Thursday, February 5, 2009

Hey, He's Got Job Security

Mr. Rogers recently talked with RightMichigan about the stimulus package; the folksy interview was divided between blaming the Democrats and yearning for tax cuts.  One of Mr. Rogers' complaints about the stimulus package:
Only 2.7 percent of the cost of this bill would go to tax incentives for small businesses.
Congressional Republicans looooove small business tax cuts (heck, they love all tax cuts),  but do tax cuts actually work?

Martin Feldstein, was President Reagan's chief economic advisor and is president emeritus of the National Bureau of Economic Research. Mr. Feldstein has this to say about business tax cuts:

The proposed business tax cuts are also likely to do little to increase business investment and employment. The extended loss "carrybacks" are primarily lump-sum payments to selected companies. The bonus depreciation plan would do little to raise capital spending in the current environment of weak demand because the tax benefits in the early years would be recaptured later.  also dissects the GOP fetish for "small business tax cuts," which includes some rather interesting Republican definitions of "small business."

A Republican committee staff member confirmed to that their report is counting anybody who made even one dollar of profit from a hobby business as a “small business owner” if they reported that income on Schedule C of their federal income-tax returns.

Their method also counts as a "small business owner" any member of an investment club -- someone who put $50 a month into a pool to buy stocks with friends and then reported a few dollars of dividends and capital gains on a K-1 form from the partnership at the end of the year

And that’s not all. Also counted as “small business owners” would be:

--A corporate executive who made $500,000 in salary and bonuses, and who also had $3,000 in income from renting out his yacht.

--A TV anchorwoman making $1 million in salary and reporting $25,000 in speaking fees as Schedule C income.

--A partner in a national accounting firm who has no side business at all, but who gets a big chunk of his income as a share of the giant partnership’s profits.

It’s silly to call any of these “small business owners,” but Gillespie went even beyond what the report said. He said 80% of the tax relief went to “small businesses,” (as opposed to “owners”). Not even the Republican staff report can back that statement.

Econbrowser offers a technical look at the (not so impressive) impact of tax cuts on economic stimulus - a little dry, but worth the read. 

Daniel Gross at has a good post on the GOP's "economic know-nothingism," noting that "Today, Congressional Republicans are taking their advice from Joe the Plumber.

So the next time you hear Rogers & Co.* going on about tax cuts - especially cuts for small business -- ask him for specifics.  Don't be surprised if you get emotion-based anecdotes instead.

* This applies to MI Senate majority leader Mike Bishop, too... 

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