Previewing my panel meeting remarks for the Saturday “Fiscal Cliff” town hall

Filed in National by on December 6, 2012

I’m basically using this space to get my thoughts together. Since I’m representing small business on the panel, my first priority is putting to the lie to Republican claims that increasing the taxes on the top two percent of Americans will “kill jobs” or “hurt small business.” If you have anything to add, or catchy turns of phrases – I’m all ears.

Small business hiring and firing has nothing to do with the top marginal income tax rates. It has to do with demand. A tax regime that shrinks the economy through “austerity,” (cutting vital services and holding back investment in public infrastructure) hurts demand much more than giving Paris Hilton a tax cut helps demand. I was fortunate to be able to go to the White House last spring as a part of the ASBC small and sustainable business summit and informing the administration in one voice that tax cuts hurt small business was a major agenda item. Small business people like myself view government as a kind of silent partner in our business that provides fire and police protection, roads, bridges, schools, and to act as a kind of referee to make sure there is a level playing field. Do we want to make sure we are getting a good return on investment for our tax dollars? Of Course. Do we think the government is some evil, greedy beast that needs to be “drowned” in a bathtub ? No legitimate business person, small or large, thinks that.

When the GOP cries “small business” they aren’t even talking about small business in any conventional sense of the term. They are talking about any “pass through entity.” So lobbying firms that take in hundreds of millions of dollars a year, hedge fund managers and even giant Agra-business concerns like Cargill, are “small business” according to John Boehner because they are “S corp” which means the profits pass through the company and are taxed on the shareholder level.

And that brings up another part of this Republican fallacy about “small business” being hurt. It is the PROFITS that get taxes, not the revenues. Taxes are paid or not paid long after hiring and firing decision have been made. I suppose it would be possible for wingnut business people to intentionally make bad business decisions in order to avoid paying taxes, but they wouldn’t be in business too long. For the bulk S corp filers it would be impossible for taxes to “kill jobs” because the very fact that they are paying taxes means that their business was profitable. If anything, low tax rates incentivize wealthier business people to NOT invest in growing their business.

There are just a bunch of lies at the heart of the GOP position that need to be unpacked, (the biggest and most pernicious is that tax cuts HELP the economy when they’ve had just the opposite effect for the past 20 years). I’d also like to remind everyone that the whole “fiscal cliff” contraption was invented because Republicans wanted to prevent tax rates for resetting to a more rational level for the top 2% of Americans. The very heart of this whole conversation is a national debt that was built by Republicans because they thought that the wealthiest Americans should have the lowest tax burden in the entire industrialized world AND we should put two wars on the nation’s credit cards while slashing tax revenues.

About the Author ()

Jason330 is a deep cover double agent working for the GOP. Don't tell anybody.

Comments (12)

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  1. cassandra_m says:

    This is good. Something I’ve been thinking about is that small businesses need governments that do what they are supposed to do. Build and maintain infrastructure, provide excellent education, keep the streets safe, keep their promises to their own workers is the easiest way for governments to keep faith with small businesses. The whole idea of a small business is to do something and do it well enough for people to want to buy it. If government is doing its job well, you’ve got a clearer line to your possible customers. These larger businesses can afford to spend their overhead lobbying for low tax rates — they’ve captured their market share and now look to make their balance sheets look better by way of changing tax policy. Changes that would necessarily inhibit the government’s ability to do its basic work. Entrepreneurs aren’t interested in holding governments hostage at the expense of their potential customer base.

    This:
    Small people like myself view government as a kind of silent partner in our business that provides fire and police protection [...]

    Change this to small *business* people. It sounds like you are speaking on behalf of the Munchkins or something.

  2. pandora says:

    This sounds really good, J. Well done and good luck!

  3. Devil's Advocate says:

    Don’t American businesses already pay the highest taxes in the world?

  4. puck says:

    “Don’t American businesses already pay the highest taxes in the world?”

    No, YOU give us the link. Do your own homework and get back to us.

    (I’m betting we get back a link from Heritage or something)

  5. jason330 says:

    Hardly. We are vying with Mexico to have the lowest corporate taxes industrialized world and the lowest share of tax revenue as a percent of the economy. Is that where we want to be?

    In the 1952 corporate income taxes accounted for 32 percent of federal tax receipts – last year they accounted for less than 8 percent.

    After using the many loopholes and off-shore tax dodges available to them, large corporations have an effective tax rate of about 18%. Many don’t pay any corporate income taxes whatsoever. Basically the current system incentivizes companies to move jobs offshore and sit on huge cash reserves.

  6. jason330 says:

    This time, I don’t mind Puck. It is a little practice.

  7. kavips says:

    Riffing off your demand paragraph, you could add, that to a small business, the Federal, and even the state, and local governments, are often seen as a customer, not an ogre. Quite a few businesses in Delaware work off contracts of the Federal Government. (Insert irony here).. I believe even Sher Valenzuela grew her business off contracts that came straight from the Federal Government. (If it weren’t for government contracts, she’d be too poor to even run for Lt. Gov.)

    You could then illustrate how much “your” small business receives as an indirect result of Federal spending. Compare that huge loss of gross revenue to your company if that spending disappeared because of Federal cuts, with the paltry savings your company would possibly continue to have, if tax rates were kept at Bush W’s level…. Show how that negative governmental loss, would impact you on the number of people employed, contributional giving, advertising, and other money you spread around the community.

    Like it or not, the Federal government is a big driver for many small businesses. When it sneezes, small businesses catch cold. On the other hand, giving Paris Hilton, Jim DeMint, or Mitt Romney more money, does nothing for you. You have yet to see one penny.

    You could also riff off how higher possible rates, affect your financial decision on whether to invest in your infrastructure or expand, or to maximize profits by not re-investing in your company. You could illustrate that jumping tax rates from 20% to 25% percent, means on every $100,000 of profit, you could pay $5000 more in taxes…. so….. shuffling $20,000 of every $100,000 away from profit and back into your business, allows you to pay the same $20,000 in taxes you always did, and increases the net worth of your business by $20,000 through the expansion or infrastructure improvements…. That $20,000 goes right back into the local community’s economy.

    Third, and this may be a stretch because I don’t think your audience is ready to hear it yet, but very low taxes give big companies a huge advantage over disadvantaged small businesses….

    Let us say you have a competitor who is 100 times bigger than you. Let us say that you both have the same profit percentage off of sales. Just that his sales are 100 times higher…. Let us say you net $100,000 and he makes $10,000,000… that 5% difference in taxes allows him to acquire an additional $500,000 each year to be used against your company… Forcing him to pay more because of his size, helps you. It may keep you from being bought up. For him to pay the same on his taxes he previously did, he will have to bury $2 million back into his business. Which means there will be $2 million less to buy you out or to be used to undercut your prices….

    Higher taxes give small business an edge against the largest of corporations who because of economy of scale, really don’t need any more breaks when their competition is small businesses…..

    Oh, well, that’s my take. Good luck. Here’s to higher taxes! Cheers!

  8. mathcheck says:

    “We are vying with Mexico for the lowest corporate taxes”?????

    Are you kidding me. Rates in the U.S. are now some among the highest in the world.

  9. jason330 says:

    Are you kidding me? My comment assumed we were all smart enough to talk about effective corporate tax rates. I guess that was a faulty assumption. You hear a bogus stat on Fox News and don;t give it a minutes thought do you?

    If our “rates” are the highest in the world, why do we have so many profitable fortune 500 companies (GE, Verizon, Pepco, Wells Fargo, etc, etc …) paying 0.0%? If I have to put it on the bottom shelf for you, I will.

    It is because they don’t pay the statuary 39% they are supposed to pay. Enforce the 39% and we would not be having this ginned up “crisis.”

  10. Dave says:

    While the effective tax rates are indeed low, I question whether the tax rates should be adjusted based on size. That is philsophically, should effective tax rates be linear or non-linear? I would advocate for linearity because it simple and scalable. The more you make, the more you pay, but your effective rate remains the same regardless of size. I see no rationale for large companies to pay a higher rate than small companies just because they are larger. Does someone have a rational argument why size (or revenue, or whatever) should be a factor?

  11. kavips says:

    Dave, the tax is flat for all those over $390,000… no matter how many billions they make, it never goes over 35%…

    And why should a small company pay the same rate as a large? Someone earning $20,000 a year, paying a 25% rate for example, pays $5,000.

    He could really use that $5 thousand. That same $5 thousand to a company making 100 billion, is 0.000005% of its profit. So although not fair to the “big guy”, it is smart to shift the money paid upward… because it is a smaller percentage of a hit….

    Secondly, if you are looking forward to new investment, that $5000 tax on such a low income, could curtail any investment that might take pace. Better to shuffle it upward, to companies who have too much to invest all of it, and let the smaller ones invest part of what they have.

    That is why taxing everyone the same rate is not fair to society at large.. Society benefits when the rich pay more, and the poor pay less….

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