McConnell Peddles Old GOP Lie About Small Business Taxes

In his first budget, President Obama apparently plans to keep his campaign promise to let the Bush tax cuts expire for Americans making over $250,000 a year. And just as during the election, Republican leaders are falsely claiming that Obama's proposal constitutes a tax hike on small business owners. This time, it is Senate Majority Leader Mitch McConnell echoing John McCain and Joe the Plumber in spreading the lie.

McConnell's myth-making came during an appearance Sunday on CNN's "State of the Union." (icon Download and icon Download videos here.) There, he fired the first salvo against President Obama's plan to end the Bush tax cuts for the wealthiest Americans who need it least. Claiming that "a vast majority of American small businesses pay taxes as individual taxpayers," McConnell thundered:

"I don't think raising taxes is a great idea, and when our good friends on the other side of the aisle say raising the taxes on the wealthy, what they are really talking about is small business."

Of course, they're not talking about small business. As CNN concluded in October, "fewer than 2% of small business owners would pay more under Obama's plan."

As it turns out, McConnell is merely parroting the same fraud now that John McCain tried to perpetrate then. Last fall, then Republican presidential candidate McCain attacked Obama, wrongly asserting, "The small businesses that we're talking about would receive an increase in their taxes right now." As it turned out, McCain's human shield and faux small business owner Joe "the Plumber" Wurzelbacher will receive a tax cut, and not an increase, under the just passed Obama stimulus package.

But in case there was any doubt the Republicans' deception on the point, the nonpartisan Tax Policy Center quickly put it to rest. As the Obama campaign correctly claimed, 98% would see their taxes decline or remain the same:

Even using the broad definition of small business that McCain likes, very few owners would see their own taxes rise.

That's because the lion's share of taxable income comes from a small number of wealthy businesses. Out of 34.7 million filers with business income on Schedules C, E or F, 479,000 filers fall into the top two brackets, according to an analysis of projected 2009 filings by the nonpartisan Tax Policy Center.

The other 34.3 million - or 98.6% - would be unaffected by Obama's proposed rate hike.

Of course, the complete falsehood of a statement is no barrier to Republicans uttering it. Now as in 2001, Republicans wrongly claimed that the estate tax led to the loss of family farms. When President Bush blasted opponents who say "the death tax doesn't cause people to sell their farms" with a mocking "don't know who they're talking to in Iowa," neither Hawkeye State farmers nor researchers could name one. As the New York Times concluded eight years ago, "Almost no working farmers do, according to data from an Internal Revenue Service analysis of 1999 returns that has not yet been published."

But just because it's a lie, doesn't mean Mitch McConnell and the Republican Party won't keep saying it.

(This piece also appears at Perrspectives.)

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