Higher Taxes Hurt Small Business

Statement

America can't tax-and-spend its way back to prosperity. And right now the clock is ticking on some very time-sensitive tax business that will have a big impact on the taxpaying public and the economy.

Washington has a few months to act before federal tax rates on estates, wages and investment income would increase significantly on January 1, 2011. The last thing the struggling economy needs is for consumers who lack confidence to have less take-home pay at their disposal and for struggling start-ups to pay more taxes instead of investing in their businesses and expanding their payrolls.

There's always been a tug-of-war in Washington between the tax cutters and the big spenders. There are those of us who believe taxpayers have a right to keep more of their own money and decide how best to save, spend and invest those dollars. Others believe Washington knows best and work relentlessly to divert more private resources into the public coffers. Recycling even more tax dollars through Washington, especially during an economic downturn, just doesn't make sense.

Consider the work of two U.S. presidents from opposite sides of the political spectrum. John Kennedy and Ronald Reagan understood that raising taxes bore negative consequences for job creation and economic growth. When corporate and personal income tax rates climbed during the Great Depression, unemployment kept climbing, too. As America struggles to shake the biggest economic downturn in decades, we can't afford to repeat the same mistakes.

In an economy where consumer spending accounts for nearly 70 percent of the nation's gross domestic product and small businesses account for 70 percent of new jobs, it would be foolish to divert even more of the American people's money into the U.S. Treasury.

With a smaller tax liability, small business owners can expand their operations, upgrade equipment and hire more workers in their hometown communities. But tax policies designed to increase revenues for more government spending won't help these hometown business leaders create new jobs that can attract and retain talent and vitality to town. What's more, raising federal tax rates would stunt the positive ripple effect that occurs in the local economy and local tax base when small businesses are able to grow and expand their sales, output and profits.

Raising taxes sets the stage for paralyzing setbacks for small business. Let's not forget -- many small business owners are subject to the highest marginal tax rates and federal estate taxes.

As the top-ranking Republican on the tax-writing Senate Finance Committee, I've long championed policies that give small business owners the freedom and opportunity to hire, expand and grow their business without having profit-burning taxes and overly burdensome regulations get in their way of getting ahead and living the American Dream.

That's why I'm working to prevent the tax hikes from being imposed on any Americans at year's end. The current congressional leadership wants to raise the marginal tax rates, as well as capital gains and dividends tax rates on taxpayers in the top two brackets, including small business owners. According to the nonpartisan Joint Committee on Taxation, 50 percent of all flow-through business income would get hit with the Democratic leadership's proposed marginal tax rate increases. This is especially harmful to small businesses, because small businesses are typically organized as flow-through entities. Since small businesses create 70 percent of new jobs and unemployment is at 9.5 percent, it doesn't make sense to raise taxes on small businesses in less than five months.

Supporters of the tax increases would like to camouflage the tax hit on small business, but their attempts to mislead cannot withstand an honest examination. The marginal tax rate hikes would directly target flow-through businesses that employ 20 million American workers.

Again, it sure seems like a waste of resources for Washington to recycle tax dollars through the public sector when small businesses can do more good and get more bang from their own buck. Let's leave more money in the hands of those who are living and working on Main Street.

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