During the Second Presidential Debate, to head off the valid criticism that his tax increase on “the wealthy” would curtail small business expansion and thus limit job creation, President Obama asserted this misleading, irrelevant statistic:
So what I’ve said is, your first $250,000.00 worth of income, no change. And that means…97 percent of small businesses, they will not see a tax increase.
This category of taxpayer includes millions who engage in “side jobs” and part time ventures, and one-person businesses.
Also included in Obama’s huge category of taxpayers are larger businesses, such as construction, or restaurant, or software firms, with several employees, who are in a position to grow and create more jobs by reinvesting profits.
If 97% of all small businesses earn less than $200,000, the remaining 3% are the most important to growing the economy and creating jobs. These are the businesses with more than $200,000 in taxable profits, who will be hit by Obama’s tax increase. Every dollar of increased taxation, is one less dollar available to reinvest in expansion that is necessary for jobs to be created.
Here are some data – some hard facts – from the IRS Statistics of Income Division for 2009, the latest available:
- 65% of taxpayers reporting more than $200,000 in income were small business owners.
- 72% of of all small business income was reported by taxpayers earning more than $200,000.
- 2.6 Million small business owners reported more than $200,000 in income.
The Bottom Line
More small business expansion is funded by reinvesting after-tax profits than by borrowing. Under new banking regulations, small business access to credit has all but disappeared. Therefore, after-tax profits are even more critical if businesses are to expand and hire more people.
Government will be seizing from the private sector some of the resources that empower free people to use their liberty to create prosperity. These resources will be used to expand government power and fund special interest constituencies, such as Obama donors in the alternative energy business.
As the chart above demonstrates, two thirds of the over $200,000 taxpayers Obama intends to punish are businesses that are large enough to have several employees now, and the potential to expand and hire more employees in the near future.