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WaPo Spreads Bogus Small Business Tax Hysteria

April 27, 2009

Back in March, ABC News was forced to update its jaw-droppingly shoddy reporting on the impact of President Obama's proposal to restore upper-income tax rates to their Clinton-era levels. Now in a piece titled, "Small Businesses Brace for Tax Battle," the Washington Post too is fanning the flames of hysteria over supposedly draconian new tax burdens for America's small business owners. Alas, the Post is just the latest to resuscitate a Republican zombie talking point on taxes - debunked but never dead.
The poster child for the Post's profile on the nouveau pauvre wealthy struggling to get by is Gail Johnson, whose chain of pre-schools netted her and her husband $515,000 over the past year. But President Obama's plans to return the top tax rate to its pre-George W. Bush level of 39.6% and restore Reagan-era limits on charitable deductions at 28% would, the Post suggests, prove devastating to the Johnsons starting in 2011:

If Obama's tax plans are enacted, her accountant estimates that her federal tax bill -- typically, around $120,000 a year -- would rise by at least $23,000, a 19 percent increase.

Sadly for the conservative echo chamber, the Johnsons are the exception that proves the rule. Despite Republicans' chicken little predictions dating back to the 2008 campaign, the Obama proposals impact only about 2% of small business owners.
John McCain introduced this fraud along with Joe the Plumber during the 2008 campaign. McCain proclaimed Obama's plan to restore 1990's tax rates for taxpayers making over $250,000 meant "the small businesses that we're talking about would receive an increase in their taxes right now." In February, Senate Minority Leader Mitch McConnell (R-KY) regurgitated the long-debunked talking point:

"I don't think raising taxes is a great idea, and when our good friends on the other side of the aisle say raising the taxes on the wealthy, what they are really talking about is small business."

Of course, they're not talking about small business. As CNN concluded in October, "fewer than 2% of small business owners would pay more under Obama's plan." But in case there was any doubt about the Republicans' deception on the point, the nonpartisan Tax Policy Center quickly put it to rest:

Out of 34.7 million filers with business income on Schedules C, E or F, 479,000 filers fall into the top two brackets, according to an analysis of projected 2009 filings by the nonpartisan Tax Policy Center.
The other 34.3 million - or 98.6% - would be unaffected by Obama's proposed rate hike.

To its credit, the Washington Post on page two of its article provides the data to refute Senator Chuck Grassley's charge that "a lot of small businesses are in that category." As the Post noted:

Most of these businesses make much less than $200,000 a year, though the precise figure is in dispute. Treasury Secretary Timothy F. Geithner has said the tax increase would affect about 2 percent of taxpayers with small-business income. An analysis by the Bush Treasury Department found that 7 percent of filers with business profit were in the top brackets in 2006. More recently, the nonpartisan Joint Committee on Taxation, which evaluates tax policy for Congress, projected that 3 percent of filers with business profits -- about 750,000 taxpayers -- were likely to face higher taxes in 2011 under Obama's proposal.

Near the end of the piece, the Post provides one dissenting voice from the tales of woe. Ace Hardware store owner Marc Friedman "said he wouldn't mind the extra $35,000 to $50,000 he stands to lose to the IRS."

But government services "can't be paid for equally by everyone," he said. "It's a big burden, but we're fortunate to be successful."

As it turns out, affluent voters agree. While polls show Americans' attitudes towards taxes are the most positive since 1956 and three-quarters back the Obama plan to raise rates on those earning over $250,000 a year, the well-to-do are with the President as well. Four years after George W. Bush swamped John Kerry By 63% to 35% among voters making over $200,000 annually, Barack Obama beat John McCain among the same group by 52% to 46%.

2 comments on “WaPo Spreads Bogus Small Business Tax Hysteria”

  1. The Rethugs have been spitting out this same garbage for a year.
    Why does the Post reprint their talking points?


Jon Perr
Jon Perr is a technology marketing consultant and product strategist who writes about American politics and public policy.

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