Killing the entrepreneurs

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By Mike Whalen

Everyone in the full-time political class pays great homage to us entrepreneurs. We are hailed as the "backbone of the American economy" and the "real engine of job creation." Even the liberal wing of the Democratic Party joins in this chorus, carefully differentiating us from that part of the private sector they can successfully publicly disdain as inherently evil. We are the "good" business folks, according to politicians throughout the whole spectrum.

So why are the Congress and the president waging war on the entrepreneurial class with unprecedented zeal, scaring us into a protective hunker-down mode while simultaneously stimulating the economy with matching unprecedented fiscal and monetary inputs? It is like trying to drive a car with one foot floored on the accelerator and one foot hard on the brake. It doesn't work.

The economic war is waged on many fronts. First, let's have a lesson in Taxation 101 for the leaders in political Disneyland. Back in 1986, we had a monster makeover change in the tax code, and one big change effectively encouraged millions of small- and medium-sized businesses to file as Subchapter S corporations, which means the business' income is reported on the individual owner's tax return as personal income. But here comes the zinger, you political Musketeers: That income isn't really the same as our personal income.

Most of us have banking partners who expect to be paid first out of the personal income. Many small- and medium- business owners, like me, actually have significant banking restrictions on our ability to pay ourselves. So when you Musketeers talk about raising taxes on the rich making more than $250,000, you are raising taxes directly on millions of businesses. And yes, that mantra you recite about us creating three-fourths of new jobs is true.

The second foot on the brake is your proposed monster health care taxes that are mainly directed at us. Have you allowed us to pool our buying power through associations or to be able to buy catastrophic health coverage for very young workers as an interim step? No, this isn't about insurance, it is about power.

You've got so many other feet on the brakes. Reinstate the death tax and lots of small and medium owners will need to resume or begin buying life insurance to protect their business instead of investing in new jobs. Brake. You've got our Main Street banker friends scared of your regulators looking up their underwriting with a magnifying glass, so credit is very tough even if the mark-to-market accounting rule has been eased. Brake. "Cap-and-trade." Brake.

I can hear the silent primordial scream of many liberals to these claims; they are thinking that business always claims that every progressive tax and regulation will have adverse consequences and life always goes on just fine. Those entrepreneurs always cry wolf, they're thinking, but the system always absorbs it. I reply, every system has a saturation point, and you've threatened to go well past it.

Snicker if you want. Have you seen the under-24 unemployment rates, especially among minorities? Hey, let's raise the minimum wage to $10 an hour and see who absorbs it and where.

Political class, you've got us entrepreneurs beaten down, discouraged and depressed. Capital may be the engine of entrepreneurial activity, but optimism is the fuel. If you guys just took some of your feet off the brakes, we could do what we entrepreneurs have always done - build stuff and add jobs. Just let us build without fear. If you don't do as I suggest, we will continue to hear of the "jobless recovery" as we entrepreneurs continue to look at your feet on the brakes and ring up "no sale."

Mike Whalen is founder, president and chief executive officer of Heart of America Restaurants and Inns and is policy chairman at the National Center for Policy Analysis.