As the United States struggles to shake the worst economic downturn in generations, Washington also is wrestling with a growing sense of unease among the public about deficit spending gone wild.
So far, the federal government has tapped 1.5 trillion tax dollars to bail out banks on Wall Street and jump-start spending on Main Street. While it has sustained 99 weeks of unemployment benefits, Washington's spending spree has not led to sustainable job creation and economic growth. It would be shortsighted and flat-out wrong for Congress not to deliver pro-growth, job-creating policies that open up opportunities to earn a good paycheck that pays the bills.
Instead of shoveling deficit dollars at the economy and cranking up tax rates to rationalize even more government spending, we ought to be showering job-creating incentives towards the job-creating engine in America, and that's small business.
Tax incentives that trigger risk-taking by innovators and investors will help create jobs and prosperity in medicine, software technology, communications, renewable energy and biosciences. What's more, policies that encourage exports will translate into higher-paying U.S. jobs throughout the manufacturing, transportation and agriculture sectors.
Just consider the success of the federal Wind Energy Tax Credit. I wrote the 1992 law that has led to exponential growth in the production of electricity generated by wind. Thousands of wind energy manufacturing jobs have been created in communities such as Newton, West Branch, Cedar Rapids and Ft. Madison. Those paychecks circulate through the local economy, helping to generate economic activity for Main Street businesses and contribute to the local tax base.
Now consider the uncertainty facing another promising green energy industry: biodiesel. The federal biodiesel tax credit expired on December 31, 2009. If anyone questions whether tax incentives help generate economic activity, look no further than Iowa's biodiesel industry. Since the federal tax credit ran out, nearly all of Iowa's 15 biodiesel refineries have stopped operations, leading to 2,000 lost jobs. Unfortunately, the current leadership of Congress has refused to allow my bipartisan bill to provide for a long-term extension of the biodiesel tax credit to advance. In the last two decades, Iowa has become a pivotal contributor to U.S. energy security. Federal policy that supports homegrown, renewable energy has sweeping benefits to our economic, energy and national security.
On another front, the leadership of Congress has taken no legislative action to extend the reduced marginal income tax rates that make the federal tax code more progressive and help small businesses grow and hire more workers. In addition, there's been no action to extend lower capital gains and dividends rates, which are necessary to help the economy grow and create new jobs. The tax on dividends alone will nearly triple if no action is taken.
I had the opportunity to co-author the biggest tax cuts in a generation as Chairman and Ranking Member of the Finance Committee, and this tax relief is set to expire at year's end. If Congress does not act, individuals and families will get hit with an average income tax increase of 10 percent. For taxpayers of all income groups, effective federal tax rates will shoot sharply upwards. Considering what happened to Iowa's biodiesel industry, it seems obvious that slapping a 17 percent tax hike on small businesses will not curb unemployment. It's a no-brainer that higher taxes make it harder for small businesses to hire more workers.
If Washington continues to sit upon unfinished tax business, the tepid economic recovery is not going to suddenly enjoy robust growth. The widespread uncertainty surrounding federal tax policy is arguably one reason we are experiencing a jobless recovery.
A growing number of Iowans is starting to wonder if all this government spending is actually driving the United States into a deficit ditch of no return. The disillusioned and debt-weary are calling for the public spigot to be dialed back. So many Iowa households work hard to spend within their means. Washington needs to show some restraint and do a better job protecting the public's money.