- The Washington Times - Sunday, March 4, 2001

There has been a great deal of talk in Washington these days about how the Bush tax-relief plan doesn't include "enough for business." The National Federation of Independent Business (NFIB), the nation's largest small-business lobby, strongly disagrees. We can, instead, attest to the fact that President Bush's plan will be great for business, especially small business.

As co-chair of the newly formed Tax Relief Coalition, we have taken a close look at the likely effects the president's proposed plan will have on small-business owners. Here is what our research shows: A vast majority of small-business owners file their taxes as individuals, not as corporations; therefore cuts in personal income tax rates benefit them more than corporate rate cuts do. At least 55 percent of NFIB's 600,000 small-business-owning members file their taxes as individuals. Their businesses are so small that they "zero out" their corporate income to avoid double-taxation.

This is the "hidden" business benefit of the president's tax-cut plan, not obvious to some but extremely clear to those of us in the small-business community. Of course, some of the president's provisions are even more directly targeted at business owners, such as the repeal of the death tax. Repealing this un-American tax would restore the American dream for many small family farms and employers whose life's work is often sold to pay Uncle Sam.

And there is even more good news in this tax cut; there is good news for the folks who work, or are seeking to work, for those small-business owners:

1. We learned from the 1986 rate cuts that lower personal income tax rates encourage small-business growth and increase the probability of raising employment levels and the wages of those new employees;

2. We also know that there is a direct relationship between the earning levels of small-business owners and the level of wages paid to their employees, the frequency of employee-health insurance offered and the frequency of employee pension plans provided.

The bottom line: There is a lot of good in Mr. Bush's proposed tax plan for small business, and therefore a lot of good for all Americans. Allowing small-business owners who file their taxes as individuals (almost half of whom file modest incomes of $30,000 to $75,000 annually) to keep more of the money they earn has a really wonderful ripple effect for other middle- and lower-income Americans. It leads to an increase in their personal income and level of employee benefits. This increase in wealth and levels of employment creates new consumers, which is also good for business, and so on.

When people say that something is good or bad for business, too often they really mean "for big business," as if all businesses are the same. But all businesses are not the same. It is small businesses, not large corporations, who employ well over half of the non-farm private sector work force and create two out of three new jobs in this country. It is small business that feels the pain of a slipping economy first, small business that saves us during economic downturns, and small business that needs a break so they can afford higher wages and benefits for their employees.

The enormous economic significance of small business in this country is why, when the Federal Reserve takes stock of how our economy is doing, one of the key things it looks at is how small business is doing.

Mr. Bush, in designing a tax-cut plan that benefits the smallest of America's businesses, is recognizing the weight that they carry in our economy. We applaud him, and thank him, for that.

Jack Faris is president and CEO of the National Federation of Independent Business.

Jack Faris is president and CEO of the National Federation of Independent Business.

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