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30 Issues in 30 Days: Does a Tax on the Wealthy Mean a Tax on Small Business?

Some small business owner callers say no.

Tuesday, September 21, 2010

WNYC

Welcome to Politics Bites, where every afternoon at It's A Free Country we bring you the unmissable quotes from political conversations on WNYC. The Brian Lehrer Show's signature election series 30 Issues in 30 Days started on this morning's show. It's a break from the horse race and spastic personality reporting that often characterizes political coverage. Instead, Brian and knowledgeable guests take time to delve into a substantial policy issue of importance in the election. Today's edition tried to answer the question of whether a repeal of the Bush tax cuts on earnings over $250,000 would amount to a tax on small businesses.

Bill Rys, tax counsel for the National Federation of Independent Business, said the members of his organization don't want to see the Bush tax cuts expire. Research his group conducted shows those small businesses are the ones that will be most effected by a repeal of the tax cuts, Rys said.

What we also found was that the business most likely to be impacted were businesses that employ between 20 and 250 workers, and those businesses account for about a quarter of the American workforce.

        

While recently passed tax cuts and incentives for small businesses are helpful, Rys said increasing any kind of tax while businesses are still feeling the effects of the recession is a bad idea. It means businesses will have less money for hiring new workers or for purchasing equiptment or services for the company, actions that would serve to bust the economy, Rys argued.

We've been at recessionary levels basically since September 2008 and having a real hard time for small businesses to dig their way out of a really tough economic stretch. And so I think any kind of increase in taxes is going to be a disincentive for investment, especially in the current environment.

         

But Robert Reich, Secretary of Labor under President Bill Clinton and author of Aftershock: The Next Economy and America's Future, said allowing the tax cuts to expire is merely a return to the tax rate during the Clinton administration, a time when the economy grew and jobs were plentiful.

Look, we're just going back to the rates that we had under Bill Clinton and under Bill Clinton, small businesses flourished! We had 22 million net new jobs created during those years.

       

Reich said that history shows that if tax cuts are extended for incomes over $250,000, people will not necessarily use that money to stimulate the economy through purchase.

Supply side economics which is based on the principle that if you lower taxes on top earners will help build the economy because benefits will trickle down to people in the middle, has been proven absolutely wrong. Over and over and over again. We had the Reagan and then the Bush tax cuts and what happened to the middle class? Basically what we've seen is that for thirty years, the median wage -adjusted for inflation- has gone nowhere.

  

Barbara, a listener from Stamford called into the show to say extending the Bush tax cuts for high earners would do nothing for her husband's small business. He makes sails. Most of his clients are wealthy people with yachts, precisely those whose purchases stimulate the economy under supplyside theory. Barbara's husband might be expected to support the extension of the tax cuts, in order to put money in the pockets of his customers, but she said the tax cuts do nothing for her husband. 

But there is nothing that correlates to an increase in his business based on the Bush tax cuts. These people have money no matter what.

    

Listen to the entire conversation on The Brian Lehrer Show or join the conversation below. What do you think? Is tax policy one of the issues you're voting on? If you're a small business owner, which candidates do you think best represent your interests?


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