The truth about taxes and small businesses: Latest Survey Results

As Congress continues to debate how to address the expiration of the Bush tax cuts, expect to hear lots of overheated claims about the impact of tax increases on small businesses. Fortunately, a new survey released today from the Small Business Majority helps dispel much of the fog that constantly surrounds this important discussion—emphasizing the point that the overwhelming majority of small businesses think that eliminating Bush-era tax breaks on investments and income greater than $250,000 per year will have no negative consequences for their business and will help provide a balanced approach to reducing the federal budget deficit.

This survey asked 500 small businesses owners what they think about various proposals to address these looming tax changes, and their responses are completely at odds with stereotypical conservative claims. For details, follow after the jump.

Specifically, the survey found that:

A majority of small business owners support increasing taxes on the top 2% of incomes and strongly oppose raising taxes on middle-class families.  While most small business owners agree that no one likes to raise taxes, a solid majority of 52% nonetheless supports increasing taxes on incomes over $250,000 per year, given the current budget situation. Nearly 40% strongly agree with this statement.  At the same time, nearly 90% oppose raising taxes on those earning less than $250,000 middle class, and 71% are strongly opposed to doing so.

A majority of small business owners agree that ending the tax cuts on incomes over $250,000 will no meaningful economic impact on their businesses. Only a 39% minority believes raising taxes on the wealthy means raising taxes on job creators and small businesses, while most businesses believe that these tax increases won’t affect them at all because they earn as profits less than $250,000 per year. Specifically, 54% of small business owners have their business income passed through to their personal taxes, yet only 5% have total household income exceeding $250,000 (similar to commonly-accepted data showing 2.5% in this category).

 For more results on small business opinions about other proposals, read the report.


  1. Alex

    October 28, 2012 at 8:09 pm

    This is a very tired argument Allan, and it continues more as a Democratic diversion to avoid talking about the real economic issues. Taxing the rich more at best generates about $ 50 to 65 billion a year, not even enough to cover the current deficit for a month. It is a ridiculous argument, and makes the uneducated think there is a very simple solution to our economic problems. The 10 year projection falsely assumes that nothing will change and investors will not change their investments , or move money out of this country. California has tried this , and the results have been disastrous.

  2. Allan Freyer

    October 29, 2012 at 9:08 am

    Alex, thanks for your comment. I’m surprised that a good conservative like yourself (and all of your alternate sock puppet profiles on this blog) would disagree with so many job creators. Regardless, CBO projects eliminating the Bush-era tax breaks on incomes over $250,000 + returning to a $5 million exemption for the estate tax will generate about $1.2 trillion in deficit reduction. The concerns you mentioned are included in their analysis and do not meaningfully impact the result. While no one believes this will eliminate the defiict by itself, adding new revenues is an important part of a balanced approach to deficit reduction. And it’s one strongly supported by the overwhleming majority of our nation’s small business “job creators.”

  3. Alex

    October 29, 2012 at 10:59 am

    I’ll give you a good example Allan. I currently invest in stocks of growing companies that hopefully will create jobs in the future primarily because taxes on capital gains and dividends are low. If the taxes are raised significantly, I will switch to tax exempt bonds or other alternative investments which are not taxable, and then will pay nothing. Revenues for the government will go down not up, and much economic activity associated with these companies will also decrease. Greater economic growth and reduced government spending are the only ways to reduce the deficit period. Obama has been unable to accomplish either one of these.

  4. Allan Freyer

    October 29, 2012 at 11:26 am

    Alex, I appreciate your point, but it just doesn’t seem grounded in factual reality. All of your wage income below $250,000 will continue to receive Bush-era tax cuts. All of your wage income above $250,000 will return to the Clinton-era rate of 39.6%. So what you’re talking about is paying 4.6% more in taxes on the portion of your wage income over 250k. And if we’re just talking about investments (you mentioned your portfolio), the tax rates return to 25% on capital gains and dividends, again just on the portion above the 250k threshold. Now maybe your non-retirement portfolio is big enough to cross these thresholds (if so, congrats), but recognize that only 1.4% of NCers (and only 2.5% of small businesses) do so.

    So while 98.6% of NCers will continue to get tax cuts, only 1.4% will see a tax increase–and only on that portion of their income above the 250k threshold. And by tax increase, we mean returning us to the same top rate we had during the 90s boom. Hard to see the devestating hit to the economy that would come from this, especially given how poorly the Bush tax cuts performed in the first place in terms of generating meaningful economic growth.

    (Which, let’s be honest, did a pretty good job of facilitating economic growth in the 1990s, especially when compared to the 2000s. How did those tax cuts help the economy again?).

  5. Allan Freyer

    October 29, 2012 at 11:28 am

    Obviously, that last paranthetical shouldn’t be there.

  6. Allan Freyer

    October 29, 2012 at 11:34 am

    And more to the point, individual investors are only going to shift their portfolios away from growth and towards tax free bonds if the yield on the bonds is higher than their after-tax returns from the growth funds. Given that we’re talking about such a small marginal increase, it’s hard to imagine such an investment strategy would pay off in the long run, so it’s unlikely that enough people would choose to do so to meaningfully affect tax revenue (or economic growth).

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