Tahlequah —
The Republican leadership is adamant about refusing to go along with any deficit reduction plan that includes an increase in the federal income tax level for households with taxable incomes above $250,000 a year. Supposedly such a measure would somehow negatively impact small businesses and therefore radically harm the economy.
It’s my understanding this is because many small firms are organized for tax purposes as so-called “pass-through entities.” A pass-through entity pays no taxes directly. Instead, its profits are distributed to its owners, and they pay income – but not payroll – taxes on the proceeds.
There’s a difference between profits and revenues. No federal income tax is levied on revenues that are used to pay business expenses such as employee salaries, raw materials, overhead and investments in new equipment. What’s left over is profit, which is taxable.
Federal taxes are levied on marginal income. That means the rate applied to profits over $250,000 would be irrelevant to the first $250,000 of taxable income. If you have $250,010 of taxable earnings, then only that last $10 would be taxed at the higher rate. This might actually encourage a small business owner to invest more of his revenues in his business – maybe by hiring another employee, rather than taking it as income to avoid the tax bite.
The arguably non-partisan Congressional Joint Committee on Taxation in June of this year found that just 3.5 percent of small business tax filers would pay a higher rate in 2013 – about 940,000 individuals, many of whom are lawyers and doctors in partnerships. Interestingly, those few percent account for 53 percent of all small business income.
Bottom line: I can’t find anything that indicates rolling back the Bush tax cuts to Clinton-era levels for the top two tax brackets would have any impact on 93.5 percent of all small businesses, or turn a previously profitable small business into something unprofitable. It does appear that those few who would be affected are making a great deal of money and not creating new jobs with it.
This view is supported by a 1989 paper co-authored by Martin Feldstein, chief economic adviser for former President Ronald Reagan, who found that the 1983-’84 recovery was caused mainly by an expansionary monetary policy and was unrelated to reductions in the personal income tax rate.
Similarly, the Congressional Research Service, a nonpartisan analysis group run by the Library of Congress, recently reviewed 60 years of economic growth and changes to the top marginal tax rates for both personal income and capital gains and concluded that “the reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth.”
So exactly what is it I’m missing? Please note the question relates purely to economics, rather than partisan political ideology.
Jim Bone, a former Tahlequah Daily Press managing editor and local law enforcement officer, recently retired as an information analyst with the United Nations.
Editorials
Higher taxes for rich won’t hurt small businesses
- Editorials
-
-
Something for the kids to do this summer
Now that school’s out for the summer, many Cherokee County parents struggle with the question of what to do with their children. It’s a dilemma most of us share at one time or another, unless we don’t work outside the home, or get our summers off, for the most part.
-
Tax cut? Don’t bet the farm
Oklahoma taxpayers who think Gov. Mary Fallin did them a favor by signing into law the new tax cut measure ought to do a little math, and then think again. As usual, the state’s playing that ages-old game known as “robbing Peter to pay Paul.”
-
Should we help them, or not?
The U.S. taxpayers may have gotten lucky. It appears congressional approval for a new infusion of disaster relief funds may not be needed for the May 20 tornado that devastated Moore, because some of the money left over from Hurricane Sandy is being put to good use in Oklahoma.
-
Treasures: Resale shops a boon for community
Tahlequah has at least five resale shops connected to worthy nonprofit or not-for-profit endeavors, and Saturday, local residents unfamiliar with their inventories will get a peek at them, all at one location.
-
Facebook good for posting future events
With more and more Daily Press readers using our Facebook page as a supplemental way to get information to the public, another explanation on how to streamline the process seems in order. Here, brevity is the key.
-
Give the teachers what they deserve
When is the demonization of the teachers of this state going to stop? How many sacrifices do teachers have to make before the public realizes the anti-educator campaign is completely baseless, initiated by a small group of malcontents looking for someone to blame for society’s ills or the failures of their own offspring?
-
Welcoming our visitors to town
In just a few days, visitors will be pouring into Cherokee County, as the Memorial Day weekend officially ushers in the local tourist season. For some of us, that means it’s time to batten down the hatches; for others, it’s time for the cash registers to start ringing.
-
Phone record debacle an insult to press
Distrust of government secrecy has been elevated to an exceptional level with the disclosure the Justice Department covertly examined two months of Associated Press phone records to determine who leaked details to the AP about a foiled terrorist plot.
-
Punishing the animal dumpers
Animal dumping is not a problem unique to Cherokee County, but anyone who’s been keeping up with current events for the past decade or so will acknowledge it’s especially prevalent here.
-
Openness on AG the right course
It takes courage to admit to a serious mistake or a personal lapse, especially when the nature of the situation may call for a public mea culpa.
- More Editorials Headlines
-
Something for the kids to do this summer
James Gandolfini Dies at Age 51
Fmr. TWA Flight 800 Investigators Want New Probe
Raw: Heat, Spurs Back on Court Ahead of Game 7
Dolce and Gabbana Convicted of Tax Evasion
Paris, Prince Depositions Used in Jackson Trial
Coiffed Cattle Get Their Close-up
In Berlin, Obama Channels Cold War Activism
Police at Patriots Tight End's Home for 2nd Day
Fed Suggests Bond Purchases Could Slow
AP: DOJ Broke Own Rules Seizing Phone Records
Raw: Baby White Rhino Debuts at Australian Zoo
Time Lapse: Rebuilding Bridge Post-collapse
Ohio Woman Accuses 3 of Holding Her Captive
Hunt for Ex-Teamster Boss Hoffa's Remains Ends
