Tax Cuts Fact Check: Gross or Taxable?

By Jenny Schlesinger

Nov 16, 2010 2:04pm

ABC News’s Z. Byron Wolf reports:  Here is a tax policy fact check as Congress mulls whether to extend the Bush era tax cuts for all Americans (as most Republicans prefer) or just those making less than $250,000 (as most Democrats prefer).  Rep. Michele Bachmann, R-Minn., told George Stephanopoulos on Good Morning America that she wants to extend all the tax cuts – even for families making more than $250,000 – in part because $250,000 is not that much for a family running a small business.  To see that interview, click HERE.  “These are people who are carpet layers who maybe employ two or three other guys. Or a plumber maybe himself and his brother and it’s $250,000 in gross sales for the business. They’re the ones that are looking at massive tax increases,” she told George.  A good number of viewers wrote in to question whether the tax cuts would really apply to small businesses and people who gross – total combined income – of $250,000.  And the viewers are correct here. The $250,000 over which Democrats want the Bush tax cuts to expire is for taxable income and not for gross income.  For more on what business income is taxable and how operating expenses and other deductions are subtracted from it, check out this IRS video. And for more on the difference between taxable and non-taxable income, click here:   For a 2008 Factcheck.org story on how many small businesses actually make more than $250,000 ($200,000 for individuals), click HERE.

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