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When Republicans talk about how Obama's proposal to let the Bush tax cuts expire on incomes over $250,000. would hurt small business, they are talking about some really, really huge businesses which are classified as 'small business' for tax purposes only. They are talking about any S corporation, partnership or sole proprietorship, some of which have incomes of billions of dollars. For example, the Bechtel Corporation, the largest construction company in the world with 2009 revenues of $30.8 billion is classified as a 'small business' for tax purposes. Price Waterhouse Coopers, an accounting firm with $26 billion in revenue in 2009, is classified as a 'small business.' It seems that any business with less than 100 owners can be classified as a small business no matter how many employees or how much revenue they have. Some small businesses are owned by billionaires. Koch Industries, a conglomerate of partnerships with 70,000 employees, owned by the billionaire Koch brothers Charles and David, is classified as a 'small business.'
Last Sunday on Face the Nation Bob Schieffer questioned John Boehner about the fact that Obama's proposed expiration of Bush tax cuts for individual incomes above $250,000. would affect only 3% of small business. Boehner replied yes, but that 3% produced over half the revenues of 'small business.' So in effect what he was saying is that 97% of small businesses would not be affected by the expiration of the Bush tax cuts, and that the 3% that would be affected includes 'small businesses' like the Bechtel Corporation, Price Waterhouse Coopers and the Koch brothers whose revenues are in the tens of billions of dollars. Last year the top 25 hedge funds had average revenues of $1 billion each. No doubt they were all classified as small businesses. And they paid about 17% in Federal taxes because of a tax scam known as 'carried interest.' This was in a year that was one of the worst for most people since the Great Depression. So when Republicans talk about how not extending tax cuts to those with over $250,000. would hurt small business, they are including businesses with revenues in the billions.
Keith Olberman in a special report blew the lid off this Republican scam. Small businesses are not just Mom and Pop stores. In fact most Mom and Pop stores do not have revenues in the billions or even more than the $250,000. limit. Republicans for years have protected 'small businesses' which are owned by billionaires who in return give them generous campaign donations. The Koch brothers, who founded the conservative think tank known as the Cato Institute, contribute mightily to right wing causes. The Republican mantra about small business is just that - a mantra which is as hollow and fake and as much a lie and distortion as most of their other talking points. In fact 'small business,' the supposed jobs generator of the economy has not really created that many jobs. That is another lie and distortion so there is no real need to make 'small business' sancrosanct and to give them generous tax cuts.
This is from the Olberman report:
Fewer than 750,000 people, less than 0.25 percent of the country, would be affected by the top rate, according to Joint Committee on Taxation figures quoted by Olbermann.
Owners of such businesses would benefit from continuation of Bush era tax cuts due to expire at the end of this year.
Rather than paying corporate taxes, the firms operate as S Corporations, sole proprietorships or partnerships, including limited liability companies that put LLC instead of Inc. at the end of their names.
All are considered pass-through structures, in which company profits are passed directly to individual owners, who then pay taxes.
Traditional corporations pay taxes on profits and pass along dividends to individuals, who pay taxes on the dividends.
Olbermann explained the rules for classification as a small business.
“It’s not the income that’s small, it’s not the number of employees that’s small, it’s just the total number of owners that’s small,” Olbermann said.
In the case of S corporations, the total number of owners can be 100, he said.
Besides that the individuals who receive the "pass through profits" have many ways of avoiding paying taxes. That's why the tax code is so thick. Their lobbyists have been hard at work making sure that wealthy people pay as little in taxes as possible.
It is time for Obama and the Democrats to take a stand against tax breaks for the very wealthy. Conservatives are never concerned about the deficit when it comes to tax cuts. Letting the Bush tax cuts expire for those making over $250,000. would bring down the deficit by $700 billion over 10 years. Letting the tax cuts continue would give an average of $100,000. to households with an income greater than $1 million. Filers with taxable income of $500,000 to $1 million would still get on average a tax cut of $6,700 compared with pre-2001 rates because their first $250,000. would still qualify for the Bush tax cuts. So even though the wealthy would still get a larger tax cut than most other Americans, they still are not satisfied because it would not be a tax cut on their entire income, only on the first $250,000. of it. Certainly the wealthy, who received most of the benefits from the Bush tax cuts, should be forced to pay their fair share to reduce the deficit. But their whole goal is to avoid paying taxes and to only talk about their concern for deficits in the same breath as ending social programs which help the needy.
Certainly tax cuts should not be given to businesses, small or otherwise, in a blanket fashion a priori in the hopes that they will create jobs. They should only be givern to businesses a posteriori which have actually created jobs, and those tax cuts should be rescinded if the jobs don't last at least five years. Any tax cuts for small business should be fine tuned enough to exclude businesses like Bechtel, Price Waterhouse Coopers and the Koch brothers each of which had 2009 revenues in the tens of billions of dollars.
