Get ready to hear a lot about “small business” as Republicans try to sell their tax plan. Who doesn’t like small business? It’s your next-door neighbor, it’s the corner store that bails you out when you just need one thing and don't want to go all the way to the big store, it’s the coffee shop where they know your name, it’s the site you turn to for news, activism, and community. Right?
Yeah, not so much. Sure, those are all small businesses, but they’re not the ones who’d benefit most (or even at all) from Republican plans for a “small business” tax cut. Republicans want a 25 percent tax rate for “pass-through” businesses, where the business pays no taxes because all of the profits pass through to the owners, who pay regular income taxes. And, according to the Economic Policy Institute:
In fact, 49 percent of all pass-through income goes to just the top 1 percent of households. This makes pass-through income one of the most concentrated-at-the-top income categories in the entire economy. [...]
For example, take a married couple whose small restaurant made them $150,000 in net profits. They will not be helped by this proposal because they’re already paying a 25 percent marginal income tax rate. 86 percent of households with pass-through income already pay 25 percent or less, so will see nothing from this Republican tax plan. The people this pass-through loophole helps wealthy people like President Trump, whose top tax rate on income from more than 500 pass-through businesses would fall from 39.6 to 25 percent.
So when you hear that Republican “small business” refrain, always ask which kind of small business they mean. Your plumber or neighborhood restaurant? Or Donald Trump, Ivanka Trump, and Jared Kushner?