Are Bush's Tax Cuts Doing the Job?
WASHINGTON — In appearances across the country, President Bush contends that the tax proposals of Sen. John F. Kerry would shut down a powerful engine of employment growth in America.
Kerry's plan to roll back income tax reductions for the wealthy, the president says, would "raise taxes for the 900,000 small businesses and entrepreneurs
There's no question some of the wealthy tax filers whose taxes would go up if Kerry's plan were enacted are the kind of corner-store proprietors and growth-company entrepreneurs Bush likes to describe in his speeches. Some clearly have created lots of jobs.
But statistics show that only 1 in 25 small-business owners would be affected by Kerry's tax increases. Of those who would get hit, half have no employees other than themselves. They include lawyers, accountants, consultants and investors who fall within Bush's generous definition of small business.
"There is absolutely no direct connection between reducing my taxes and increasing employment," said Eric Schoenberg, a New Jersey investor who fits Bush's definition because he and his wife report income on a tax form used by some small businesses. Schoenberg receives a graduate fellowship stipend at Columbia University, and his wife receives architect fees. Neither has any employees.
"If anyone were to describe me as a small-business owner, they would definitely be stretching," Schoenberg said. "I wouldn't call myself an entrepreneur either."
The issue of small-business ownership and its effect on employment is important because it addresses the credibility of one of Bush's principal defenses of the four rounds of tax cuts he has pushed through Congress since taking office.
According to administration officials, small businesses create two out of three new jobs and employ half of all private-sector workers. About 90% of them are organized as proprietorships, partnerships and Subchapter S corporations whose profits and losses "flow through" to the personal tax returns of their owners, rather than being taxed as a separate corporate entity.
About 25 million small-business owners will benefit this year from the president's tax cuts, the administration said. Of those, officials said, 940,000 would see their taxes go back up under Kerry's proposal to rescind the Bush cuts for people in the top two income tax brackets -- almost everyone with an annual income above $200,000.
