Saturday, September 18, 2010
Tax Increase Would Hit Few Small Businesses
President Obama and Congress are debating on whether to allow the Bush Tax Cuts to expire for the top 2% of income earners. Opponents argue that the tax increase would be detrimental to hundreds of thousand of small business and prevent them from creating jobs that would help pull the economy out of the recession. However, the IRS says that only 3% of businesses will be subject to the tax increase. That is 97% of small businesses don't earn enough to be subject to the tax increase. House speaker Nancy Pelosi said that tax breaks have not added jobs to the economy, only increased the deficit. However, Charles Grassley, Republican Iowa, says that the tax increase could prevent businesses from expanding just as they begin to grow.
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In my opinion, the tax increase will help lower the deficit, which will help increase national savings, eventually bring down interest rates and thus increase investment. Keeping in mind that the IRS reports show only 3% of the businesses affected by the tax increase and historical evidence showing that there has not been any significant increase in the hiring of labor with the tax cuts, increasing taxes for the wealthiest Americans will help improve the general economy as it lowers deficit. Although in the short run, business expansion may slow down, taxing the wealthiest will help improve investment (as more national savings will eventually bring down interest rates) in the long run. The increase in funds available for investment will encourage entrepreneurs to start up small businesses, and thus improve the employment rate. Also, it is important to remember only the small businesses (as defined by the IRS) will be subject to the tax increase.
ReplyDeleteThat the IRS (an independent agency) estimates only 3% of small businesses will be affected is telling of how Republicans exaggerate and exploit economic fears for political gain. The idea that Democrats are "anti-small business" is a common theme they trumpet but it seems to me that most Republican lawmakers are more interested in protecting their own accumulated wealth and that of their campaign contributors than helping the economy as a whole, even with almost 10% of the population unemployed.
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