Tax Cut Chicanery (1)

As a “compromise” with Democrats who opposed it, the 2003 legislation that enacted the Bush tax cuts included an expiration date: 12/31/2010. The current, lame duck Congressional session is the last chance for the current Democrat majority to extend the Bush tax rates and prevent a substantial increase on every American who pays income tax.

As always in Washington, the debate includes a lot of false assertions. On Fox News Sunday White House Adviser David Axelrod dodged a question with one of the most often repeated Obama/Democrat talking points:

We can’t afford…tax cuts that will go almost entirely to millionaires and billionaires.

The goal of this assertion is to plant in the mind of the audience a vision of the idle rich, whose investments generate income in the millions or even billions each year, sipping champagne on enormous yachts.  But that vision is a deception.  Most upper bracket taxpayers earn less than $1 million, and half of them are owners of small businesses, not idle yachtsmen.

If the Democrats really wanted to a tax increase only on Millionaires they would propose one.  But it would not generate a significant amount of revenue because, as the chart above shows, it would hit too few taxpayers.

So instead they talk about millionaires and billionaires but demand tax hikes on people with lower incomes.

The charts display IRS data from 2008, the latest year available.  Half the taxpayers earning over $200,000 were actually small business owners who are required by the tax code to report the incomes of their businesses on their personal tax returns.

As the lower chart shows, most small business income was reported by taxpayers in the over $200,000 bracket.  These are the most successful of small businesses, the ones that are or soon will be in a position to expand and hire additional employees.  They’re also the small businesses targeted for tax increases.