deconstructing idea that not extending tax cuts is bad for "small business" - daily kos #p2

source http://www.dailykos.com/storyonly/2010/9/23/904477/-Small-Business?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+dailykos%2Findex+%28Daily+Kos%29

As Keith Olbermann puts it, the Republicans have turned small business into a brand that has little to do with shoestring entrepreneurs or mom-and-pop operations or even the 500-employee companies that the Small Business Administration sets as the upper limit for "small." For the GOP, it's a handy propaganda phrase that helps to conceal the fact that ultra-wealthy Americans are ducking corporate taxes by filing the take from some phenomenally profitable companies with their personal income taxes.

All perfectly legal. And all part of the decades-long upward transfer of wealth that the GOP and its enablers would like to keep in motion. That's what's ultimately behind their effort to persuade people that failure to extend tax cuts to the very richest Americans will disproportionately hurt small businesses and undermine the economy and eliminate their capaciy to create badly needed jobs.

It's a scam. It's a swindle. And Democrats need to press their advantage with the large majority of the population who agree that the richest among us should not continue to receive the lucrative tax cuts delivered to them by the Cheney-Bush administration.

Most Democrats, including the President, favor giving these tax cuts a proper burial. A few of them, again including the President, have been making a decently persuasive case. But, despite the years of accumulated evidence that these tax cuts did not create the jobs and economy-enhancing investment claimed for them, an appalling number of the Blue Dogs in their midst are up to their usual transparent stratagems. Keeping these tax cuts does nothing for the mass of their constituents, but it pays them big dividends from the moneybags of those who support their continued incumbency. It's a fine arrangement unless you're among the 90 percent of Americans who will eventually have to cover the damage it causes with higher future taxes or reduced benefits and services, or both.

The vast majority of businesses in the United States - large and small - are organized as sole proprietorships, partnerships or S-corporations. About half of the net income of these businesses is filed on individual tax forms, instead of being subject to corporate income taxes. Most small businesses are, in fact, small, making this set-up in the vast majority of cases beneficial to the nation's common interests.  But not in all cases. As the Joint Committee on Taxation has reported, and even House Minority Leader John Boehner has conceded, 97 percent of taxpayers with business income would not be affected if the top two tax rates returned to their pre-2001 level. Among the 3 percent who would be affected are the 400 richest - a few billionaires in that group - and others in the ultra-wealthy elite. They qualify as small business owners under the ridiculously broad definition of the term even though they own highly profitable companies that are anything but small.

Pat Garafalo at the Wonk Room makes the consequences clear:

• As Citizens for Tax Justice pointed out, Bechtel Corp., the largest engineering firm in the country, is an S corporation, and thus its owners file their income from the company on their personal tax returns. It is the fifth-largest privately owned company in the U.S. and had gross revenue in 2008 of $31.4 billion.

• The Tribune Company — the country's second largest publisher of newspapers, including the Chicago Tribune and the Los Angeles Times — is also an S corporation. It actually saved $1.8 billion in taxes by not filing as a corporation.

• The average gross adjusted income of someone who receives more than half of their income from an S corporation and will be affected by the expiration of the Bush tax cuts for the wealthy will be $1.1 million next year.

"Small business" owners of KKR, Koch Industries, CoorsTek, the Carlyle Group, Harrah's Entertainment and PriceWaterhouseCoopers are among the other wealthy Americans who would benefit from extending the top-level tax cuts.

Estimated 10-year cost of this grotesque rip-off: $690 billion plus $140 billion in interest payments to cover debt service.

As if this were not enough, according to their Pledge to America, the Republicans plan to allow "small business owners" to add another tax deduction equal to 20 percent of their business income. Another windfall for the folks who, unleashed by Citizens United, are pouring hundreds of millions into this year's election so they can get into high office more people who will approve the appointments of yet more Supreme Court Justices who gave them Citizens United in the first place. Unlike most of the Pledge, which the Republicans will jettison if they ever manage to return to power, that tax deduction is one item you can be certain they will deliver. Cutting taxes for their sugar-daddies is something they can always be counted on until the day, if nobody stops them, those levies clock in at zero.