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Mail
Magazine 24
Obama Tax Hike
on Small Business Would Chill Hiring
by Romina Boccia
“Would raising taxes on the wealthiest Americans have a chilling effect
on hiring in this country?” When asked this question by Today’s Matt
Lauer, Warren Buffett confidently answered, “No.” How could this be,
when the tax hikes desired by President Obama would fall directly on
some of America’s most successful job creators?
As Kris Roglieri wrote in The Washington Post:
What policymakers fail to realize is that most small business owners,
who also employ most of the country’s workforce, declare their business
profits on the owner’s personal income tax return and are taxed at the
personal income tax rate. Given that the net income number for many
will be over $250,000, the proposed tax hikes could have a dramatic
effect on small businesses and the growth and hiring decisions they
will make. Another point policymakers overlook is that business owners
will ultimately pass this cost on to the middle class by raising prices
on goods and services, possibly triggering layoffs and stalling hiring.
Professor George Haynes of Montana State University analyzed small
business employment based on the Federal Reserve Survey of Consumer
Finances and found that those small businesses run by families earning
more than $250,000 per year employ 93 percent of the people working in
small businesses. Raising these businesses’ taxes means that they have
fewer resources available to invest and create jobs.
Based on data from the President’s own Treasury Department, tax hikes
on upper-income earners would directly fall on 91 percent of income
earned by job-creating businesses that pay their taxes through the
individual income tax, which are known as flow-through businesses.
Successful small businesses face a double whammy from the Obama tax
hikes. In addition to allowing the Bush tax cuts to expire for wealthy
Americans, President Obama’s signature health care law will raise their
taxes yet further. As Heritage’s Curtis Dubay explains:
The higher tax rate on wages and salaries will cause workers to cut
back on their hours, which will slow economic growth. It will also
deter job creation at small businesses. The income of certain small
businesses (sole proprietorships) is wage and salary income to the
owner. As both employee and employer, the owner therefore pays the
entire newly increased 3.8 percent [hospital insurance] tax rate. With
more of the owner’s—and therefore the business’s—income taken by higher
taxes, the owner will have fewer resources to invest back into the
business to create jobs.
The answer to whether raising taxes on upper-income Americans would
chill hiring is an emphatic yes—especially because those taxes fall on
some of the nation’s biggest job creators. Lawmakers should avoid tax
hikes on all Americans—no matter what Warren Buffett and other
supporters of higher taxes would have you believe.
Source: blog.heritage.org
Read this article with graphs at Mail Magazine 24
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