The Washington Monthly

September 20, 2010

'SMALL' BUSINESSES THAT AREN'T ESPECIALLY SMALL.... For quite a while, a standard Republican argument has been that allowing tax rates on the wealthy to expire on schedule would hurt small businesses. One silly far-right congressman went so far as to insist that the policy would increase taxes on 94% of America's small businesses. (It wouldn't.)

The Joint Committee on Taxation recently reported that only 3% of small businesses would be affected by the expiration of Bush-era top rates. Asked about this a week ago, House Minority Leader John Boehner (R-Ohio) said, "Well, it may be 3%, but it's half of small business income. Because, obviously, the top 3% have half of the gross income for those companies that we would term small businesses."

Is this right? The key part of Boehner's answer was those last few words: how Republicans "would term small businesses." The GOP definition includes entities that aren't "small," and aren't even necessarily "businesses."

Many of those 750,000 small businesses aren't small at all. Some, like Bechtel Corporation, are positively enormous.
The Democratic and Republican figures come from the non-partisan Joint Committee on Taxation. But numerous think tanks and government organizations have examined the data and come to similar conclusions: First, that letting the Bush tax cuts on the top two brackets of "small-business" income would impact a tiny percentage of those businesses; and second, that many of the "small businesses" that would be impacted are actually giant companies -- which explains why such a tiny fraction of them can account for half of small business income.

Under the Republican definition of "small business," the GOP is fighting to protect companies like Wall Street buyout firm Kohlberg, Kravis and Roberts, "which recently reported more than $54 billion in assets managed by 14 offices around the world." PricewaterhouseCoopers, a massive international auditing firm, qualifies for the label, too. So does Tribune Corp., which owns the Chicago Tribune, the Los Angeles Times and the Baltimore Sun.

In many cases, we're not even talking about "businesses" at all.

Senate Republican leader Mitch McConnell says President Barack Obama wants to subject half of all small-business income to a tax increase, a move that he says would strike a blow at the U.S. job-creation engine.
McConnell's numbers only add up if you consider people like billionaire investor George Soros, most movie stars and Obama himself small-business owners, tax experts say.

That's because the lawmaker is basing his figure on a broad definition of the term that experts say includes authors, actors and athletes who employ few if any workers. It also encompasses businesses that many people wouldn't consider small, such as Soros's hedge-fund firm and major law partnerships.

"Every student who is a part-time Web designer, partner in a law firm with a billion dollars of revenue and investor in a hedge fund gets lumped together in the data, along with real small businesses," said Ed Kleinbard, a former staff director of the congressional Joint Committee on Taxation and now a law professor at the University of Southern California. "We are being over-inclusive in our use of small-business income."

Well, we're not; Republican leaders who hope to deceive the public are.

As a member of George W. Bush's Council of Economic Advisers recently conceded, "How can it be that 3 percent of owners are accounting for 50 percent of small business income? Those firms they're owning can't be all that small.... They're very large."

Something to keep in mind when GOP lawmakers start lying again.

—Steve Benen 4:30 PM Permalink | Trackbacks | Comments (14)

Comments

Steve, would you mind elaborating upon the sb definition that allows Tribune Inc. I'd always thought that the defintion was under a certain (500 or so) number of employees that allowed efficiently profitable financial/consulting, etc. firms to be included, but a multilateral corporation like Tribune? I'm stumped.

Posted by: Mike on September 20, 2010 at 4:36 PM | PERMALINK

Apologists for corporate institutionalization, at the very expense of our democratic ways of life!

The Republican brand seems to be monolopized by cockimamie dunderheads (an obscure political term that means turd-brains!)! -Kevo

Posted by: kevo on September 20, 2010 at 5:11 PM | PERMALINK

Republicans count on the general public to be so ignorant that they will not even notice or care. Unfortunately for our country, I am afraid that they are correct.

Posted by: cb on September 20, 2010 at 5:22 PM | PERMALINK

The Repubs know they can just lie and lie, and first Rush then Fox parrot them, and then the Librul Mediduh go with "conventional wisdom."

Posted by: cb is right on September 20, 2010 at 5:25 PM | PERMALINK

The problem is FAUX and the GOP lie and lie and the liberals go 'fair'...and then when you question them they say (the Libruls) that they don't want to sink to the Republicans 'level'...and the GOP knows it and doesn't care.

Posted by: SYSPROG on September 20, 2010 at 5:27 PM | PERMALINK

THIS ADVERTISEMENT should write itself.

"Bechtel income X billion, Art Anderson income Y billion, Take Over Artists partnership Income Z million.

"What do they have in common?"

Republicans think they are small businesses

We think republicans are either insane or liars. Now they want to run the country, again.

just say No.

VOTE Democratic.

Posted by: KurtRex1453 on September 20, 2010 at 6:58 PM | PERMALINK

I find it hard to believe that Boehner's argument isn't a joke. It's like a circus employing the world's tallest midget. The argument is that the bill is bad for small businesses -- oh 3% of small businesses, well that's terrible because they are the largest small businesses.

Boehner is the world's smartest idiot. No I take that back, I know lots of idiots whose reasoning is much more convincing and impressive

Posted by: Robert Waldmann on September 20, 2010 at 7:21 PM | PERMALINK

I second Mike's request for someone to tell us exactly how the GOP is defining small business in this argument.

My impression is that they are counting all Schedule C filers, so that lots of big partnerships and LLC's get counted, but that's not clear.

If that's right, it's an absurd definition, of course, but I sure would like for someone to provide the specific information, instead of just going on about how idiotic it is.

Posted by: Bernard Yomtov on September 20, 2010 at 7:25 PM | PERMALINK

@ Bernard Yomtov: The link to TPM in Steve's piece has a graph that indicates what kinds of tax-filers are being referred to as "small businesses." But the labels are hard for me to read. It might be S-corporations.

Posted by: FlipYrWhig on September 20, 2010 at 7:48 PM | PERMALINK

Republicans often use the small business argument to pull a fast one, deliberately confusing revenue vs. profit. For example, your small business does $500K in sales, you'll be crushed by taxes! No matter that the business's taxable income might be only $100K, or that a somewhat larger business might re-invest profits in new equipment for expansion, so again it isn't taxable.

Posted by: Joe Buck on September 20, 2010 at 8:42 PM | PERMALINK

Boehner's weasel out by claim that the 3% affected account for half of small business income (using a unique GOP formula for "small") still leaves the assertion that "94%" of American businesses would have higher taxes a hard-core easily debunked lie.

Posted by: TC58 on September 21, 2010 at 12:14 AM | PERMALINK

As Paul Krugman pointed out today, he, President Obama, and George Soros all have small business income under the Republicans' definition.

The other thing to keep in mind here is that it is President Obama and Congressional Democrats who have the track record of helping small businesses over the past two years - providing stimulus relief over a Republican filibuster, helping make health insurance more affordable for small businesses, and fighting to provide tax relief to all small business income under $250,000 per year.

http://www.winningprogressive.org/obama-small-business-support

Posted by: Winning Progressive on September 21, 2010 at 12:42 AM | PERMALINK

Kinda reminds me of the GOP characterization of what constitutes a "family farm" re: the Estate Tax.

When it comes to the Republicans, it's all in the language...

Posted by: 400metres on September 21, 2010 at 11:56 AM | PERMALINK

Last night on CBS Evening News they let Boehner sit there and state this misleading, deliberately meaningless statistic without any rebuttal or even comment. Nice work, CBS. Next time (and every time) remember to ask the hard questions.

Posted by: Eric W on November 8, 2010 at 1:41 PM | PERMALINK

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