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Friday, July 13, 2012 - Page updated at 05:00 p.m.

It's a small (business) world after all — just ask politicians

By Gail Collins
Syndicated columnist

Our subject for today is the care and feeding of small businesses.

"I love you guys," Mitt Romney told a teleconference hosted by the National Federation of Independent Business. "I love the fact that you're working hard to follow your dreams and to build businesses. I — I love you guys. I love the fact that you're — that you're working hard to — to follow your dreams and to — and to build businesses."

To summarize: We love you, guys.

And they're everywhere! The Small Business Administration defines a small business as one with fewer than 500 workers, and that's 99.7 percent of everything out there. "There are 5.7 million firms with employees in this country, and about 5.7 million have fewer than 500 employees — rounding slightly," said Robert McIntyre, the director of Citizens for Tax Justice.

It's sort of metaphysical. I am you as you are me and we are one and we are all small businesses. Ich bin ein small business. No wonder politicians want to get on their good side.

All of this takes us to President Obama's call for Congress to extend the Bush tax cuts for families with incomes below $250,000 a year. Most people, the president said, believe it is wrong to "raise taxes on middle-class families." It was certainly a triumphant moment for the administration's economic policies. In 2008, who among us could have hoped that four years in the future, middle-class Americans would be making $250,000 a year?

But Romney called the idea "a massive tax increase on job creators and on small business." He also denounced it as "another kick in the gut to the middle class in America," thus signaling his determination to broaden the American middle even further, as well as to call everything the president does a "kick in the gut" for the rest of this campaign season.

How do we feel about this argument, people? We are not talking about business taxes, in the normal sense of the word. If we were, it would quickly become so incredibly confusing that you would be begging me to go back to the matter of the dog Romney once tied to the roof of his car.

The typical American business owner does not pay corporate taxes. He or she subtracts expenses from revenues and declares the bottom line as income. There are many, many advantages to this approach. You can avoid corporate tax rates, and it's a lot easier to deduct things. If you're a baker of gourmet cupcakes, you can subtract the entire cost of your new $50,000 ovens from your income, right up front, as well as lunch with your best friend who is also an occasional cupcake purchaser.

"There are rules, of course, but both the rules and the implementation of the rules are fuzzy," said William Gale, the co-director of the Tax Policy Center.

And everybody can get into the game! Including partners in hedge funds and law firms and investment banks. "Here's the beauty — each of the hedge fund principals themselves is a small business," said Gene Sperling, director of the National Economic Council. Sperling is a small business himself because he gets occasional royalty payments for cowriting a few episodes of "The West Wing."

This flight to small is so popular that the Congressional Research Service concluded that if taxes on high incomes went up, it would actually create more small businesses because more rich people would want to "seek self-employment because the opportunities for tax evasion and avoidance are greater."

Small business growth. It's what makes America great.

When the Republicans claimed that capping the Bush tax cuts at $250,000 would hurt small businesses, the Obama administration quickly retorted that only about 3 percent of the small business owners have incomes above $250,000.

Yeah, said the Republicans, but that little slice still represents more than 900,000 people, and half of all the nation's business income.

Yeah, said the Democrats, but that's because of the hedge fund managers and law partners and movie stars with rental property.

Yeah, said the Republicans, but the high-end sort-of-small businesses will still cut back on jobs or investment if their taxes go up. Taxes rise, bad things happen. It's an article of faith. The Hartford Financial Group said it did a survey that showed just that, although as Robb Mandelbaum pointed out in The New York Times, only 2 percent of the small businesses surveyed actually cited taxes as their prime concern.

We do know these things: Republicans do not like income taxes, even for very wealthy people. Possibly particularly for very wealthy people. Barack Obama, who also has royalty income, is a small business. Possibly the only small business the Republicans do not love.

Gail Collins is a regular columnist for The New York Times.

© 2012, New York Times News Service


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