Tahlequah Daily Press


December 11, 2012

Higher taxes for rich won’t hurt small businesses

Tahlequah — The Republican leadership is adamant about refusing to go along with any deficit reduction plan that includes an increase in the federal income tax level for households with taxable incomes above $250,000 a year. Supposedly such a measure would somehow negatively impact small businesses and therefore radically harm the economy.

It’s my understanding this is because many small firms are organized for tax purposes as so-called “pass-through entities.” A pass-through entity pays no taxes directly. Instead, its profits are distributed to its owners, and they pay income – but not payroll – taxes on the proceeds.

There’s a difference between profits and revenues. No federal income tax is levied on revenues that are used to pay business expenses such as employee salaries, raw materials, overhead and investments in new equipment. What’s left over is profit, which is taxable.

Federal taxes are levied on marginal income. That means the rate applied to profits over $250,000 would be irrelevant to the first $250,000 of taxable income. If you have $250,010 of taxable earnings, then only that last $10 would be taxed at the higher rate. This might actually encourage a small business owner to invest more of his revenues in his business – maybe by hiring another employee, rather than taking it as income to avoid the tax bite.

The arguably non-partisan Congressional Joint Committee on Taxation in June of this year found that just 3.5 percent of small business tax filers would pay a higher rate in 2013 – about 940,000 individuals, many of whom are lawyers and doctors in partnerships. Interestingly, those few percent account for 53 percent of all small business income.

Bottom line: I can’t find anything that indicates rolling back the Bush tax cuts to Clinton-era levels for the top two tax brackets would have any impact on 93.5 percent of all small businesses, or turn a previously profitable small business into something unprofitable. It does appear that those few who would be affected are making a great deal of money and not creating new jobs with it.

This view is supported by a 1989 paper co-authored by Martin Feldstein, chief economic adviser for former President Ronald Reagan, who found that the 1983-’84 recovery was caused mainly by an expansionary monetary policy and was unrelated to reductions in the personal income tax rate.

Similarly, the Congressional Research Service, a nonpartisan analysis group run by the Library of Congress, recently reviewed 60 years of economic growth and changes to the top marginal tax rates for both personal income and capital gains and concluded that “the reduction in the top tax rates appears to be uncorrelated with saving, investment and productivity growth.”

So exactly what is it I’m missing? Please note the question relates purely to economics, rather than partisan political ideology.

Jim Bone, a former Tahlequah Daily Press managing editor and local law enforcement officer, recently retired as an information analyst with the United Nations.

Text Only
  • Tourism Council and chamber should cut the proverbial cord

    They are defined by two separate purposes and operate under two distinctive sets of bylaws, but years of conflicting opinions have left lingering questions and confusion over the relationship between the decades-old Tahlequah Area Chamber of Commerce and the younger Tahlequah Area Tourism Council.

    July 30, 2014

  • NSU needs to be more candid when its plans go awry

    Many area residents were disappointed to learn this week that the NSU Fitness Center, and its all-important indoor lap pool, won’t open next month, as originally announced.
    This latest delay is no surprise.

    July 28, 2014

  • Higher premiums a just reward for drunken drivers

    Over the past several years, Oklahoma has slipped in many of the polls that count. This week, we learned Tulsa is No. 4 on a list of cities with high rates of fatal DUI accidents. Is anyone really surprised?

    July 25, 2014

  • Maybe it’s time to think about having another BalloonFest

    The 18th annual BalloonFest was the last one held, in 2010. In summer 2011, when the Daily Press staff hadn’t heard anything about the much-anticipated event, we started asking questions.

    July 23, 2014

  • If you see a drunken driver, take the time to call in a report

    If you see something, say something. You’ve heard the warning, and seen it imprinted on placards at airports. In the wake of 9/11, it became a national mantra, mainly aimed at spotting potential terrorist activities. But it’s good advice anytime, and for any reason, even at the local level.

    July 14, 2014

  • City officials should stop squabbling and try to work together

    It’s bad enough that the Chamber of Commerce scandal has given Tahlequah a black eye. But if the bickering among city officials doesn’t stop, the community will have a complete set of shiners for its public face.

    July 11, 2014

  • Only full disclosure will restore trust in the chamber

    Despite pressure from some quarters, neither the Press nor anyone else who values full disclosure will be clamming up until all the facts are known, and those who are responsible meet with justice.

    July 10, 2014

  • Only full disclosure will restore trust in the chamber

    A few board members for the Tahlequah Area Chamber of Commerce are saying they’ve heard nothing but positive things lately – about the chamber itself, and presumably, about themselves.

    July 9, 2014

  • Employer-sponsored insurance may now be a ‘hostage’ situation

    When the fallout settles from the Supreme Court’s Hobby Lobby decision, many Americans might decide they’re better off with health insurance that doesn’t come from their boss.

    July 7, 2014

  • With confidence in Congress at 7 percent, time for a new slate

    Note to Congress: We don’t like you. Not at all.
    A Gallup poll released Monday, June 30 confirmed what most of us already know: the American public is disgusted with the House and Senate. The survey recorded the lowest level of confidence since Gallup began asking the question in 1991: a whopping 7 percent. That’s not a typographical error; it’s a single digit.

    July 2, 2014


Do you believe school administrators and college presidents in Oklahoma are paid too much?

Strongly agree.
Somewhat agree.
Somewhat disagree.
Strongly disagree.
     View Results
Tahlequah Daily Press Twitter
Follow us on twitter
AP Video
Netanyahu Vows to Destroy Hamas Tunnels Obama Slams Republicans Over Lawsuit House Leaders Trade Blame for Inaction Malaysian PM: Stop Fighting in Ukraine Cantor Warns of Instability, Terror in Farewell Ravens' Ray Rice: 'I Made a Huge Mistake' Florida Panther Rebound Upsets Ranchers Small Plane Crash in San Diego Parking Lot Busy Franco's Not Afraid of Overexposure Fighting Blocks Access to Ukraine Crash Site Dangerous Bacteria Kills One in Florida Workers Dig for Survivors After India Landslide Texas Scientists Study Ebola Virus Smartphone Powered Paper Plane Debuts at Airshow Southern Accent Reduction Class Cancelled in TN