Friday, November 11, 2011

Most small business owners who create jobs aren't millionaries.

A U.S. Treasury Department, Office of Tax Analysis study shows that Republicans are dead wrong when they argue that a surtax on millionaires would be a job killer.

Obama and the Democrats have proposed a 5.6 percent surtax on incomes greater than $1 million to pay for tax cuts for workers, infrastructure spending, hiring incentives and cash for local governments to keep teachers and police from being laid off.  House Speaker John Boehner and other Republicans argue that such a tax would be a “job killer” since, as Boehner put it in a recent interview, “you're going to basically increase taxes on the very people that we're hoping will reinvest in our economy and create jobs.”  However, is that true? 

In August 2011, The Office of Tax Analysis (OTA) at the U.S. Treasury Department released the results of a study looking at the income of “small business owners with employees.”  They defined a “small business owner with employees” as someone with $10 million or less in income or deductions and a minimum labor deduction of $10,000.

OTA found that:

Only one-fifth of small businesses are employers, using the above definition.
  • Over half of small business owners reported total income of less than $50,000, and half of those businesses reported a tax loss for the year.
  • Only 0.5 percent of small businesses reported a profit in excess of $1 million.
  • For those businesses owners who reported a profit in excess of $1 million, only half of their income came from the operation of the business.  The other half came from investment and rental income.

Bottom line?  A surtax on Americans with incomes greater than $1 million would affect almost only a small fraction of small business owners and they don’t fit the image most of us have of a “small business owner.”  Politifact says:

“The study paints a clearer picture of what many of us think of as a small business -- a bagel shop or dry cleaner -- that has several employees, earns a modest income for its owner and yields profits of much less than $1 million. “

Read the OTA report here:

Read Politifact here:

No comments: