| I hope you've all noticed that we've got PolitiFact's "Truth-O-Meter" running in the left-hand sidebar. PolitiFact is an excellent service, diligently fact-checking statements made by politicians of all ideological stripes. And there are a lot of really interesting results.
Here's one that struck me today: you know how, when people talk about what would happen if we repealed the Bush tax cuts for the wealthy, it would kill jobs? Supposedly because a whole lot of those wealthy taxpayers are actually small businesses which, as everyone knows, supply most of the jobs in this country?
Turns out, that statement is "barely true." Here's the analysis:
One of the arguments Republicans use to support tax cuts for the wealthy is that most are small business owners. Conservative pundit Stephen Hayes made the case on ABC News' This Week, after U.S. Treasury Secretary Timothy Geithner affirmed the Obama administration's commitment to raising taxes on high earners.
"The people that we're talking about, these so-called wealthy, most of them are small-business owners," Hayes said. "So if you're talking about cutting taxes for people who can put people back to work, that's who you're talking about."
It's certainly more politically palatable to urge lower taxes for mom-and-pop business owners than for Wall Street fat cats. But is it true that most of the rich are small business owners? ...
The basis for Hayes' claim comes from details gleaned from Internal Revenue Service data. The U.S. Treasury Department found in 2007 that many of the wealthiest tax filers report some type of non-wage income, such as income from a sole proprietorship, a partnership or an S corporation. (An S corporation is simply a corporation that chooses to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes.) The Treasury Department estimated that 75 percent of tax payers in the top bracket reported this type of income.
But here's the rub.
Does this mean that all those wealthy taxpayers were small business owners? Probably not. This kind of income could be reported from anyone who earned money from a source other than a regular job, such as consulting or public speaking. It could also be reported by those who make most of their income from partnerships, such as law firms and medical practices. And it could include investors who have little involvement in the day-to-day operations of a company.
It's impossible to know how many of these high earners are what most people think of as small business owners.
OK, so how can we try to find out?
One indication, however, might be if these wealthy taxpayers reported that most of their income was from this business-type income. The nonpartisan Tax Policy Center analyzed IRS data in March 2009, looking to see how many wealthy tax filers could say that half of their income or more came from business income. The center found that, among the wealthiest filers -- the top 1 percent -- only 25 percent earned more than half their income from business-type income. The percentages for non-wage income were even smaller among taxpayers earning less.
In other words, yes, lots of "business income" is reported on wealthy individuals' tax returns. But in many cases, there isn't much connection between that business income and jobs for anyone other than the filer.
Bottom line:
do many wealthy tax payers report types of business income that might be from owning a small business? Sure. But it's impossible to tell how many meet the definition of what most of us think of when we think of small business owners. Other data indicates that among all tax payers who might be small business owners, most would not see taxes go up if the Bush tax cuts for the highest earners are allowed to expire. Hayes said that "these so-called wealthy, most of them are small-business owners." We rate that statement Barely True.
Good to know. |
