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Administration Tax-Cut Rhetoric And Small Businesses

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Abstract:

The Bush Administration has consistently asserted that its tax cuts, and especially the reduction in the top income tax rate and repeal of the estate tax, are of great value to small businesses. These assertions have been at the heart of both the Administration’s claims regarding the virtues of its tax cuts and its calls to make the tax cuts permanent.

An examination of the relevant data demonstrates, however, that the Administration’s statements seriously exaggerate the benefits of its tax cuts — and especially of the top-rate reduction and estate tax repeal — to the vast majority of small businesses. Claims that the top-rate reduction and estate tax repeal are of substantial benefit to small-business enterprises hold true primarily for a small, rather elite group of businesses — those whose owners have very high incomes and have accumulated significant wealth. For the overwhelming majority of households with small-business income — about 99 percent of them — the reduction in the top income tax rate and the repeal of the estate tax offer no benefits at all.