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Increasing Taxes Hits Small Business Job Creators


Posted by Hugh Johnson on Friday, July 27th, 2012, 3:24 PM PERMALINK


This content is provided by the Americans for Tax Reform Foundation.

Taxing small business to pay for more government is the policy equivalent of “you didn’t build that.”  Increasing taxes on the top bracket—$200,000 single; $250,000 married—hits small businesses, sole proprietorships and family farms that file as individuals or “pass through entities.”

In 2011, the nonpartisan Joint Committee on Taxation estimated that this plan hits 750,000 entities.  A more recent update in their model concludes that, under this plan, 940,000 small businesses will pay higher taxes.

The economy grew 2.0 and 1.5 percent in the last two quarters.  Growth in real nonresidential fixed investment declined for the third straight quarter.  RNRFI is an indicator of how much businesses spend on new or improved facilities and technology from quarter to quarter.  It is an important measure of how much the private sector is growing and planning to grow since the new equipment is used to expand operations, hire more people and increase overall prosperity.  It seems, then, that the private sector is not “doing fine.”

So the economy is in a stall, businesses are investing less and less in pro-growth measures like expanded production capacities and hoarding cash.  Meanwhile, Congress is talking about raising taxes on 940,000 small businesses which comprise 75 percent of all small businesses in the country.  As Americans for Tax Reform noted, the top 3 percent of small businesses employ a majority of everyone who works for a small business.  Raising taxes on these businesses in a good economy is bad policy, in a recession it is a recipe for economic contraction and further job loss.

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