On January 1st, 2013, millions of middle-class families will see their taxes go up if Congress fails to act, costing a typical family of four $2,200. President Obama is calling on Congress to extend tax cuts for the 98 percent of Americans making less than $250,000 and allow the Bush tax cuts to expire for the top 2 percent of wealthy Americans—reestablishing the income tax rates under President Clinton.
The President’s plan extends tax cuts for 97 percent of American small-business owners, building on the 18 tax cuts for small businesses that he has already signed into law—all of which help them grow and create jobs.
Mitt Romney, however, wants to make the Bush tax cuts for the wealthy permanent while adding $5 trillion in new tax cuts weighted toward millionaires and billionaires. Instead of talking about his own plan, Romney is distorting the President’s proposal by claiming it amounts to a “massive tax increase” on small businesses and job creators. But the facts don’t support his claim:
What Mitt Romney defines as “small businesses” includes millionaires and billionaires, law partners, hedge fund managers, and passive investors. Under this definition, over half of the 400 highest earners in the United States—a group that averages over $200 million each in taxable income—would be considered “small businesses.”
Even under this flawed definition of small business, the nonpartisan Tax Policy Center noted that approximately 97 percent of taxpayers with small business income would be completely unaffected by the President’s plan. This has been confirmed by the independent Congressional Research Service, which concluded that “only a small fraction of businesses will be affected [by allowing the temporary income tax cuts to expire for people earning over $250,000 a year], around 2 percent to 3 percent.”
As the Center for Budget and Policy Priorities has pointed out, even the very small percentage of small business owners who would be affected by tax increases on high-income households are unlikely to respond by reducing hiring or new investment [Center on Budget and Policy Priorities, 4/24/2012].
President Obama has a proven record of cutting taxes for small businesses. He has already signed 18 small business tax cuts into law and has a plan to help 2 million actual small businesses—not law firms and hedge funds—hire workers and make new investments. Mitt Romney will no doubt continue to claim that returning tax rates for millionaires and billionaires to where they were in the 1990s—when small businesses created jobs at nearly twice the rate that they did last decade—amounts to “class warfare.”
But the facts show that cutting taxes for middle-class families and asking the super-wealthy to pay their fair share isn’t just the right thing to do; it’s a proven way to create jobs and grow our economy—not from the top down, but from the middle out.