"First they ignore you, then they ridicule you, then they fight you, then you win." -- Mahatma Gandhi

Obama’s Tax Hike Would Hit Nearly 1 Mil Small Businesses

July 10th, 2012 by mopns · No Comments

Yesterday, President Obama announced his plan to deal with the massive tax hike scheduled for January 1st under current law: he’ll allow that tax hike to hit small businesses while putting it off for another year for other taxpayers.

As The Wall Street Journal editors put it today, “So the 2013 tax cliff is a big enough economic problem that President Obama now wants to postpone it for some taxpayers. But it isn’t so big that he’s willing to curb his desire to raise taxes on tens of thousands of job-creating businesses. That’s the essence of Mr. Obama’s announcement Monday that he wants Congress to extend current tax rates for a year, but only for those making less than $200,000 a year.”

Nearly two years ago, President Obama signed an extension of tax rates for everyone, arguing that tax increases then “would have been a blow to our economy.” But the economy today is performing even worse than it was in December 2010. At that time, real GDP growth over the prior four quarters was 3.1%, but today real GDP growth over the four previous quarters is only 2%. If tax hikes would have hurt a struggling economy then, why is the president pushing for them now?

The WSJ editors note, “Mr. Obama is demanding tax increases, not tax cuts, and large increases at that. If the Bush tax rates expire as scheduled on December 31, rates on the top two income brackets will jump to 39.6% from 35%, and 36% from 33%.” Importantly, they explain, “Congress’s Joint Tax Committee—not a conservative outfit—estimates that in 2013 about 940,000 taxpayers will have enough business income to meet Mr. Obama’s tax increase threshold. And of the roughly $1.3 trillion in net business income, about 53% will get hit with the higher tax rates. This is because millions of businesses report their income as sole proprietors and subchapter S corporations that file under the individual tax code.”

No wonder the AP reports today, “The economy and uncertain political climate are taking a toll on small business owners’ optimism, making them hesitant to expand. The National Federation of Independent Business said its index of small business owners’ sentiment fell 3 points in June to 91.4 after edging lower in May. The index, compiled from a survey of NFIB members, shows that business owners are concerned about the economy. The number of owners expecting business conditions to improve in six months fell 8 percentage points and the number expecting their sales to rise slid 5 percentage points. . . . Owners said they are scaling back plans to hire and to buy equipment. That’s a troubling sign for the U.S. labor market, which is struggling to gain traction.”

Related:

Rasmussen Reports: Consumer Confidence Declines in June

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