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EDITORIAL: Small businesses sweat it out

Democrats offer no summer relief from looming tax hike

- The Washington Times - Friday, May 18, 2012

The arrival of summer in the nation's capital is always heralded by humidity and resulting citywide lethargy. Unfortunately for small-business owners perspiring over what taxes they'll owe Uncle Sam for the year, this season is no different. Growth-killing tax rates are slated to spike within months if Congress doesn't act, but no relief is on the horizon.

Known as the "Bush tax cuts," rates were slashed in 2001 and 2003 by a Republican Congress to spur the faltering economy. They were passed with a sunset provision, meaning they would expire in 2010 unless renewed. Even the Democratic-controlled Congress could see that demanding another pound of flesh from struggling Americans would be political and economic hara-kiri so rates were re-upped until the end of this year. Unless re-renewed, they will revert this December with top rates going from 33 percent and 35 percent to 36 and 39.6 percent, respectively.

This increase will turn up the heat on the 75 percent of small businesses organized as "pass-throughs" - entities whose income is taxed at individual rates because of how the business is structured. Higher tax bills will take away from the money these entities have to invest in their businesses or hire more people. This is significant considering that 54 percent of the private-sector workforce is employed by pass-throughs.

On Tuesday, Speaker John A. Boehner, Ohio Republican, said the House would vote to extend all of the Bush tax cuts before the election. There is no sign Senate Majority Leader Harry Reid, Nevada Democrat, plans to bring up legislation to save Americans from the average hit of $3,000 per family that the new rates will deliver.

President Obama will be no help. Having never owned or managed a commercial enterprise or been troubled with a bottom line, his idea of alleviation is asking Congress for a paltry tax credit. Item No. 3 on his finger-pointing "to-do list" is to give a 10 percent income-tax credit to firms that create new jobs or increase wages in 2012 and to extend 100 percent business expensing. This offer - after declining to call for the elimination of the tax uncertainty currently plaguing small businesses - shows a distressing disconnect with real life on Main Street.

"To say, 'here are tax breaks for hiring a new person' at the same time as saying 'you're going to have huge tax increases at the end of the year,' doesn't make sense," Dan Danner, president of the National Federation of Independent Business, told The Washington Times. "A hit-and-miss tax break on hiring more employees or increasing salaries would be incredibly small compared to the boatload of tax increases looming. A small-business owner won't hire a person he doesn't need if his business doesn't justify it, to get a tax credit."

In an economic climate fraught with uncertainty, letting small-business owners know how much they need to set aside for the taxman would go far in cooling down anxiety. Extending the current tax rates now would allow job creators to help the economy grow instead of forcing them to toil longer hours to fuel the bureaucratic furnace.

The Washington Times

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