Special Reports: Tax Talk

The 2011 Tax Increases Impact on Small Businesses

Many of my colleagues across the aisle have been referring to the $3.8 trillion tax increase that will take effect January 1, 2011 as a "tax on the wealthy," because, according to them, a majority of these tax increases will only impact those Americans who file taxes in the upper income brackets. Not only is their original logic flawed – these tax increases will impact almost every American who pays income taxes, including some of the lowest income families – but they forget to mention that many of these "wealthy" Americans are actually American small businesses like your locally owned and run grocery store or diner.

According to the nonpartisan Joint Committee on Taxation, 94% of all US businesses in 2007 filed taxes on their owners' individual tax forms – meaning they filed all their business income as an individual. This makes the tax filing process for many small businesses much easier and more manageable. But, because of these dramatic new tax increases, it also means that 94% of small businesses could see their tax liability increase as much as five percent beginning 2011. In fact, according to further estimates from the Joint Committee on Taxation, small business owners will pay over half of the new taxes raised by the increase of just the top two tax rates. So much for this being a tax on the wealthy.

This won't just result in higher prices for consumers. When the cost to do business increases, business owners are much less likely to hire new employees, and they are sometimes forced to cut employee benefits or worse, let some employees go. Small businesses account for roughly 70% of all job creation in this country. At a time when our national unemployment rate continues to hover around 10%, increasing the tax liability of small businesses will do nothing more than stifle any hope of job creation.

But you don't have to just trust me on this. President Obama's own chief economic advisor Dr. Christina Romer, after thorough research, published a paper where she stated that 'tax increases appear to have a very large, sustained, and highly significant negative impact.' So even while the president's top economic advisor knows the truth – that tax increases do nothing but hurt our economy – the president continues to claim that he hasn't met an economist who believes that stopping these tax increases would help the economy. Whether the president wants to admit it or not, I think most Americans would at least agree that tax increases on businesses will only hurt our already sagging job market and could stagnate any economic growth during one of the worst economic recessions our country has experienced in a generation.

Next week on "Tax Talk," I will discuss the 50% cut in the child tax credit and how it will affect Oklahomans. If you would like to keep up with the special report, I encourage you to visit my website at www.house.gov/lucas and select "Special Report: Tax Talk."

 

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