BIDEN ADMINISTRATION FALSELY CLAIMS 97% OF SMALL BUSINESSES EXEMPT FROM BIDEN TAXES

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The Biden administration’s claim that the President’s agenda will protect 97 percent of small business owners from income tax rate increases is misleading, according to a study by the nonpartisan Washington-based Tax Foundation.

“To assess the economic effect of higher marginal tax rates, it matters how much income or investment will be affected—not how many taxpayers,” write the foundation’s Alex Durante and Erica York.

“The Treasury analysis specifically examines filers with pass-through income, or income that is reported through a sole proprietor, partnership, or S corp. Although the White House news release does not link to the actual study, it appears that they simply calculate how many filers are above the income thresholds where President Biden’s taxes would apply.”

Looking at filers with pass-through income likely understates the effect on small businesses, and therefore underestimates the effect on the economy more broadly, asserts the study.

The government analysis classifies as small businesses many filers at the lower part of the income distribution who may not operate what we think of as a traditional business that makes capital investments, employs workers, and generates significant income.

According to the study, “A better way to assess the overall impact of the Biden tax increase on the economy would be to look at the share of pass-through income that would be impacted by it.”

The foundation found that 6 percent of filers with pass-through net income with adjusted gross incomes above $400,000 were responsible for 52 percent of all pass-through income reported to the IRS. That such a small group of filers generates more than half of all pass-through income implies that taxes that target this group could impact the economy significantly.

Moreover, according to the study, recent IRS data for tax year 2018 further confirms that a significant share of pass-through business income would face higher marginal tax rates under Biden’s proposals.

“While taxpayers making above $500,000 comprise roughly just 4 percent of returns that reported either business net income or net losses, they account for more than half of the resulting net income. In other words, while a relatively small number of business owners would be affected, an outsized share of business activity (as measured by business income) would be affected by the proposed tax increases.”

The study concludes: “When thinking how higher tax rates would affect the economy, the relevant piece of information is not the number of people affected—it’s the amount of economic activity. By focusing on the number of people, the Biden administration is misleadingly claiming their tax proposals would have a small effect. The actual statistics show more than half of pass-through business income could face tax increases.”

Source:
https://taxfoundation.org/97-percent-small-businesses-wont-pay-more-income-taxes-under-biden-tax-plan/

WEALTH INEQUALITY LIKELY OVERSTATED ACCORDING TO NEW STUDY

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A report issued by the nonpartisan Washington-based Tax Foundations states that while it is commonly asserted that wealth inequality is too high and rapidly growing over time, “New research from Federal Reserve Bank of Boston economists suggests wealth inequality has grown less than previously estimated and that shares of wealth held by top earners drops significantly when accounting for sources of lower- and middle-class wealth that are often overlooked.”

The Federal Reserve Board’s Survey of Consumer Finances (SCF) is often used to measure wealth inequality, but it fails to adequately capture two sources of retirement wealth that are important for many low- and middle-class households: Defined-benefit (DB) pensions and Social Security (SS) benefits, writes the foundation’s Alex Durante.

Durante states that “Normally, these two sources of wealth are challenging to capture in surveys because it is difficult for people to accurately calculate their future income streams from DB pensions and Social Security. But they are important sources of wealth for certain households so excluding them from the picture will understate wealth at the lower and middle parts of the distribution.”

The Federal Reserve authors of the study found that “When accounting for both defined-benefit and defined-contribution plans, the share of wealth for the top 5 percent of earners drops from 72 percent to 51 percent in 2019. It drops even further, to 45 percent, when adding in SS benefits. Although the share of wealth held by the top 5 percent does still rise from 1989 to 2019, it does so by eight fewer percentage points after these adjustments.”

“This is an important study,” said Jim Tobin, economist, former Federal Reserve auditor, and president of Taxpayers United of America (TUA). “While politicians frequently express ‘concerns’ about wealth inequality, the study clearly shows that the issue is often based on an incomplete picture of the underlying data.”

Source: https://taxfoundation.org/wealth-inequality/

CTA Redline Scam

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Does Chicago have $2.3 billion to spend on anything? That’s the price of extending the Red Line from 95th Street to 130th Street, a distance of 5.6 miles–almost $411 million per mile. Much of this money, about half, must come from federal funding that has not yet been approved.

Will this gargantuan project increase ridership, and if so, will this increase pay for the excessive extension? Of course not. The city will be throwing money it doesn’t have down the bureaucratic black hole. That’s what bureaucratic agencies, planners and commissions do best. They always present their most optimistic scenarios, that almost always end up costing more than originally predicted.

Only a relatively small number of commuters would use this extended line. The subject of user fees is ignored because nobody believes that the Red Line extension can pay for itself. Unlike private businesses, public projects do not need to pay for themselves although they should. That is the fundamental problem.

Furthermore, maintenance of this Red Line extension would add to Chicago’s already huge deficit. Indeed, almost a billion dollars a year is needed just to maintain the current CTA lines and that’s just to keep this outdated system from further deterioration. About $12 billion is needed for the current maintenance backlog, which is not even in the Red Line extension discussion.

The CTA Red Line is a mode of transportation that is obsolete. Relying on 19th century technology is a formula for the past, not the future. Spending tax money on boondoggles never seems to deter the overpaid government bureaucrats who are adept at spending other people’s money. That is what they do best.