Research Briefing

Obama Agenda’s Message To Businesses: Hire Less, Lay Off More And Pay Up

“Per The White House … ‘On Tuesday, The President Will Address The Annual Meeting Of The Business Council … The President Will Discuss His Efforts To Spur Job Creation … He Will Also Address The Important Role The Business Community Plays In The Fight To Get The American People Back To Work.’” (Mike Allen, “Mike Allen’s Politico Playbook Daily Update,” Politico, 5/1/10)

BUT OBAMA WANTS BUSINESSES TO ACCEPT NEW NORMAL

OF HIGHER COSTS UNDER GOVERNMENT-RUN HEALTH CARE …

Economist Says ObamaCare's Tax Increases On Small Businesses Could “Quash The Nascent Recovery.” “Families earning more than $250,000 and individuals making more than $200,000 will not only pay new healthcare-related taxes, but also face the likely expiration of upper-income tax cuts enacted under President George W. Bush ... The healthcare overhaul calls for collecting more than $200 billion in new taxes over 10 years from upper-income taxpayers … That would raise nearly $443 billion over 10 years, by one estimate based on administration figures, which Democrats see as a pot of gold they can use to respond to the public clamor for deficit reduction. ‘They are in a push-pull situation,’ said Roberton Williams, a tax policy analyst at the nonpartisan Tax Policy Center. ‘They really want the money [from raising taxes]. But they don't want to quash the nascent recovery.’” (Janet Hook, "Tax Burden Mounting For High Earners," The Los Angeles Times, 4/8/10)

ObamaCare’s New Regulations Will Make It More Difficult For Small Businesses To Hire “Lower-Income People.” “[E]mployers who do not offer ‘affordable’ coverage to employees would have to help pay the cost of such benefits for their low-income workers ... The Center on Budget and Policy Priorities … said this proposal ‘could unintentionally discourage the hiring of lower-income people,’ by adding a new ‘health surcharge’ to the cost of employing them.” (Jeff Zeleny and Robert Pear, “Obama Says Government Health Coverage Plan Would Not Hurt Private Insurers,” The New York Times, 6/23/09)

And ObamaCare Has Onerous New Tax Reporting Requirements For Small Businesses. “Tucked away in just 23 lines of Section 9006 of the Healthcare reform bill be a dramatic change in the 1099 reporting requirements.  No longer will corporations or payments for merchandise be exempt 1099 reporting … There is no doubt this will be an administrative nightmare for many businesses in the first year or two … Have a large business related meal at a restaurant, this will need to be reported on a 1099.  Spend a week in a hotel in Waco Texas, you will need to send a 1099.” (Jaime Downey, “Healthcare Reform Bill Expands Business Tax Reporting,” The Boston Globe’s “Managing Your Money” Blog, 4/12/10)

LESS JOBS TO CREATE, LOWER WAGES TO PAY UNDER A NATIONAL ENERGY TAX …

Obama's Energy Agenda Still Includes “Cap-And-Trade” National Energy Tax. “Riding a political hot streak with health care and a new arms deal with Russia, President Obama tries to today to revive his energy agenda... The president also continues to push a 'cap and trade' program to restrict production of greenhouse gases. Republicans are not as crazy about either idea, saying cap and trade in particular would cripple American industry, and Obama's energy package has been stalled in Congress.” (David Jackson, "Obama Looks To Energize His Energy Agenda," USA Today, 3/31/10)

That Could Lead To Nearly 1 Million Jobs Lost Per Year. “Overall, a cap-and-trade system that reduces annual GDP by 0.34 percent per year can be expected to reduce U.S. employment by roughly 964,900 jobs per year ...” (Andrew Chamberlain, "Who Pays For Climate Policy," Tax Foundation, 3/09)

CBO Director Says Cap-And-Trade National Energy Tax Will Make Businesses Lower Wages. “By gradually increasing the prices of fossil fuels and other goods and services associated with greenhouse-gas emissions, climate legislation would ... Reduce the total supply of labor by raising the prices of consumer goods and thus reducing workers’ real wages.” (Douglas Elmendorf, Committee On Energy And Natural Resources, United States Senate, 10/14/09)

LOST OPPORTUNITIES TO COMPETE UNDER OBAMA’S ANTI-TRADE AGENDA …

Obama’s Refusal To Send Trade Agreements To Congress Will Cost American Exports Billions Of Dollars Per Year. “U.S. trade policy, or the lack thereof, is the other major threat to American economic competitiveness in Asia … A U.S.-South Korea free-trade agreement negotiated by the Bush administration has gone unratified for more than two years. Under the Korea trade deal, 95 percent of consumer and industrial products would become duty-free in three years, boosting American exports to South Korea by $10 billion annually ...” (Editorial, “Deal With It,” The Washington Post, 11/13/09)

Obama’s Lack Of Action On Colombia Free Trade Agreement To Congress Hurting American Farmers. “The latest warnings from a would-be free-trade partner come from Colombia. Its free-trade agreement with the US has languished since 2006, awaiting congressional approval … In the case of Colombia, the losers are primarily American farmers. A case in point: yellow corn. In 2008 the US held 80 percent of the Colombian market – more than 100 million bushels. But last year, under Colombia’s trade agreement with Brazil and Argentina, tariffs on yellow corn from those countries fell to zero (compared to a 15 percent tariff on US corn). The US share of Colombia’s market plummeted by more than half.” (Howard LaFranchi, “U.S. Losing Jobs As Free Trade Agreement Languishes, Columbia Says,” The Christian Science Monitor, 4/22/10)

And After Obama Cancelled Program Allowing Mexican Trucks In The U.S., Mexico Has Imposed “Retaliatory” Tariffs That Are Hurting U.S. Businesses. “The cancellation of a pilot program to allow Mexican truckers to work in the U.S. precipitated the Mexican retaliatory tariffs, which range up to 45% on $2.4 billion worth of U.S. products. … Industries such as the potato industry have already lost substantial revenue from reduced sales to Mexico. … At Appleton Papers Inc., the fight over who can drive a truck across a border 1,600 miles away has translated into falling wages and rising anxiety. ” (Gary Fields, “Trade Dispute Divides Workers,” The Wall Street Journal, 4/6/10)

AND FEWER LOANS TO START AND GROW BUSINESSES UNDER OBAMA’S SAVINGS TAX

Sen. Max Baucus (D-MT) Says There Isn’t “Much Doubt That There Will Be A Bank Tax.”  “It was a short hallway conversation but spoke volumes about the dilemma facing Democrats, hungry for new revenues after emptying the cupboard on health care reform. ‘I don’t think there’s much doubt that there will be a bank tax,” Senate Finance Committee Chairman Max Baucus told POLITICO.” (David Rogers, “Baucus: A Bank Tax Is Coming,” Politico, 4/26/10)

CBO: “The Fee Would Probably Lower The Total Supply Of Credit In The Financial System To A Slight Degree. It Would Also Probably Slightly Decrease The Availability Of Credit For Small Businesses.” (Douglas W. Elmendorf, Director Of Congressional Budget Office, Letter To Senator Charles E. Grassley, 3/4/10)

• Tax Will Kill Banks’ Incentives To Lend.   “Administration officials worry about a credit crunch and want banks to lend more. Banks don’t lend out of thin air — they need liabilities on the other side of their balance sheets to fund new loans. The proposed tax would assess a 0.15% levy on bank liabilities (minus insured deposits.) ... But it’s not an incentive to lend, something to remember the next time they’re getting bashed for worsening the credit crunch.” (Jon Hilsenrath, “A Reason To Be Skeptical Of Bank Tax Plan,” The Wall Street Journal’s “Real Time Economics” Blog, 1/15/10)

JCT Report Warns Tax Could Hurt Small Businesses. “[A] Joint Taxation Committee report this month said that ‘because commercial loans are assigned the highest risk-weight of 100 percent, a tax on risk-based assets could prove a disincentive for an institution to make such loans … to small businesses.’” (David Rogers, “Baucus: A Bank Tax Is Coming,” Politico, 4/26/10)

Related post:

Obama v. Business