Solution for Bad Economy – Raise Taxes?

On the campaign trail, President-elect Barack Obama, a Democrat, proposed raising taxes on upper-income earners – which naturally includes many small business owners and investors.

But in such a bad economy, will an Obama administration actually carry through on such a measure?

Well, the November 8 New York Daily News reported the following:

Despite speculation to the contrary, President-elect Barack Obama will act on his campaign promise and roll back the Bush administration's tax cuts for the wealthiest Americans, an Obama senior adviser told The Daily News.

The Obama camp rejected the overnight analysis by some pundits who speculated the language at his first news conference Friday suggested the President-elect was backing away from his tax plans.

"No change to the tax plan - at all," the aide said.

If that is the case, those tax increases – including higher personal income, capital gains and dividend tax rates – would serve as another drag on the economy. Indeed, entrepreneurs and investors are in a holding pattern waiting to see what will happen in a wide array of policy areas, including taxes. The question is: Just how much will the costs of starting up, building and investing in a business rise?

The economy certainly will suffer if taxes are increased on upper-income earners who have the resources to invest and take risks, or if the possibility of increased taxes continues to loom in the near future.

If we're serious about getting the economy back on track, then entrepreneurs, businesses and investors not only need the assurance that taxes are not going up, but that broad-based, permanent, substantive, pro-growth tax relief is on the way.

Raymond J. Keating
Chief Economist
Small Business & Entrepreneurship Council