Republicans must protect small business owners in any “fiscal cliff” deal

boehner

For the last couple of weeks, we’ve been saying that the likelihood of House Republicans caving on taxes is pretty high. House Speaker John Boehner has said that he wants tax reform, but he’s sent mixed messages. Just last year during the debt ceiling fight, Boehner was willing to trade $800 billion by eliminating tax loopholes for a broader deficit deal. More recently, Boehner submitted a counterproposal to the White House that would have cut spending, reformed entitlements, and raised tax revenue; the specifics of which were not revealed.

They are some that say that Boehner’s approach is pro-growth and will create jobs. However, whenever money is taken out of the private economy — whether through closing loopholes or raising tax rates — it is to the detriment of investment and job creation.

If by some off-chance you were hoping that House Republicans would fight to the bitter end on taxes, Byron York explains why that isn’t likely to happen (link via Doug Mataconis at Outside the Beltway):

 

Republicans will cave on the question of raising the tax rate for the highest-income Americans. The only question is whether they do so before or after the government goes over the so-called fiscal cliff.

First, many in the GOP do not believe that raising the rate on top earners from 35 percent to 39.6 percent (the rate before the Bush tax cuts) would seriously damage the economy. Second, they know that most Americans approve of higher taxes on the top bracket, and President Obama, having campaigned and won on that platform, seems dead-set on higher rates. Third, they fear that if the government does go over the cliff and Democrats propose re-lowering taxes for everyone except the highest earners, Republicans would be in the impossible position of resisting tax cuts for 98 percent of the country on behalf of the top 2 percent.

 

Interestingly, the Wall Street Journal notes data from the National Federal of Independent Business (NFIB) this morning showing that small business sentiment declined in November:

 

The National Federation of Independent Business‘s small-business optimism index plunged 5.6 points to 87.5 last month. The drop puts the index back to readings seen during the last recession.

The report said two major events shaped the November results: the election and superstorm Sandy. To disentangle these, the NFIB separated results from states hit by Sandy.

“What is quite clear from the data is that the election was the primary cause of the decline in owner optimism, not the hurricane, although hurricane effects were apparent,” the report said.

 

Small business owners, the engine of our economy realize that President Obama’s re-election means higher taxes. What the White House doesn’t understand is that there are thousands of small businesses that make over $250k a year — most of which file their tax returns as an S-Corp or sole proprietorship — who will be affected by his tax hikes.

But if he is prepared to go full-squish on the tax issue by raising tax rates, Boehner should be trying to raise that tax ceiling above $250k as much as he can — say $1 million, which Sen. Chuck Schumer (D-NY) and other Democrats have said was acceptable. And if not there, then $500k.

No fiscal conservative wants a tax hike; however, many of us have resigned ourselves to losing this battle. But at this point, protecting small business owners has to be the priority for Boehner and House Republicans.

 
 


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