One frequently hears certain politicians talk about how restoring the temporary tax cuts,on even the wealthest 2% of tax payers earning over $250,000 would hurt small businesses, the main job creators. It is well known now that about 97% of small businesses earn less than $250,000/yr. A rather detailed consideration of this number is given by the Center On Budget and Policy Priorities* that yields an even somewhat small percentage, perhaps 1.9%.
The Federal government definition of a small business is complex, but is usually given as 500 employees. For investment purposes, a monetary limit is usally adopted, say $2 billion. An interesting discussion of the problem is given by Ruth Marcus in the NY Times.** Some parts of this article are given in italics follow:
....the economic drag of higher rates on the wealthiest taxpayers is far less than the impact on the middle class. The Congressional Budget Office estimates that raising top tax brackets would lower growth next year by one-tenth of a percentage point, compared to a 1.3-percentage-point hit if middle-class taxes rose.
....according to the Center on Budget and Policy Priorities,* 237 of the wealthiest 400 taxpayers, with incomes averaging more than $200 million, would be considered small-business owners. So would President Obama, because he receives book royalties.
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Rather, it sweeps in all taxpayers with business income, no matter how small a share of earnings, along with lawyers or hedge fund managers whose firms are organized as partnerships.
These upper-bracket “small businesses” are not making hiring decisions based on tax rates. Most don’t employ anyone. According to the Treasury Department, less than 6 percent of income to taxpayers in the top two brackets went to small businesses that employ people.
Warren Buffet recently said that the top 100 earners in the U.S. would be unaffected by the increase in marginal tax rates. This is so because of income tax deductions or loopholes. Nonetheless, raising the top two brackets from 33% and 35% to 36% and 39.6% is estimated to yield $493 billion over 10 years.*** This sum would constiture about 12% of the $4 trillion austerity budget needed to return Federal deficit to 2011 values.
If you haven't read the Buffet op-ed article, you should: http://www.nytimes.com/2012/11/26/opinion/buffett-a-minimum-tax-for-the-wealthy.html.
* http://www.cbpp.org/cms/index.cfm?fa=view&id=2697
** http://www.washingtonpost.com/opinions/ruth-marcus-the-shifting-line-on-tax-cuts/2012/12/04/e50bd63e-3e46-11e2-ae43-cf491b837f7b_story.html?wpisrc=nl_opinions
***http://crfb.org/sites/default/files/Raising_Revenue_from_Higher_Earners_11_15-2_1.pdf
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