Obama tax plan no small deal to small businessmen

President Barack Obama’s plan to increase taxes on top earners would have only a small impact on the nation’s economy, according to congressional budget experts. But don’t tell that to small business owners facing a tax hike. Obama’s proposal would hit about 940,000 people who report business income on their individual or household returns, says the Joint Committee on Taxation, the official scorekeeper for Congress. That’s only 3.5% of the people who report business income. However, those business owners are projected to earn 53% of the $1.3 trillion in business income that will be reported on individual returns next year. That, Republicans in Congress argue, makes those business owners an important engine for economic growth and job creation. Many economists agree that tax increases in general limit economic growth. But there are big disagreements about magnitude: how much relatively small changes in the top two income tax brackets would affect the economy and job creation. The Congressional Budget Office estimated last month that Obama’s plan to increase taxes only on top earners would reduce economic growth by 0.1% of gross domestic product next year, or about $16 billion. That translates into about 200,000 fewer jobs. By comparison, letting all the tax cuts enacted in 2001 and 2003 expire would reduce economic growth by 1.4% of GDP, resulting in about 1.8 million fewer jobs, the CBO says. Read the full story here.