Marcus Makes the Case for … Lower Tax Rates on Small Businesses

J.D. Foster / September 17, 2010

Ruth Marcus tried her best yesterday to undercut the argument that tax cuts hurt the economy’s main job creators — small businesses. But once you straighten out the curves of her case, you find a highway leading directly to the opposite conclusion. It turns out she actually reinforces the point that higher tax rates tend to hurt those small businesses most likely to hire.

Marcus cites a handful of interesting papers to support her argument. The traditional lore about small-business job creation comes from David Birch’s 1979 book The Job Creation Process. It reported that small businesses created two-thirds of the net new jobs, or more. As the Small Business Administration notes in a retrospective on small-business advocacy, researchers in other countries “were reaching the same conclusions.” On a global basis, big businesses generate the headlines, while small businesses generate the jobs. (more…)