"I don’t know many small-businessmen or -women who are making themselves $280,000, so I am not sure that very many small businesses are going to be affected by this," House Majority Leader Steny Hoyer said. Congressman Hoyer is right that there aren’t many $280K+ small business owners. Hoyer’s claim goes awry when he concludes that few businesses will be affected. Hoyer’s ignorance of US economics is no excuse for such silly comments.
First, let’s talk about the proposed increased marginal tax rates. The proposed 5.4 percent surtax on married couples making $1 million or more would raise the top marginal tax rate in 2011 to more than 45%, up from 35% today. At a minimum, we’re about a 1.4 percent surtax on individuals who make more than $280,000.
Second, let’s consider how higher marginal tax rates affect small business. Mr. Hoyer, it may surprise you to know two-thirds of small business profits pay taxes in households making at least $250,000 per year. So when you increase taxes, you’re increasing taxes on 2 out of every 3 business dollars. In order to remain competitive, firms with higher marginal tax rates will lay off employees to maintain profits or cut workers’ wages.
Third, Mr. Hoyer, you need to consider the scope of how many different businesses are affected by higher marginal tax rates. Turns out 1/3 of workers are employed by small businesses ranging from between 2 and 100 employees.
In short, House Majority Leader, you’re affecting the livelihoods for a substantial number of workers in small business. Not only are you incorrect in saying that small businesses will not be affected, you’re also helping Obama break his promise never to increase taxes on individuals making less than $250,000 a year.
Democrats and Obama, helping destroying American jobs one tax at a time.