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Taxing the 2 Percent

This morning, the Times has a very good discussion about the proposed tax rates President Obama will be discussing with Congressional Republicans in the coming weeks, which is part of a larger negotiation of talks about the “fiscal cliff” (if you are bored by that term and still don’t know what that means, here’s a primer). The president wants to raise taxes for the wealthiest 2 percent of Americans, and Republicans argue that the wealthiest Americans are also job creators and small business owners, so raising taxes on them would discourage hiring. One small business owner in Cincinnati, Anne Zimmerman, whose business has made a profit of between $250,000 and $500,000 in its most recent years, would be targeted for a tax increase in the same way that someone earning $15 million would. Zimmerman shares the same viewpoint as I do:

“I’m not going to change my business decision-making process based on a few percentage points of tax increases,” she said. “If it helps get the country on a better path, well, we’re all in this together.”

It’s an idealistic point of view. I’ll concede to that. And the reality is that Obama’s plan isn’t going to fly through Congress. Here’s where the negotiations will really happen:

“But both sides have agreed in principle on raising revenue by reducing or eliminating loopholes, tax subsidies and deductions at the high end of the income scale. Even if the top rates do not rise, the efforts to limit deductions would make the tax system more progressive, with the biggest impact felt by those at the very top in incomes.”

We’ll just have to wait and see how the negotiations go.


4 Comments / Post A Comment

3jane (#645)

OK, so I have never understood why individual income tax increases were somehow tied to small businesses, and thankfully I read this article:

“Because the profits of many companies are taxed as the owners’ individual income, the group facing increases also includes 3 percent of all small businesses.”

NY Times, I do not appreciate your conflation of “many” and “3%” there. Also, I really doubt a lot of people start small businesses to make tons of money (because hey apparently only 3% of them do!). ALSO the people who would fire/not hire employees or cut their benefits or salaries because they made 6% less in profits due to taxes are scumbags and should pay more taxes.

@3jane Many (most?) of those are attorneys, doctors, architects, and similar who work for themselves. Almost nobody hires employees and still takes their business profits as personal income, unless it’s maaaaybe a temporary admin assistant or something.

kitten_witawip (#1,309)

Patiently waiting for the trickle down effect since 1985.

cmoney (#2,344)

My one problem with that is that the person at $250k is going to be making a much bigger sacrifice for the “good of America” than the person with $15 million in income. Obviously someone always has to be the loser, but the way deductions work and also the way that the person making $15 million in income is probably making their income (probably from bonuses/the stupid “carried interest” thing that treats PE and hedge fund managers bonus for doing well with the funds they are managing as a capital gain/actual capital gains) means that those at the $15 million level are far more able to avoid taxation than someone at the $250k level. It would be more fair to set the highest tax rate at an income level that would specifically target those who can offset their income through deductions/expensive lawyers or accountants/other shenanigans than the arbitrary 2% highest income earners.

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