As Congress debates solutions to the “fiscal slope,” the future of the Bush Tax Cuts on incomes over $250,000 continues to play a pivotal role. Allowing these tax cuts to expire will provide over $1 trillion in new revenues—a key component of a balanced approach to deficit reduction—yet we consistently hear that taking this approach will disproportionately harm small business “job creation” and long-term economic growth.
As a new policy brief clearly demonstrates, these concerns have little merit—allowing these tax cuts to expire will have virtually no impact on the kind of small businesses that genuinely contribute to job creation. The specific tax changes under discussion would allow the 2001 and 2003 tax cuts on incomes above $250,000 to expire in 2013, thus changing the top marginal tax rate from 36 percent to 39.6 percent. According to the report, allowing the upper income tax cuts to expire in this way would affect only small percentage of small business owners and small business income, and even those few would see no significant barrier to capital reinvestment and job creation as a result.