Research Briefing

While Obama Claims To Focus On Jobs, His Looming Tax Hike On Small Businesses Tells A Different Story

“President Obama On Wednesday Will Rule Out Any Compromise That Would Extend The Bush-Era Tax Cuts For The Wealthy Beyond This Year…” (Jackie Calmes, “Obama Will Not Extend Bush-Era Tax Cuts To Wealthy,” The New York Times, 9/7/10)

• Obama Claimed That Higher Taxes On Small Business Is Good For The Economy. “So let me be clear to Mr. Boehner and everybody else: we should not hold middle class tax cuts hostage any longer. We are ready, this week if they want, to give tax cuts to every American making $250,000 or less. That’s 98, 97 percent of Americans. Now for any income over this amount, the tax rates would just go back to what they were under President Clinton. This isn't to punish folks who are better off – God bless them - it's because we can't afford the $700 billion price tag. And for those who claim that our approach would somehow be bad for growth and bad for small businesses, let me remind you that with those tax rates in place under President Clinton, this country created 22 million jobs, and raised incomes, and had the largest surplus in history.“ (Pres. Barack Obama, Remarks At The Cuyahoga Community College West Campus, Parma, OH, 9/8/10)

DEMS’ TAX HIKE WILL HURT SMALL BUSINESS OWNERS

Dems' Tax Hike Will Hit More Small Businesses Than They Care To Admit. ”House Speaker Nancy Pelosi flipped the number around, saying that the planned tax increases would exempt '98% of American families and about 97% of small businesses.' The impact is far more severe than Mrs. Pelosi and Mr. Biden suggest. In fact, the sound bite about 3% of small businesses, which has been picked up by numerous pundits, is one of the more misleading statements in the long history of economic propaganda.” (Kevin A. Hassert and Allan D. Viard, Op-Ed, "The Small Business Tax Hike And The 97% Fallacy," The Wall Street Journal, 9/3/10)

Nearly Half Of The Business Income That Is Reported On Personal Tax Filings Goes To Families And Businesses That Would Have Their Taxes Raised By Dems. “The numbers are clear. According to IRS data, fully 48% of the net income of sole proprietorships, partnerships, and S corporations reported on tax returns went to households with incomes above $200,000 in 2007. That's the number to look at, not the 3%.” (Kevin A. Hassert and Allan D. Viard, Op-Ed, "The Small Business Tax Hike And The 97% Fallacy," The Wall Street Journal, 9/3/10)

“It's Clear That Business Income For Large And Small Firms Will Be Hit By The Higher Tax Rates. And In Point Of Fact, Firms Of All Sizes Contribute To The Nation's Prosperity.” (Kevin A. Hassert and Allan D. Viard, Op-Ed, "The Small Business Tax Hike And The 97% Fallacy," The Wall Street Journal, 9/3/10)

 Dems’ Income Tax Rate Increase Will Hit Small Businesses That Create 60 To 80 Percent Of New Jobs, “Discouraging” Their “Growth Or Expansion.” “They want to restore the higher, Clinton-era tax rates on the top two individual income brackets, increasing the 33 and 35 percent rates to 36 and 39.6 percent. But these higher rates won't just hit high wages; they'll hit business income ... Depending on how we define 'small business,' these higher tax rates would raise taxes on 45 to 55 percent of small business income ... So why should we pay attention to the way our tax code treats small businesses? They are an important source of innovation and risk-taking, creating between 60 and 80 percent of net new jobs, employing over half the labor force ... Higher income tax rates reduce the investment spending of entrepreneurs and the likelihood that they invest at all, discouraging the growth or expansion of small businesses.” (Robert Carroll, "Small Business And The Personal Income Tax Rates," Tax Foundation, 10/28/08)

Obama's Higher Income Tax Rates Will Stifle Entrepreneurship And Hurt “An Important Source Of Innovation.” “The impact of the higher tax rates on the entrepreneurial sector is also particularly troubling. An often underappreciated feature of our tax system is that roughly one-third of all business taxes are paid by owners of flow-through businesses ... when they file their individual tax returns. These businesses are an important source of innovation and risk taking.” (Robert Carroll, "The Economic Cost Of High Tax Rates," Tax Foundation, 7/29/09)

Small Businessman Says He Hasn't Hired This Year Because His Taxes Have Increased And He Expects Them To Increase Again With The Dems' Tax Hike.  “Last year, even as he struggled through the worst of the recession, Chris Upham said revenue at his District-based real estate and construction businesses doubled -- allowing him to hire two agents. But Upham said he hasn't increased his staff thus far in 2010 and he doesn't expect to for the remainder of the year. That's because his taxes rose sevenfold. And he said he anticipates they'll increase again if the Bush tax cuts for people earning $250,000 and above expire at the end of the year.” (V. Dione Haynes, "Small Businesses Feel Squeeze By Obama's Policies," The Washington Post, 9/4/10)

ECONOMISTS, BUSINESSES AND ENTREPRENEURS AGREE: THIS IS NO TIME TO RAISE TAXES

Small Business And Entrepreneurship Council President Says Dems’ Tax Hike Along With New Regulations Are Making “Small-Businesses Owners Feel As If They Are Under Siege From Washington.”  “Kerrigan, however, argues that new regulations from the Department of Labor, the Environmental Protection Agency and the IRS, along with the expiration of Bush-era tax cuts and new proposals affecting telecommunications, energy, healthcare and financial services have helped small-business owners feel as if they are under siege from Washington. These issues have also stopped them from hiring until they have a clearer picture of what the regulatory landscape will look like in the near future.” (Jay Heflin, “Small-Business Advocate Says Lending Bill Will Not Help Economy,” The Hill, 8/31/10)

NFIB: “‘The Best Thing To Do Is To Get Rid Of Uncertainty, And That Includes The Cliff We're Falling Off With All These [Tax] Provisions That Are Expiring,’ Said Bill Rys, Tax Counsel For The National Federation Of Independent Business, A Small-Business Group.” (Jonathan Weisman and John D. McKinnon, “Obama to Push Tax Break,” The Wall Street Journal, 9/6/10)

Former OMB Director Peter Orszag: “[N]o One Wants To Make An Already Stagnating Jobs Market Worse Over The Next Year Or Two, Which Is Exactly What Would Happen If The Cuts Expire As Planned.” (Peter Orszag, Op-Ed, “One Nation, Two Deficits,” The New York Times, 9/7/10)

Business Executives Said The Best Way To “Spur Demand” Is To Stop The Dems’ Tax Hike. “Business executives said Tuesday that the measure might deliver a temporary lift to business spending. But several said a more enduring way to spur demand would be to extend the Bush administration income-tax cuts—which expire in January—for higher earners.”  (Dana Mattioli and James R. Hagerty, “Businesses See Benefits Of Tax Break As Limited,” The Wall Street Journal, 9/8/10)

Obama’s New Proposals Do Not Address The “Big Issues,” Mainly The Looming Tax Hikes. “Economists and business trade groups see Obama's proposal as giving a modest boost to the economy, not as having the major effect that would come from removing the uncertainty about the Bush tax cuts. Those cuts are set to expire at the end of the year, and Republicans are insisting that unless they be allowed to continue in their entirety, there would be further damage to the weak recovery.” (Jim Puzzanghera, “Businesses Like Obama Tax Write-Off Plan But Want To Keep Bush Tax Cuts Too,” The Los Angeles Times, 9/8/10)

• California Business Owner Says His Biggest Concern Is The Dems’ Tax Hike, And Obama Is “Not Really Addressing The Big Issues.” “‘He's not really addressing the big issues,’ Brad Benson, president of Squires-Belt Material Co. in San Diego, said of Obama. . . . ‘I think it's maybe a small step in the right direction, but as a manufacturer, I'm more concerned with the tax-cut issue,’ said Benson, whose company supplies drywall and other building supplies for commercial and residential construction.” (Jim Puzzanghera, “Businesses Like Obama Tax Write-Off Plan But Want To Keep Bush Tax Cuts Too,” The Los Angeles Times, 9/8/10)