Over and over again we hear Democrats claim that raising tax rates on the rich won’t dampen economic recovery. They also claim it would only affect a fraction of small business owners. In yesterday’s debate, the president asserted, as he has often, that 97 percent of businesses who pay individual rates would not see a tax increase.
Well, judging from this new study by Internal Revenue Service, allowing Bush-era tax rates for high earners to expire, the centerpiece of President Obama’s tax plan and a big part of his campaign rhetoric, would mean that 1 million companies would be hit with new taxes. According to the IRS, which goes to great lengths to define a small business, high-income earners make up 24 percent of all small businesses that have employees.
Other studies (and pundits) have grossly underestimated the impact that a tax hike on high earners might take on small business, discounting owners of small C corporations and others. Wealthy earners with small businesses account for 923,000 employees. There are many more in business for themselves.