In case you missed it…
June 25, 2010 at 3:44 pm
http://www.offthechartsblog.org/in-case-you-missed-it%e2%80%a6-7/
Posted by: CBPP
Posted in: In Case You Missed It
http://www.offthechartsblog.org/in-case-you-missed-it%e2%80%a6-7/
Posted by: CBPP
Posted in: In Case You Missed It
This week on Off the Charts, we discussed the Senate jobs bill, state tax policies, and the growth in income inequality.
- Earlier in the week, LaDonna Pavetti, director of the Center’s welfare reform and income support division, highlighted the TANF Emergency Fund. The 2009 Recovery Act’s “best-kept secret,” the fund supports state jobs programs that will provide work for nearly 190,000 adults and youth. The jobs bill that failed to clear the Senate this week would have extended the fund (which expires September 30), enabling states to keep these effective programs in place.
- Chad Stone, our chief economist, sat down with us for a Q & A on unemployment insurance, which the jobs bill would have extended as well. Stone also blogged about the importance of the jobs bill and the misplaced arguments against it. He explained why it’s vital to extend unemployment insurance, aid to states, and the TANF Emergency Fund, despite political obstacles.
- On the state level, Jon Shure, deputy director of state fiscal policy, explained that research studies contradict the claim that rich people flee higher-tax states for lower-tax ones. Raising taxes on the highest-income households, Shure argued, is “a sensible and effective way for states to help offset the huge drop in revenues during the recession.” Shure looked at New Jersey Governor Chris Christie’s proposed budget, which would essentially raise taxes on low-income working families even as Christie has ruled out raising taxes on millionaires.
- Arloc Sherman, senior researcher, discussed new data showing that after-tax incomes nearly quadrupled for the top 1 percent of Americans in the last three decades, while barely rising among middle- and lower-income households.
In other news, the Center released reports explaining why the health reform law’s Medicaid expansion isn’t likely to “crowd out” private insurance, what states and the economy lost when the Senate jobs bill failed, and new Congressional Budget Office data on income inequality. We also released a podcast on the basics of unemployment insurance (available on our website and on iTunes).
It would be helpful if the Center could describe the composition of ‘small business’ so the general public would learn what small businesses would be subject to tax because of income. This would end the implication that ‘mom and pop’ stores and start-up companies would be taxed.
It would also be helpful if the same type of description would be developed for the estate tax.
Such descriptions should include charts or graphs.
Thank you for your consideration of this request.
Unfortunately, it is very difficult to define exactly what constitutes a small business, and hence to separate legitimate small businesses from the general category of taxpayers with business income. Occasionally the Tax Policy Center will provide alternative measures, such as taxpayers with business income who derive at least 25% of their income from business sources. But even that does not really get at the group you’re interested in: that measure will probably exclude the guy who rents out his vacation home, but it will still include the law firm partner. Unfortunately this all comes down to how the tax code classifies business income, and is very hard to get around.
Still, the bottom line is that extending the tax cuts would do little for small business because only the top 3 percent of people with ANY business income would benefit. And, if you narrow this down to small businesses, the percentage is clearly even smaller.
Note that we follow the Joint Committee on Taxation’s definition of business income, as defined in JCT’s letter of April 6, 2009: “For purposes of this analysis, business income consists of income from sole proprietorships (Schedule C); farm income (Schedule F); and income from rental real estate, royalties, partnerships, subchapter S corporations, estates and trusts, and real estate mortgage investment conduits (Schedule E).