Republicans block small business lending bill

Grover Norquist's Fuzzy Math

Posted by JAY NEWTON-SMALL Friday,
July 11, 2008 at 12:09 pm

Grover Norquist today comes up with a somewhat baffling defense of Carly Fiorina's claim that 23 million small businesses would see tax hikes under Obama's tax plan. Grover argues this:

In 2006 (the latest year available), $706 billion of such income was reported to the Internal Revenue Service. Of this, about half was reported by households in the top marginal income tax rate. Interestingly, two-thirds of this income was reported by households making $250,000 per year or more — the very same households that Obama wants to increase taxes on.

Using this argument to say most small businesses would see a tax increase is disingenuous.

Grover's right in saying that there are many “small businesses” who make a LOT of money (remember, Tiger Wood's Woods falls into this category). Small businesses are generally considered three groups: sole proprietors (schedule C), sub chapter S and partnerships. Most people think of partnerships are mom and pop running a soda shop. But in America, partnerships also include private equity groups and hedge funds – so Jamie Jim* Simons who made $1.7 billion last year is actually considered a small business.

In 2006 only 2.6 million households filed tax returns in the highest two brackets taxed at 33% and 35% -- it is impossible to say, therefore, that 23 million small businesses are going to get taxed at a higher rate. It is irrefutable that in terms of sheers numbers only a few hundred thousand of the 23 million small businesses make more than $250,000 a year – and those few hundred thousand make the bulk of profits earned by “small businesses” last year (I'd bet most of them have a NYC zip code). All Grover is doing here is telling us that there's huge income disparity among small businesses as there is among all Americans. Yes, two-thirds of small business income would see a tax hike under Obama: but the vast, vast majority of those few hundred thousand hedge fund magnets and golf stars can afford it (and, ironically, many of them would actually get taxed at a lower rate because of carried interest, but that's another debate).

http://swampland.blogs.time.com/2008/07/11/grover_norquists_fuzzy_math/