In a letter to the editor in today’s Wall Street Journal, Assistant Treasury Secretary Michael Mundaca argues against Kevin Hassett and Allan Viard’s Sept. 3 op-ed claiming that small businesses will be hit by raising individual income tax rates. Mundaca writes:
The problem with their argument, however, is that it counts any type of partnership income, sole proprietor income, or S corporation income as small-business income… Our analysis indicates that small-business owners under this definition, who would be affected by allowing the top two rates to increase as scheduled, have an average gross income of over $1 million.
So, what we’re quibbling with here is the definition of small-business income. Mundaca is arguing that a small business with gross income over $1 million isn’t small. We’ve made the point over and over that manufacturers are capital intensive – one manufacturing press alone could cost $1 million. Frankly, a small manufacturer with only $1 million in gross income is small!
But, we’re flexible. If it makes folks feel better, we’ll call them “medium-sized” businesses. It doesn’t change our position though. We think that raising taxes on a “medium sized” manufacturer with $1 million in income (which incidentally, would be a $35,000 tax increase) is a bad idea. And we think it will hurt job creation.