How will the proposed top-end tax rate increases affect government revenues? Posted on August 11, 2010 by Lane Kenworthy Read Dylan Matthews, Paul Krugman, and perhaps also this. ShareClick to share on Twitter (Opens in new window)Click to share on Facebook (Opens in new window)Like this:Like Loading... Related
Chuck Marr and Gillian Brunet of CBPP see extending the tax cuts for the wealthy as having little positive effect on small businesses. Their argument begins;
“In reality, however, extending the tax cuts would do little for small business because only the top 3 percent of people with any business income, let alone income from a small business, would benefit.”
Click to access 8-3-10tax.pdf
Small business need consumer demand for their goods and services, not further tax breaks. It is small businesses that do best under high growth, high employment conditions because this creates the high spending that these businesses thrive on. The authors of the Report continue;
“History refutes the notion that small businesses would be unable to thrive under a 39.6 percent tax rate. Small businesses do not need an exemption from that rate to prosper. During the 1990s, when the top tax rates were at the levels to which they are slated to return in 2011, small business employment rose by an average of 2.3 percent — or 756,000 jobs — per year. In contrast, between 2001 and 2006, when tax rates were lower as a result of the 2001 tax law, small business employment rose at only a 1.0 percent annual rate (367,000 jobs per year) — less than half as much.
In short, the 1990s tax rates did not deter a robust, job-creating economic expansion, and the lower tax rates after 2001 did not prevent a recovery that proved very disappointing in generating job growth.”
This is the crux of the matter. Robust economy growth, not tax cuts, will benefit small business. This can only come through more fiscal stimulus. Job creation leads to income growth and spending which bolsters the sales revenue and profits of small business.