Computation error: Isakson pulled a TRIPLE whammy, and got credit for only a double
In a previous post, I awarded Sen. Johnny Isakson (R-GA) a double-whammy for this statement on allowing the Bush tax rates to expire:
“[I]ncome taxes will rise … . from 35 percent to 39.6 percent where two-thirds of small businesses are taxed.”
Whammy Number 1: Twisting the Grover Norquist factoid that two-thirds of all business income is reported by filers earning more than $250,000 so as to suggest that two-thirds of small businesses would face the increase of which he speaks. Actually, not even 4% of small business owners earn $250,000 per year.
Whammy Number 2: Eliding the distinction between the top marginal rate and the overall rate of tax so as to suggest that the high earning businesses of which he speaks pay federal income taxes of nearly forty percent on all their income.
But I missed a whammy.
Whammy Number 3: Mismatching the $250,000 threshold for the two-thirds marker laid down by Norquist to the $347,000 threshold for the top marginal rate under pre-Bush cut tax rates so as to pump up by yet another notch the apparent proportion of businesses subjected to the forty percent rate.
Since the income curve has a long tail in the direction of high incomes, it is certain that a large proportion of all incomes above $250,000 fall between $250,000 and $347,000. I’ve not been able to find figures cut precisely to match these numbers, but the percentage of returns reporting incomes of $500,000 or higher is about one-half of one percent. It seems likely that the percentage of returns reporting incomes of $347,000 or high is in the vicinity of two-thirds of one percent. If you have more definitive numbers, please link to them in the comment section.
So, here’s the upshot. Two-thirds of one percent of all small business owners would face a marginal rate of 39.6% on income in excess of $347,000 per year.
Judges, please give Johnny Isakson full credit for a triple-whammy distortion of Grover Norquist’s dubious-in-its-own-right small business meme. A mere double-whammy is just not enough to produce a 100-fold misrepresentation.