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Only 31 House Democrats Willing to Offer Soft Support for Small Businesses

By: Russ Vought (Diary)  |  September 16th, 2010 at 09:57 AM  | 

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Nothing quite focuses a politician’s mind like an upcoming election.

31 vulnerable House Democrats wrote to their Leadership that they want no part in raising taxes on any class of individuals—at least given the “fragility of our economy and the slow pace of recovery.” The letter also admits what every conservative has been arguing for years—many small business owners file at the top income tax rate and if you raise their taxes, you kill jobs.

Quite frankly, the letter isn’t terribly surprising given the electoral mood of the country, and how many seats are in play according to the election prognosticators. What is surprising to me is that only 31 signed the letter.

Melissa Bean of Illinois signed the letter. Why didn’t her home state colleagues, Bill Foster and Debbie Halvorson?

Zach Space of Ohio signed the letter. Why not John Boccierri, Steve Driehaus, Mary Jo Kilroy, Betty Sutton, and Charlie Wilson?

Jason Altmire of Pennsylvania signed the letter. Why not Chris Carney, Mark Critz, Kathy Dahlkemper, Tim Holden, Patrick Murphy, and Paul Kanjorski?

As for these 31 members who signed the letter, let’s not give them too much credit for admitting economic reality on a piece of paper, especially since they are not exactly pledging to vote against any tax bill that falls short of a full extension of all current tax rates.

But the letter is quite revealing of either those without any economic clue as to how jobs are created or killed or those who are simply so militant in their ideology that they are willing to press on in their obstinate resistance to sound policy.

COMMENTS

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  • Death_of_the_Donkey

    job creation and I am getting annoyed by this scare tactic argument. Small businesses get to deduct salary expenses and thus the rate of taxation on profits should have no impact on hiring an additional employee so long as that small business can make a profit above and beyond the expense of that employee (salary and benefits), which is why Obamacare is going to have a real impact on hiring, but the tax hike would not. Second, the vast majority of small business owners do not approach the high income brackets that are going to be affected by the proposed tax hike.

    However, in general, the extension of all the current rates keeps money in the hands of those who earn it, which is a far more efficient tool for the allocation of resources than what government would do with it. That is the argument we should be making, not this false small business one.

    • http://beaglescout.wordpress.com Beaglescout

      The viability of a small business is determined by its post-tax profits. If they are high enough to justify the extra work and risk in running a business then the owner will keep on keeping on. If they aren’t high enough then the owner will lay off employees and reduce expenses in other ways to get profits up. And if he can’t get profits up to a high enough level, he’ll shut the business down and go to work for someone else.

      Yes, higher taxes on small businesses do destroy jobs. Not directly, but indirectly.

    • http://impudent.edublogs.org/ kyle8

      From the Heritage Institute, the Cato Institute, and others I follow like Don Boudreaux all disagree with you?

    • cpa2222

      As a cpa and economist, I have to tell you that you’re only partially correct. There are more things than the ordinary income tax rate that will increase. Dividends, cap gains and certain deductions are affected, as well. New hires come from “after tax” income, and while it’s true the salaries are deductible, it’s the same as making contributions–you’re out 100% in cash flow before you get any “benefits” from the hire. With borrowing difficult, if not impossible, the only source of money to hire or buy equipment is after tax dollars.

      • izoneguy

        I just got tired of sending those huge checks to the IRS while I went without paychecks for weeks & months.

    • izoneguy

      You don’t take into account a small business’s cash flow.

      If a small business had a revenue stream that matched the rigid requirements of the IRS then you would be correct. However int he real world – The IRS wanted their tax payment on my employees salary every month – at the same time and matched to what I paid the employees. – But some months we found ourselves short of cash flow. So after the employees salaries are paid – the rent – utilities & loan payments are made – there was not enough left over some months to even pay myself.

      Late payments by my customers was not an excuse I could use for the IRS. So some weeks & months I had to borrow money from a credit line to pay the IRS. My business partner & myself would get paid last. Some months I would not pay myself so I would not have to pay the taxes on my salary.

      A small business can only exist so long on dipping into a credit line. Sure you say – well increase sales – this is very hard to do in a competitive business. If you slash prices to gain business you will have to slash overhead as well – usually employees – and this is what we are seeing and why the “official” unemployment rate is 9.6% – Now throw the tax increase coming in 2011 and you have a receipe for a toxic stew that might throw this country into a full blown depression.

      This is Obama’s strategy – slash & burn – if he cannot hold onto Congress he will make damn sure the taxes will go up and then blame Republicans for the the New Great Depression -

  • loveformycountry2010

    If the democrats, don’t fully extend the bush tax cut to everyone the economy will tank next year and they will get blamed.