The following assessment is quite sad:
Only 0.5 percent of small business owners, and 3.3 percent of filers with any income from small businesses that employ people, make $1 million or more per year.
One way to read it says if you own a small business your chances of making more than $1 million a year are extraordinarily small. Another way to read it (in terms of the upcoming tax fight in Congress) is that ending cuts for top income earners wont hurt small business owners, they don’t make enough to be in the top brackets.
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 percent of small business owners face the top two rates.
tax rate cuts for high-income people are a poorly targeted way to deliver tax cuts to small businesses.
With the economy still suffering from inadequate demand, policymakers should focus on what small businesses (and large businesses) need most: more customers. Until they see a pickup in sales, businesses with excess capacity are unlikely to use the proceeds from any tax cuts to hire more workers or expand capacity further.
Furthermore, the last time we raised the rates on top earners the economy did extraordinarily well, exposing the lie of trickle down economics.
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
The last points in the article lead to a fascinating connect the dots puzzle showing that tax cuts aren’t going to help small businesses create new jobs. Most new jobs from small businesses come from new small businesses (start-ups). Most start-ups take several years to become profitable. Tax cuts for small businesses won’t help until they are profitable.