On CNN's Your Money, Maryland Business School Professor Peter Morici does the Republicans a favor and repeats their latest favorite talking point for them, that repealing the Bush tax cuts is going to raise taxes on half of small business income. I
September 11, 2010

On CNN's Your Money, Maryland Business School Professor Peter Morici does the Republicans a favor and repeats their latest favorite talking point for them, that repealing the Bush tax cuts is going to raise taxes on half of small business income. I noticed this change in their rhetoric a while back after they were repeatedly called out for lying and saying that the repealing the tax cuts would affect half of all small businesses. Once enough charts started showing up proving that nonsense to be wrong, they've all shifted their talking points to this.

Think Progress' Wonk Room explained why Morici's talking points are bunk as well.

Kyl first offered two data points (unsourced, of course) to illustrate how crucial small businesses are to the economy. That’s fine, but it’s also entirely beside the point. Kyl offers no evidence that any of the businesses he referenced would be affected by the expiration of the Bush tax cuts at all, and chances are extremely high that they would not, as fewer than 2 percent of small businesses owners file in the top two income tax brackets.

Kyl then tries again by referencing this JCT report, which states that “half of all income reported by individuals in the top two brackets is business income.” But did you notice anything at all odd about that sentence? Did you notice that the word “business” is not preceded by the word “small?” Maybe it’s because the very next sentence from the very same JCT report that Kyl relies on says:

These figures for net positive business income do not imply that all of the income is from entities that might be considered ’small.’ For example, in 2005, 12,862 S corporations and 6,658 partnerships had receipts of more than $50 million.

So, what we are really talking about here is extremely wealthy people who claim millions and millions of dollars in income as “business income” and have no relationship at all to actual small businesses. In fact, that very same JCT report states that only 3 percent of taxpayers with any net positive business income at all will be affected by the expiration of the Bush tax cuts for the wealthy. The Post rightly dismissed Kyl’s argument as “tired” and “unsubstantiated,” because, as his reliance on cherry-picked data makes clear, that’s exactly what it is.

Look for more of this since I've seen so many of them repeat this nonsense over the last month or so it's ridiculous. I don't care what network or what show, if they're talking about repealing the tax cuts, some Republican hack is repeating this talking point without being challenged.

Transcript via CNN below the fold.

VELSHI: Sometimes it is a silly thing to do to take the politics out of a discussion that is really all about politics. But we laid out how tax cuts are supposed to work, at least in theory. So where do Democrats and Republicans stand on this issue? How is it going to affect midterm elections?

Peter Morici is a professor at the University Of Maryland School Of Business. Mark Preston is our CNN senior political editor.

Mark, we're heading into these midterm elections. Who's scoring more points on the tax cut debate right now?

MARK PRESTON, CNN SENIOR POLITICAL EDITOR: Clearly the Republicans are right now. Because at a time when we have unemployment near 10 percent, Ali, in some states it's 10, 11, 12, 13 percent, on economic issues Republicans are going to win and when you talk about as Republicans are saying that we are take away these tax cuts that is going to hurt Democrats, and Democrats are very concerned about that heading into November.

VELSHI: All right. One of the biggest points in this debate is those tax cuts. Letting the Bush tax cuts expire, specifically for the rich, because nobody is arguing at the moment that they should expire for the middle class. There's an argument, make sense of it for me in a minute. But let's listen to the president talk about these tax cuts, for cutting the tax cuts for the rich. Listen to this.


BARACK OBAMA, PRESIDENT OF THE U.S: Those claim that our approach would some how be bad for growth, bad for small businesses. Let me remind you that with those tax rates in place under President Clinton, this country created 22 million jobs and raised incomes and had the largest surplus in our history.


VELSHI: So, Peter, I think the president scores a couple points by making that particular analogy, saying that we're going back to the tax rates that were in place under President Clinton, when those were very prosperous times, except he wasn't dealing with the greatest financial crisis since the great depression, so spell this out for me. Is it OK what the president is saying? Is it really going to hurt us, to eliminate those tax breaks, in other words to increase the rate of taxes that the richest in America pay?

PROFESSOR PETER MORICI, UNIV. OF MARYLAND BUSINESS SCHOOL: First of all, it's not the people that are making 2, 3 and 4 million a year that I am worried about. It's all those small businesses where they netted $250,000, $500,000, where two people work together, a husband and wife and have a large capital investment in that business; it's also their retirement to asset.

Repealing those tax cuts for folks, for families above $250,000, raises to above 50 percent the taxes on 50 percent of the small business income in America. Mr. Obama, this is not the 1990s and the high-tech boom. This is a tough economy; raising those taxes on those small businesses would negate anything else that he would want to do. VELSHI: Mark, this really comes down to whether or not you think raising taxes or eliminating those Bush tax cuts is going to be worse for or better for the economy. And again, one of the difficulties we have seen in the campaign particularly in the last week is that President Obama and people running for election this midterm are not necessarily on the same page about this. I'm talking about Democrats.

PRESTON: No and they're not. That's because President Obama doesn't play the same in every state and every district across the country. Certainly in the more conservative districts, perhaps in the south maybe a little bit out west, you're going to have Democrats who will not agree with President Obama's plan. Look, at this point it's almost every man for himself. Ali, you are heading into November. You have Democrats who are to mean to get reelected and if they need to cut the president loose, if they need to criticize him, they are going to criticize him.

VELSHI: But Republicans don't suffer from that same problem at the moment, Mark.

PRESTON: No, because they're not in power. So they can just sit back, and it goes back to what we were talking about earlier where Republicans don't have to offer a lot of explanations. They can just let Democrats keep on talking, talking and hope that the voters don't like what they're hearing from Democrats.

VELSHI: Peter, one of the things I love about having you on the show is that you're not given to hyperbole. One of the things that we've been hearing about is increasing taxes or decreases taxes and what it does to the economy, and lots of people point back to Ronald Reagan cutting taxes. Ronald Reagan had a lot more room to cut taxes than we do right now. In other words he cut taxes from a very, very high nominal rate to a substantially lower nominal rate. The bottom line is we can't do that again. So give me some perspective on what raising or lowering taxes has done at a critical juncture in the U.S., in the economy at some point in the U.S.

MORICI: Well, during the Bush period, he inherited a recession as well. Certainly not as severe and cutting taxes did get the economy growing again, but critically he cut taxes on a more or less permanent basis. Granted they'll expire at the end of this year. President Obama is offering some temporary credits that would help small businesses and big businesses, you know expense capital equipment. Temporary measures don't work. They have to be permanent.

VELSHI: Can I ask you why? Because I know a lot of people have made that point.

MORICI: Sure, look at cash for clunkers. A personal decision, we gave people a subsidy to buy cars but temporarily, so it boosted car sales temporarily, then they tanked. The whole history of investment tax credits going back to the Kennedy administration is they accelerate temporarily investment and then it falls off like a stone.

What's more, businesses will not hire an investment if they don't see customers coming around the corner, and they simply don't see that now.

VELSHI: All right. Mark, the president invoking President Clinton and what happened under his administration with the same tax rates. He's up against comparisons that are made like Peter just made to President Bush cutting taxes, he is up against comparisons to Ronald Regan, what does President Obama have to learn from the mistakes and the missteps of former presidents?

PRESTON: Well look. I mean what President Obama has to do right now is really appeal to a very small group of voters across the nation right now to help Democrats. Ali, this election is not going to be won -- look, Democrats might not be as enthused about the election. He needs to try to get those Democrats out. The Republicans are enthused; they are going to come out. It's that small sliver, that middle of the road voter, those undecided that need to come out. And when you are talking about economic policy and small business owners probably by and large are undecided voters Ali.

VELSHI: All right. Good discussion, thanks very much to you guys. Mark Preston and Peter Morici we will continue our conversation with you. Obviously we have a lot to talk about.

Can you help us out?

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