Millionaires Surtax

Sen. John Thune, perhaps using the "phone a friend" option to find a mythical job-creator. (Jonathan Ernst/Reuters)

NPR wanted to talk to a millionaire small business person who would be hurt by the proposed millionaire's surtax as a pay-for in the Senate Democrats' proposal for extending the payroll tax cut. So they asked a bunch of GOP congressional offices for help in finding those business owners.
They were unable to produce a single millionaire job creator for us to interview.
So we went to the business groups that have been lobbying against the surtax. Again, three days after putting in a request, none of them was able to find someone for us to talk to. A group called the Tax Relief Coalition said the problem was finding someone willing to talk about their personal taxes on national radio.

So next we put a query on Facebook. And several business owners who said they would be affected by the "millionaires surtax" responded.

"It's not in the top 20 things that we think about when we're making a business hire," said Ian Yankwitt, who owns Tortoise Investment Management.

NPR talked to three business owners, who all said that hiring decisions for their companies are based pretty much solely on return on investment and whether their companies need the extra hands to meet demand. They all also said something along the lines of what Jason Burger, co-owner of CSS International Holdings based in Michigan, said: "It's only fair that I put back into the system that is the entire reason for my success."

However, according to Sen. John Thune (R-SD) those people aren't at all representative of his mythical over-taxed "job creators."

"Those I would say were exceptions to the rule," responds Thune. "I think most small-business owners who are out there right now would argue that raising their taxes has the opposite effect that we would want to have in a down economy."
But those small-business owners apparently don't want to talk.

We already know that the actual effect on small business of a millionaire's surtax is miniscule: Just one-tenth of the 1 percent would actually end up being subject to the tax. Senate Democrats shouldn't be too quick to jettison the millionaire's surtax. They've already got Speaker John Boehner in a tight spot with his caucus over this issue. They should be rhetorically beating him and all Republicans about the head and neck hourly with this issue.

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For the second week in a row, the Senate on Thursday voted down proposals to extend the payroll tax holiday through next year. In the case of the Democrats' proposal, Republicans objected to the "millionaires surtax" that would be used to pay for it.

Ever since the idea of the surtax was introduced weeks ago, Republicans in Congress have railed against it, arguing that it is a direct hit on small-business owners and other job creators.

The argument is that many small-business owners report company profits on their individual taxes because of the way their businesses are structured. Sen. John Thune, R-S.D., says the surtax would hurt their ability to hire.


EnlargeJ. Scott Applewhite/Associated Press
Republican Sen. John Thune of South Dakota says the "millionaires surtax" would hurt small-business owners' ability to hire new workers.
"It's just intuitive that, you know, if you're somebody who's in business and you get hit with a tax increase, it's going to be that much harder, I think, to make investments that are going to lead to job creation," says Thune.

We wanted to talk to business owners who would be affected. So, NPR requested help from numerous Republican congressional offices, including House and Senate leadership. They were unable to produce a single millionaire job creator for us to interview.


So we went to the business groups that have been lobbying against the surtax. Again, three days after putting in a request, none of them was able to find someone for us to talk to. A group called the Tax Relief Coalition said the problem was finding someone willing to talk about their personal taxes on national radio.

So next we put a query on Facebook. And several business owners who said they would be affected by the "millionaires surtax" responded.

"It's not in the top 20 things that we think about when we're making a business hire," said Ian Yankwitt, who owns Tortoise Investment Management.

Tortoise is a boutique investment firm in White Plains, N.Y. Yankwitt has 10 employees and in recent years has done a lot of hiring.

As a result, Yankwitt says he's had many conversations about hiring, "both with respect to specific people, with respect to whether we should hire one junior person or two, whether we should hire a senior person."

He says his ultimate marginal tax rate "didn't even make it on the agenda."

Yankwitt says deciding to bring on another employee is all about return on investment. Will adding another person to the payroll make his company more successful?

For Jason Burger, the motivation is similar.

"If my taxes go up, I have slightly less disposable income, yes," said Burger, co-owner of CSS International Holdings, a global infrastructure contractor. "But that has nothing to do with what my business does. What my business does is based on the contracts that it wins and the demand for its services."

Burger says his Michigan-based company is hiring like crazy, and he'd be perfectly willing to pay the surtax.


"It's only fair that I put back into the system that is the entire reason for my success," said Burger.

For the record, both Burger and Yankwitt have made campaign contributions to Democrats in the past, but they say their views on the surtax are about the economics of their businesses and not their politics.

And they're not alone.

WED NOV 30, 2011 AT 10:39 AM PST
Millionaire's surtax no 'job killer,' would hit just one percent of small businesses
byJoan McCarterFollow
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Speaker John Boehner has a sad for America's "small" businesses, like Starbucks.
So far, House Speaker John Boehner is still resisting the idea that the continued payroll tax cut for middle-class America should be paid for by the 1 percent. Actually, as it turns out, the proposed 3.25 percent tax on millionaires would be paid by about one-tenth of the 1 percent, but that won't keep Boehner from bleating about "job creators." Which he's done in this case, with his spokesman telling reporters that the idea is a "job-killing tax hike on small businesses."
Except, as Suzy Khimm explains, it's not.

The millionaire’s tax would indeed affect about 30 to 40 percent of business income that’s reported on individual tax returns, rather than on corporate tax returns. But that income is concentrated among a very small group of small businesses. The tax would only affect about 1 percent of those the Treasury Department classifies as "small business owners."
Just 2 percent of all business owners who file taxes through individual returns—including sole proprietorships, limited liability corporations, S corporations, and partnerships—have taxable income that’s more than $1 million, according to an August 2011 Treasury report. And just about 1 percent of those Treasury categorizes as "small businesses owners" would be affected by the Democrats' proposed millionaire's tax —about 273,000 in total. That number drops even further—to 51,000—if you define "small business owners" as those earning at least 25 percent of income through their firm.

Of course, it all depends on how you define "small business," and we know that Boehner's definition doesn't really correspond to reality as most of us know it, since he calls the world's largest coffee purveyor a small business.

This is worth a bump.