The Senate’s entire debate Saturday on extending the current tax rates to avoid raising taxes on targeted income groups was obviously important to manufacturers. The National Association of Manufacturers issued a statement from our Executive Vice President Jay Timmons, “Manufacturers Oppose Tax Increases on Business“:
Manufacturers oppose the Senate’s amendment to the Middle Class Tax Relief Act of 2010 because it would result in a tax increase for the vast majority of America’s small and medium manufacturers. The tax relief enacted in 2001 and 2003 played a key role in stimulating our economy as it repealed the estate tax and lowered both the individual tax rates and tax rates on investment.
Yet in searching The Congressional Record’s account of the debate, we find just a single mention of the word “manufacturers.” Thanks to Sen. John Thune (R-SD) for the citation in his floor remarks, refering to medical device manufacturers, as well as the broader discussion of how the “millionaires’ tax” is really a tax on small business. Excerpt:
[Here] we are today debating what evidently has become the Democratic economic theory, which is to raise taxes to create jobs. We have seen this in play throughout the last couple of years. The cap-and-trade bill was a tax on energy. It didn’t get through the Senate because we were prepared to stop it, but it passed in the House of Representatives and was headed here. The health care bill raised taxes on medical device manufacturers and drug companies and health insurance plans, all of which is going to get passed on to small businesses in the form of higher insurance premiums.
Here we are debating a frontal, direct tax increase on small businesses. It is the most astounding theory on how to create jobs I have ever seen–raising taxes to create jobs. That hasn’t worked in practice. The Senator from Iowa eloquently pointed out that, historically, if you go back over the past half century, not only does it not create jobs, it doesn’t generate additional revenue. As he pointed out, when you raise taxes, you don’t get more revenue. When you lower taxes, you get more revenue. Why? Because it affects the behavior of the American people. It affects investors, it affects the allocation of capital, and it affects people across this country when they know their tax rates are going to be low.
This seems to me to be completely off the track and off the point that the American people want us to focus on, which is keeping the main thing, the main thing–how can we expand the economy and create jobs? We do that by keeping taxes low on small businesses, which, by the way, create two-thirds of the jobs in our economy.
What will be the impact of the proposal we will vote on today in terms of small businesses and their ability to create jobs? According to the nonpartisan Joint Tax Committee, half of small business income would be subject to higher taxes. That translates into 750,000 small businesses that would be faced with higher taxes. That also, incidentally, impacts about 25 percent of the workforce in this country.
How does that translate in real terms? When these taxes go up on January 1 for people who make more than $250,000 a year, who are probably paying the 33-percent or 35-percent marginal income tax rate today, their taxes will go up to 36 percent or 39.5 percent. If they are a family of four and they have personal exemptions, these phase out. There is a cap on the number of itemized deductions they can take. When that kicks in, their top marginal income tax rate could go up to 41 percent.