The 2001 and 2003 Tax Cuts and Small Business
Publication Date: March 2007
Special Collection: John D. and Catherine T. MacArthur Foundation
Keywords: Income diversity; Tax code; Economic projections
The Bush Administration and Congressional supporters of the 2001 and 2003 tax cuts have often asserted that these tax cuts, and especially the reductions in the top two income tax rates, are of great value to small business. They argue that failure to extend these tax cuts would cause significant harm to small business owners. An examination of the relevant data demonstrates, however, that such statements seriously exaggerate the benefits the tax cuts provide to the vast majority of small businesses. The tax cuts have indeed provided significant tax breaks to a small, elite group of households with some small-business income. But for the vast majority of such households, the tax cuts offer far more limited benefits, and the reductions in the top income tax rates offer no benefits at all.