Supporters of various tax benefits for high- income households often claim that failure to maintain them would have an undue effect on many small businesses. But even assuming a broad definition of “small business,” such claims are often exaggerated or false.

First, critics charge that allowing the 2001 tax cut’s reduction in the top two marginal income tax rates for individual taxpayers to expire as scheduled would affect a large proportion of small-business owners. In fact, only 1.9 percent of filers with any small-business income are projected to face either of the top two income tax rates in 2009. By contrast, more than 14 percent of filers with small-business income claim the Earned Income Tax Credit (EITC) for low-income workers. Thus, strengthening the EITC could help more than seven times as many small businesses as reducing the top income tax rates.

http://www.cbpp.org/files/8-29-08tax.pdf