After the House passed its version of Donald Trump’s One Big Beautiful Bill Act (OBBBA) last year – the one that paired a $5tn-plus tax cut with $1tn-plus of cuts from food stamps and Medicaid – the House speaker, Mike Johnson, explained that “this is not giving tax cuts to the millionaires”. The beneficiaries, he said, were “small business owners” that “provide the jobs in every community in America”.
Johnson was playing to the myth of the modest, sturdy Main Street job creator. It is an appealing story. It’s also the most consequential piece of BS distorting American policy that deprives the government of tax revenue, stunts American capitalism, twists regulations, thwarts competition and overwhelmingly serves millionaires’ interests.
The speaker was specifically talking about “pass through” businesses. About 95% of businesses in the country take this form. They employ half of all workers and generate more than half the nation’s business income. These creatures of the tax code are freed from paying the corporate income tax rate. Instead, their untaxed profits are distributed to their owners, who generally face lower individual tax rates, saving them billions.
Republicans have consistently gone to bat for pass throughs. In 2017 Ron Johnson, the Republican senator from Wisconsin, threatened not to vote for Trump’s Tax Cut and Jobs Act, relenting only after the Senate increased a tax deduction for pass-through business income from 17% to 20%. “I just have it in my heart a real…
