Speaking yesterday in Kansas City, President Bush made the following remark about his proposed tax cut:
We also drop the top rate from 39.6 to 33 percent. And this is where some of the folks in Washington would rather holler than listen to the facts. It's easier to say some things about maybe certain folks shouldn't be getting tax relief. But I want people to understand this about dropping the top rate. A major beneficiary of dropping the top rate from 39.6 to 33 percent are small business owners. Thousands of small businesses pay taxes at the top personal rate.
To the untrained eye, this looks like a surly swipe at Washington-based critics of Bush's tax proposal. But close readers of this column will quickly grasp that it is really a heavily camouflaged admission of error. This past Friday, Chatterbox dinged Bush, Rep. Jennifer Dunn, and/or the Treasury Department for claiming that 17.4 million small businesses stood to benefit if Congress were to enact Bush's proposed reduction of the top tax rate from 39.6 percent to 33 percent. In fact, according to the Center on Budget and Policy Priorities, the maximum number of small businesses who stood to benefit was 691,000, which is less than 5 percent of the figure cited by Bush. And according to Bob McIntyre of Citizens for Tax Justice, even that overstates the Bush tax proposal's impact on small business. In truth, McIntyre says, only 160,000 small businesses are paying the 39.6 percent rate, or less than 1 percent of the figure cited by Bush. (There may be 17.4 million small businesses in the United States, but McIntyre points out that only 13.3 million of these pay income taxes at all because only 13.3 million report profits. The Treasury report cited by Bush, which misleadingly stated that "many" of the 17.4 million small businesses paid the 39.6 percent rate--fewer than 1 percent is hardly "many"--also managed to ignore the fact that 4.1 million small businesses report losses. For more details, click here.)
When you know all this, the subliminal message in yesterday's Kansas City speech becomes clear. When Bush says that small businesses will be "a major beneficiary" of his tax cut, his vague language acknowledges that his administration can no longer claim that "many" small businesses will benefit. And when he says that "thousands of small businesses" pay the 39.6 percent rate, he's conceding that he can no longer say that 17.4 million small businesses will be helped by his tax cut.