Thursday, June 2, 2011

Gov. Dayton Calls Republican's Bluff

With the prospect of a state government shutdown on July 1st rapidly approaching, Republican leaders from the House and Senate are meeting with administration officials today for a bipartisan panel discussion what may as well be called a game of "Minnesota Hold 'Em". Although the meeting is not being held at the Canterbury Card Room, the stakes could not be higher.

Since both sides have on their poker faces and neither appears willing to budge, what good could possibly come out of today's meeting? Well I for one am looking forward to the Governor providing details on his proposal to shield S Corps and small businesses from the effects of his proposal for a modest tax hike on the wealthiest 2% of Minnesotans to bring their tax rates in line with the rate paid by the middle class. Hopefully this will shine a spotlight on one of the biggest lies in the history of American Politics, the Republican's claim that a tax hike on the uber wealthy would kill job creation by small business, which accounts for approximately 85% of job growth.

We've heard this claim out of Republicans time and time again whenever their constituencies are faced with the possibility of paying their fair share in income taxes. Despite the fact that this claim has been repeatedly debunked by every nonpartisan fact checking organization, including the highly esteemed, a project of the Annenberg Public Policy Center at the University of Pennsylvania School of Journalism. In the last presidential election cycle the actual percentage of jobs created by small businesses that would be effected by a repeal of the Bush tax cuts was estimated to be only 6%.

Now I can just hear the right-wingnuts muttering under their collective bad breath, "nonpartisan, huh". You see, whenever the right is confronted with, sorry, an inconvenient truth, their tactic, much like Mussolini's or Jesse Ventura's, is to attack the messenger. Organizations that follow a strict code of journalistic ethics are not credible so say the right. Only corporate controlled, entertainment dominated, info news organizations like Fox News are to be believed if you are a true Republican.

Recently the Washington Post looked into this issue at the federal level in the context of the Obama Administration rolling back the Bush era tax cuts for the wealthy:

"When Republicans speak of “small businesses,” they are referring to the companies that file under the individual tax code. But not all of them are what most Americans would consider small businesses — and not all of them are that small, either. In fact, a report by the Joint Committee on Taxation — the nonpartisan congressional entity that ‘scores” tax legislation — found that the number of tax returns by so-called “flow-through entities” has soared in recent years.

As of 2005, the JCT says, retail trade (such as mom-and-pop shops) accounted for about 11 percent of so-called S corporations, holding 12 percent of total assets, and 5 percent of partnerships, with less than 1 percent of total assets. Another 14 percent of S corporations were in construction but the largest category, at 15 percent, were “professional, scientific and technical services.”

Some of these “pass-through” companies are rather large, with revenues of more than $50 million, but they represent just a small proportion of such companies. According to calculations by Donald Marron, director of the Urban-Brookings Tax Policy Center, in 2008 such companies accounted for less than one-tenth of one percent of all returns filed — but they had 40 percent of revenues and 30 percent of all profits.

“Large businesses thus account for a large share of the economic activity pass-through entities undertake,” Marron recently told Congress. “Policymakers should therefore take care not to equate pass-throughs with small business.”

The result, according to the Joint Committee on Taxation, is that only 3 percent of all “small businesses” paying taxes would be affected by Obama’s plan to lift marginal tax rates on families making more than $250,000 and individuals making more than $200,000. (See page 25 of the JCT report.) That group — about 750,000 taxpayers — accounts for 50 percent of the estimated $1 trillion in business income reported in 2011. The other 97 percent of “small businesses” shared the rest — and under Obama’s plan, they would get to keep their Bush-era tax cuts."

So in light of the cold hard fact as gleaned from the nonpartisan Joint Committee on Taxation "...that only 3 percent of all “small businesses” paying taxes would be affected by Obama’s plan to lift marginal tax rates..." I look forward to hearing the response from Senate Majority Leader Amy Koch and the Republicans to Governor Dayton's calling their bluff.

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