End tax cuts for the wealthiest

End tax cuts for the wealthiest

This afternoon President Obama will hold a press conference to talk about growing the U.S. economy and reducing the deficit.  He will certainly address the fictitious “fiscal cliff” you’ve heard so much concern about.  You can watch it live here.

The talking point on this scary fall is that the country’s economy will dive into a recession on January 1 if we don’t take action by the end of the year.  The truth is that Congress can act on all the fiscal issues involved in the early part of January and the average American won’t feel any pain. (Wall Street investors will make all their money back from any stock losses during December so don’t cry for them.) 

We aren’t in jeopardy of falling off a cliff.  It will be more like a slow motion rappel down the hill with a secure harness allowing us to zip right back to the top when compromise is achieved.

We can expect the President to talk about the Bush-era tax cuts that are set to expire for everybody on December 31st.  The President ran on the pledge to only allow these tax cuts to end for individuals making over $200,000 and joint filers making over $250,000 a year. 

The controversy over this tax policy has been going on for several years.  My first opinion editorial in The Hill ran in September 2010.  The message was very simple then as it is now—end tax cuts for the wealthiest.

The Hill’s Congressional Blog
September 23, 2010

End tax cuts for the wealthiest

By Frank Knapp, Jr.

The Board of Directors of The South Carolina Small Business Chamber of Commerce voted this week to support the effort in Congress to end tax cuts for the very rich. Here’s why.

First, letting the tax cuts for the top two income brackets expire will impact very few real small business owners. The reality is that almost all small business owners are middle-class Americans with middle-class incomes. Of those who aren’t, more small business owners are lower income than upper income. Only two to three percent of tax filers who claim income from a business make over $250,000 a year. Many of these people are wealthy passive investors or part of large corporate law and accounting firms who invest in financial and real estate partnerships — not hands-on small business owners.

While big business CEOs, Congressional lobbyists, Wall Street bankers, some attorneys and other professionals will lose their tax cuts on the portion of their incomes that is over $250,000 (they keep the tax cuts on the portion under $250,000) — the vast majority of small business owners will not be impacted at all.

Second, if our government is going to borrow $700 billion from China and other nations, using it to cut taxes on the very rich is an extremely counterproductive way to put American’s back to work and grow our economy.

The Congressional Budget Office this year looked at 11 policy options in terms of boosting small business and creating local jobs. It found that keeping the tax cuts for the top two income brackets was the least effective because higher-income households simply don’t spend as much of their income as middle and lower-income households. Remember — spending money in your local economy helps small businesses, not sending checks to hedge funds or putting money into “too big to fail” banks that favor quick buck speculation at the expense of Main Street investment.

Instead of handing more money to those who won’t create main street jobs, the money would be better used to help the real engine of our economy — the small businesses that create most of our new jobs. We should be stimulating more customers for our small businesses through infrastructure projects and keeping teachers and law enforcement officers working. We could also be giving incentives to small businesses to start hiring again by reducing their payroll taxes or other measures. And we can do all of this for a lot less money and reduce our nation’s deficit at the same time.

Allowing the tax cuts on the top two income tax brackets to expire and putting the money into more productive “job creating” or deficit reduction uses is the right business decision for our country’s small businesses and our nation’s economy.

Frank Knapp, Jr. is the President & CEO of The South Carolina Small Business Chamber of Commerce.