect. Yeah, I know, now you will post some doom and gloom story about how bad things would be without the stimulus but it will also be based on supposition and theory. The only thing that matters is results. Trickle down saved us from the Carter recession. Keynesian economics is a total failure.

No backtracking on my end at all. You are the one trying to shift the debate. If tax cuts for the wealthy are needed to create jobs and if those tax cuts would indeed benefit job creating small businesses as is claimed, then those small businesses that benefit would have to have employees. Those 48% you quote doesn't represent the small businesses that have staff. The same report by the same Congressional Research Service - not the CBO - on which the GOP's 48% is based also states that this is not to be mistaken for small businesses with employees. The same Congressional Research Service pointed out quite clearly that the administration is correct in claiming that a small portion of small businesses would be effected by the expiration of the Bush tax cuts if small business if defined as a employer.

The stimulus did a lot of good things for the economy. There isn't a serious economist out there that would claim anything to the contrary. Remember that Rush and Glenn and Sarah aren't economists. They are entertainers.

And again, it's demand for a product, the opportunity to generate additional profits that drives hiring and expansion decisions for any business - small and large - not some tax rates on the profits (income for those businesses that pay personal rather than corporate income taxes). If I can earn and extra $1,000.00 then I will do that whether I get to keep $650.00 or $620.00 of those dollars. And if I can make an additional $100,000.00 I will do that whether I get to keep $65,000.00 or 62,000.00 of that. It's silly to suggest otherwise.

Edited November 30, 2010 by Mr. Big Dog

[luckytxn 2,264]

Nice backtrack. Expected. I proved my point that 48% of small business owners fall into the 250K bracket and you smoothly move to class warfare. To cite the CBO is a real laugh. They never get anything right. Its like a computer, garbage in, garbage out. They just take numbers given to them and crank out the result the instigators wanted. Give them different numbers and they get a different result. If you place your faith in that useless group then I can understand why you believe the partisan garbage you put forth here.

The stimulus did absolutely nothing. It didn't create jobs and it didn't help the economy. Trickle down worked when Reagan did it. That is indisputable. What Obama and the dems did (with the help of the dumbazz reps) had little to no effect. Yeah, I know, now you will post some doom and gloom story about how bad things would be without the stimulus but it will also be based on supposition and theory. The only thing that matters is results. Trickle down saved us from the Carter recession. Keynesian economics is a total failure.

Exactly. The only way to get any tax hike is to demonize the object you want to tax. Years ago we all knew that small business hired most of the workforce and was the engine of this country. It is too easy to put up a Wal Mart or GM or any huge conglomerate and say they are the baddies and that they should be paying through the nose for us poor simple folks wants. Never mind that the tax increase will actually mean that small business will now be hit and that the thin profits they have to look at will mean that an employee may have to be let go or no hiring and the ones that are working will have to do more.

The small business is still the engine of this country in hiring employees. You make it harder for them to compete then don't cry when they fail or at the least struggle.

[one...two...tree 2,762]

In the nearly 10 years that the Bush tax cuts have been in effect, how many jobs did they create?

[Mr. Big Dog 10,747]

Exactly. The only way to get any tax hike is to demonize the object you want to tax.

Who's demonizing anyone? Upper income tax breaks have just proven a very ineffective tool in stimulating job growth. Demand creates jobs. Upper income tax breaks don't create demand. 1.1 million total jobs created as a result of the Bush tax cuts packages. That's less than what this economy created annually prior to the tax cuts. It is, in fact, the weakest job growth on record. Why would anyone in their right mind want to repeat something that failed so colossally?

In the nearly 10 years that the Bush tax cuts have been in effect, how many jobs did they create?

Over the whole 10 years? Zippo. Take out the job loss due to the recession and you end up with 1.1 million. During the 90's, the economy created 1.76 million jobs a year.

[JohnSmith2007 353]

No backtracking on my end at all. You are the one trying to shift the debate. If tax cuts for the wealthy are needed to create jobs and if those tax cuts would indeed benefit job creating small businesses as is claimed, then those small businesses that benefit would have to have employees. Those 48% you quote doesn't represent the small businesses that have staff. The same report by the same Congressional Research Service - not the CBO - on which the GOP's 48% is based also states that this is not to be mistaken for small businesses with employees. The same Congressional Research Service pointed out quite clearly that the administration is correct in claiming that a small portion of small businesses would be effected by the expiration of the Bush tax cuts if small business if defined as a employer.

The stimulus did a lot of good things for the economy. There isn't a serious economist out there that would claim anything to the contrary. Remember that Rush and Glenn and Sarah aren't economists. They are entertainers.

And again, it's demand for a product, the opportunity to generate additional profits that drives hiring and expansion decisions for any business - small and large - not some tax rates on the profits (income for those businesses that pay personal rather than corporate income taxes). If I can earn and extra $1,000.00 then I will do that whether I get to keep $650.00 or $620.00 of those dollars. And if I can make an additional $100,000.00 I will do that whether I get to keep $65,000.00 or 62,000.00 of that. It's silly to suggest otherwise.

All I can say is that you are totally wrong. Tax cuts stimulate. The stimulus did nothing. There is no evidence to prove the contrary except in the liberal propaganda. Supply side has worked without fail. I say let the people keep more of their money. It is ours to begin with.

BTW, you totaly fail when you try to link my opinions to Glen, Rush or Sarah. I don't listen to them, I don't quote them and your attempt to smear is an epic fail. Typical of a lib though, when you lose an argument you attempt to link your adversary with extremists. It shows the shallowness of your argument and the weakness of your position. Its to bad that the left feels that they have to demonize the people they disagree with. It really shows you in a bad light.

[JohnSmith2007 353]

Over the whole 10 years? Zippo. Take out the job loss due to the recession and you end up with 1.1 million. During the 90's, the economy created 1.76 million jobs a year.

Epic fail again. We had 4% unemployment thoughout the Bush admin. We didn't need to create a bunch of jobs because everyone that wanted one had one. When the dems took over congress in 2007 that is when things went to hell. Spin it however you want but you cannot deny that the Bush tax cuts gave us a much better economy than we have right now. Ask yourself this, are you better today or 4 years ago?

[Mr. Big Dog 10,747]

Tax cuts stimulate. The stimulus did nothing.

Interesting statements seeing that the stimulus actually contained roughly $200 billion in tax cuts. You say those stimulate but you also say the recovery package did nothing. Care to reconcile these contrary statements?

[Mr. Big Dog 10,747]

Epic fail again. We had 4% unemployment thoughout the Bush admin. We didn't need to create a bunch of jobs because everyone that wanted one had one. When the dems took over congress in 2007 that is when things went to hell. Spin it however you want but you cannot deny that the Bush tax cuts gave us a much better economy than we have right now. Ask yourself this, are you better today or 4 years ago?

We did not have 4% unemployment throughout the Bush years. That's a demonstrably false statement. The closest you come to that number is the 4.2% Bush inherited in Jan 2001. It went up to 6.3% (by Jun 03) from there to then fall to 4.4% (by Mar 07) to then shoot up to the 7.6% that he left for the next President coming into office. At no point in time did Bush have a 4% unemployment rate and certainly not throughout his presidency.

You say we didn't need to create a bunch of jobs because everyone that wanted one had one? Were the Bush tax cuts not sold on the premise that they would create 5 million jobs at a time when the unemployment rate was on the way up? That never happened. This supposed goal was never accomplished - not even close.

As for myself, I am actually much better off today than I was 4 years ago.