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Andrews and Obama Plan Massive New Taxes on Small Business

May 25, 2010

 

Rob Andrews

Obama’s Plans $1.4 Trillion In New Taxes On Businesses.

“In all, Obama would increase taxes on some businesses … by a total of about $1.4 trillion over the next decade…” (Stephen Ohlemacher, “Obama Budget Would Impose Host Of Tax Increases,” The Associated Press, 2/1/10)

Nearly $1 Trillion In Taxes Come From Letting Many Of The Small Business Tax Cuts From 2001, 2003 Expire. “President Barack Obama’s $3.8 trillion budget for fiscal 2011 raises $2 trillion in taxes, cuts spending on programs with considerable political support and still leaves the nation with $8.5 trillion in additional debt over the next decade.”; “Taxes on high-income earners would rise by nearly $1 trillion over the next 10 years, under the budget plan put forward by President Barack Obama on Monday. The bulk of that increase comes as tax cuts enacted under President George W. Bush expire at the end of 2010.” (Jonathan Weisman, “White House Proposes $3.8 Trillion Budget,” The Wall Street Journal, 2/1/10; Martin Vaughn, “Tax Cuts To Expire For Top Earners,” The Wall Street Journal, 2/2/10)

 

Expiration Of Bush Tax Cuts For Wealthy Will Hit Small Businesses And Halt GDP Growth. “President Obama proposes to increase tax rates on high-income households while making the existing tax rates permanent for taxpayers below the top tax brackets. While the increase would hit only a relatively small fraction of all households, that group represents a large share of total taxes and of private spending. Raising their tax rates would be a substantial blow to overall spending and therefore to GDP growth. Small business investment and hiring would also be adversely affected because half of all pr ofits, including most of small business income, is taxed at personal rates rather than at the corporate rate.” (Martin Feldstein, Op-Ed, “Extend The Bush Tax Cuts – For Now,” The Wall Street Journal, 5/12/10)

Obama’s Income Tax Rate Increase Will Hit Small Businesses That Create 60 To 80 Percent Of New Jobs, “Discouraging” Their “Growth Or Expansion.” “They want to restore the higher, Clinton-era tax rates on the top two individual income brackets, increasing the 33 and 35 percent rates to 36 and 39.6 percent. But these higher rates won’t just hit high wages; they’ll hit business income … Depending on how we define ‘small business,’ these higher tax rates would raise taxes on 45 to 55 percent of small business income … So why should we pay attention to the way our tax code treats small businesses? They are an important source of innovation and risk-taking, creating between 60 and 80 percent of net new jobs, employing over half the labor force … Higher income tax rates reduce the investment spending of entrepreneurs and the likelihood that they invest at all, discouraging the growth or expansion of small businesses.” (Robert Carroll, “Small Business And The Personal Income Tax Rates,” Tax Foundation, 10/28/08)

 

Obama’s Higher Income Tax Rates Will Stifle Entrepreneurship And Hurt “An Important Source Of innovation.” “The impact of the higher tax rates on the entrepreneurial sector is also particularly troubling. An often underappreciated feature of our tax system is that roughly one-third of all business taxes are paid by owners of flow-through businesses … when they file their individual tax returns. These businesses are an important source of innovation and risk taking.” (Robert Carroll, “The Economic Cost Of High Tax Rates,” Tax Foundation, 7/29/09)

 

BECAUSE THEY WON’T REIN IN THEIR WASTEFUL, BIG GOVERNMENT SPENDING

 

According To CBO, The Deficit In 2010 Is Projected To Be A Historically High $1.5 Trillion.  “If the President’s proposals were enacted, the federal government would record deficits of $1.5 trillion in 2010 and $1.3 trillion in 2011. Those deficits would amount to 10.3 percent and 8.9 percent of gross domestic product (GDP), respectively. By comparison, the deficit in 2009 totaled 9.9 percent of GDP.” (“An Analysis Of The President’s Budgetary Proposals For Fiscal Year 2011,” Congressional Budget Office, March 20 10)

  • Obama Rang Up Record-Setting $1.42 Trillion Deficit In 1st Year In Office, Nearly Triple The Previous Record. (David Jackson, “Obama Team Makes It Official, Budget Deficit Hits Record. By A Lot,” USA Today‘s “The Oval” Blog, 10/16/09)

According To CBO, Ten Year Deficits As A Result Of Obama’s Spending Plan Will Total $9.75 Trillion. (“An Analysis Of The President’s Budgetary Proposals For Fiscal Year 2011,” Congressional Budget Office, March 2010)

 

If Obama’s Spending Plan Goes Through, Debt Held By The Public Is Projected To Be $20.3 Trillion In 2020, Equaling 90 Percent Of GDP.  “Under the President’s budget, debt held by the public would grow from $7.5 trillion (53 percent of GDP) at the end of 2009 to $20.3 trillion (90 percent of GDP) at the end of 2020–$5 trillion above what CBO projects for 2020 in its baseline (see Figure 1-2).” (“An Analysis Of The President’s Budgetary Proposals For Fiscal Year 2011,” Congressional Budget Office, March 2010)

 

AND CONGRESSIONAL DEMS REFUSE TO MAKE A BUDGET TO EVEN ATTEMPT TO CONTROL THEIR BINGE SPENDING

 

Speaker Pelosi and Majority Leader Hoyer Have Indicated That They Do Not Plan On Passing A Budget This Year.  “House Speaker Nancy Pelosi, a California Democrat, and House Majority Leader Steny Hoyer, a Maryland Democrat, signaled on May 13 that they are prepared to write separate spending measures rather than lay out a five-year fiscal blueprint.”  (Brian Faler, “Democrats Unlikely To Pass Spending Plan In Face Of Deficits,” BusinessWeek, 5/21/10)

 

  • Budget Committee Chairman John Spratt In 2006:  “If You Can’t Budget, You Can’t Govern.”  (Jonathan Allen, “Budget Looms Over Midterm Elections,” Politico, 5/10/10)
  • If House Dems Fail To Pass Obama’s Budget, It’ll Be “The First Time Since The Modern Budget Process Was Enacted In 1974.” “Indeed, the national political mood and a sense of legislative exhaustion following the marathon health care debate has the House leadership seriously considering ditching a budget for the first time since the modern budget process was enacted in 1974.” (Steven T. Dennis & Tory Newmyer, “GOP Targets Powerful House Chairmen,” Roll Call, 5/4/10)

 

But Dems Know They Would Face “Steep Political Consequences” If They Pass A Budget “That’s Covered In Red Ink.” Although the practical implications of forgoing a fiscal blueprint are minimal, there are potentially steep political consequences for Spratt and his fellow budget writers no matter what they do. If they fail to pass a budget, they’ll be portrayed as ineffective. But there could also be peril for other politically vulnerable Democratic lawmakers if they are forced to vote on a blueprint that’s covered in red ink. The Senate Budget Committee’s version anticipates a deficit of nearly $1.3 trillion in fiscal 2011 — down a bit from the 2010 projection but an eye-popping figure nonetheless.” (Jonathan Allen, “Budget Looms Over Midterm Elections,” Politico, 5/10/10)

However, Lack Of A Budget Means There Are No Caps On Discretionary Spending.  “The budget resolution–which sets an annual framework for taxes and spending–is one of the few pieces of legislation that Congress must pass annually. … Several problems arise from not passing a budget. First, it prevents Congress from capping discretionary spending for fiscal year (FY) 2011. The House and Senate may “deem” spending targets for their appropriations committees, but the respective spending targets may not even match each other (which would create large problems when the spending bills reach the conference committee).” (Brian Riedl, “As Deficit Deepens, Congress Refuses To Enact A Budget Blueprint,” The Heritage Foundation, 4/22/10)

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