Thursday, July 12, 2012

What's so special about "small business"?

Both presidential campaigns are eager to portray themselves as champions of "small business."  So we have the Romney campaign misleadingly portraying the Obama Administration's proposal to let the top bracket return to 39.6% as in the main a tax increase for "small business."  Part and parcel, of course, of their preferred new word for rich people, which is "job creators."

The Democrats, meanwhile, are pushing a bill in the Senate that would offer temporary tax credits for small businesses that hire new employees or increase their payrolls.  This at least might be stimulative if it's properly designed, not too gameable, and does not create too many odd incentives at the margin.  But there's no reason I can see to limit or direct it to small businesses. A job is a job, and a wage increase is a wage increase.

"Small business" sounds good rhetorically, whether you are trying to put a misleading face on support for the top 0.1%, like the Republicans, or simply trying for a more generally faux-populist tone, like the Democrats.  Tax breaks for "big business" certainly don't sound as wholesome.  But there is no particular reason to favor one part of the business sector over another, or to give businesses a tax incentive to stay small  And even without the rhetorical edge, "small business" often has an advantage over "big business" in mustering political support in Congress, due to the advantages of being decentralized and hence in lots of members' districts, where the "small business" leaders often are prominent local personages and important campaign contributors.  (I don't know if Citizens United, in addition to strengthening business interests' hand generally, has increased the political influence of "big business" relative to the more localized sector.)

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