SBE Council Offers Four Reasons to Oppose Obama's Tax Proposals

Today, the Small Business & Entrepreneurship Council (SBE Council) was critical of President Barack Obama's tax proposals, which would hurt small businesses by raising taxes on upper income earners.

SBE Council noted that such tax increases would hurt small business in four key ways.

SBE Council President & CEO Karen Kerrigan noted, "First, many successful entrepreneurs rank among these top income earners. Are we really better off reducing the resources these individuals have for business expansion, innovation and job creation? The answer to this question should be obvious to all, but the President keeps missing or ignoring this fundamental point."

Kerrigan continued, "Second, this proposal would effectively jack up taxes on capital by effectively raising levies on, for example, capital gains and dividends. Investing in start-ups and small businesses is a high-risk venture. It makes no sense to reduce the potential returns from these critical investments."

SBE Council chief economist Raymond J. Keating added two more points. Keating said, "Here's a fundamental question: Is the economy better off leaving these resources in the private sector, or handing them over to politicians and their appointees? Quite frankly, you have to be a blind political ideologue to think that the economy is going to benefit more by putting these resources in political hands. This economy is only going to get back on track when government stops creating uncertainty and imposing costs on entrepreneurs and investors. This proposal does exactly opposite of what we really need."

Keating added: "For good measure, when faced with trillions upon trillions of dollars in added federal spending and debt, it's preposterous to think that this tax increase would accomplish anything substantive. Especially after upper-income individuals adjust their behavior and decision-making, the eventual revenue take for the government would be far less than the expected. And in the end, revenue gains would only be feeding increased government spending. It seems like President Obama is more interested in scoring political points among his base rather than getting serious about growing the economy and reducing the size of government."

News Flash: Large percentage of small business owners will get hit by proposed tax hikes moving through Congress

Small business advocates like the Small Business & Entrepreneurship Council (SBE Council) continue to say that the proposed tax hikes moving through Congress will largely impact small business owners and entrepreneurs. We have argued that taxing small business owners in a down economy is a foolish policy move as the nation is even more dependent upon our sector for job creation, innovation and getting the economy back on a solid growth track.

A memo from U.S. Senator Chuck Grassley (R-Iowa), Ranking Member, Senate Finance Committee, and Rep. Dave Camp (R-Calif.), Ranking Member, House Ways and Means Committee, reports on a new study that finds more than half of the proposed $338.8 billion tax hike on “wealthy earners” will fall on small business owners.

Here is their analysis of the Joint Committee on Taxation report:

“According to the non-partisan Joint Committee on Taxation, in 2011, the President would tax $88 billion of net positive business income at the 36 percent rate and $349billion at the 39.6 percent rate. This tax increase would raise $18.694 billion in 2011. Multiplying this over ten years suggests the proposed higher marginal rates are likely to cost small business owners somewhere in the neighborhood of $187 billion over the ten-year budget window. That equates to roughly 55 percent of the revenue raised under the President’s proposed higher marginal tax rates coming from tax increases on net positive small business income ($187 billion out of $338.76 billion). Moreover, the Joint Committee on Taxation found that approximately half of the income (47%) targeted by the President’s marginal tax rate increase proposals in 2011 would be earned by small business owners.”

Obama Administration officials, and specifically U.S. Treasury Secretary Timothy Geithner, have said that only 2 percent of small business owners would get hit by their proposed tax hike. (This proposal, moving through Congress, allows the 33 percent and 35 percent brackets to rise to 36 percent and 39.6 percent in 2011.)

As an aside, it is estimated that the percentage of small business owners getting hit by the proposed tax hike would increase once you include taxpayers earning more than $200,000.

As SBE Council continues to say, raising taxes now on any individual or business
remains an unwise and counterproductive policy measure.

Karen Kerrigan, President & CEO