SBE Council Chief Economist on Obama Tax Plan

Today, Raymond J. Keating, chief economist for the Small Business & Entrepreneurship Council (SBE Council), issued the following statement regarding the tax plan details released by the campaign of U.S. Senator Barack Obama, the presumptive Democratic Party presidential nominee:

“Senator Obama likes to talk about change. Unfortunately, his tax plan reflects the kind of old and tired class warfare thinking we’ve heard too many times in the past.

“Obama would jack up the two highest personal income tax rates, hike capital gains and dividend tax rates, increase Social Security payroll taxes on upper-income earners, and maintain a death tax with a top rate of 45 percent. Obviously, these measures would raise the costs of working, investing and entrepreneurship.

“Ironically, Obama’s plan and his economic advisers say his tax plan would benefit small business. But it should be obvious that raising the costs of work and investment are not positives for small business. For good measure, higher personal income tax rates directly hit the bottom line of small businesses.

“Data released earlier this year by the Treasury Department noted that 74 percent of taxpayers benefiting from the reduction earlier this decade in the top personal income tax rate are entrepreneurs with pass-through businesses (such as sole proprietorship, partnership, and S-Corps), and 70 percent of those reaping rewards from reductions in the top two tax rates own small businesses. So, these Obama tax increases would hit small businesses hard, with fallout coming in the form of restrained economic growth and job creation.

“In the end, class warfare tax policy is all about using envy to political advantage. Envy never makes for sound economic policy.”