Speaking to a small group at a Middle Class Task Force roundtable yesterday in Washington, D.C., Vice President Biden noted, “It’s costly, but at a time of recession, you should not be raising taxes on people who need disposable income, or on small businesses, for that matter.” However, that is exactly what will happen if the 2001 and 2003 tax cuts are allowed to expire at the end of this year.
Almost 70 percent of all manufacturers are organized as S-corporations or other entities taxed at the individual rate. If Congress fails to act, the top marginal individual tax rate will rise to nearly 40 percent. The estate tax, which was temporarily repealed for 2010, will go back into effect in 2011 at the jobs-killing rate of 55 percent. In addition, capital gains taxes will increase to 20 percent. These tax hikes will hit small and medium-sized manufacturers particularly hard.
Allowing the low tax rates, which have been especially beneficial for small and mid-sized companies, to expire is the wrong approach for a fragile economy in need of policies that encourage job creation and competitiveness.
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