If it’s summer in Washington DC then apparently it must be time for a tax fight, except this time we already know what lays beyond the clouds on the horizon – a steep cliff, one which the economy could fall off of if our nation’s leaders don’t agree to a different path. As anticipated, the car we are all riding in just picked up speed toward that cliff earlier today when the President in a White House speech advocated for increasing marginal tax rates on some Americans.
This proposal comes despite the mounting evidence that this is the wrong approach – one which will hurt small businesses and our fragile economic recovery. According to the Congressional Joint Committee on Taxation in a report last month, allowing marginal rates to go up to the pre-2001 levels on those taxpayers in the top two brackets would result in tax increases on nearly 53 percent of all flow-through business income.
As the President stated in his remarks earlier today, “the folks who create most new jobs in America are America’s small business owners.” With nearly 70 percent of manufacturers organized as a flow-through business, these proposed tax hikes will very likely have a dampening effect on the growth and strength of the manufacturing sector. In fact, 64 percent of manufacturers have cited a negative business climate and uncertainty as their chief concern in planning for the future.
Instead of supporting tax increases on business owners, the NAM supports the proposal to be considered by the U.S. House later this month which would extend today’s lower tax rates for one year and enact a mechanism for Congress to use an expedited path to consider comprehensive tax reform during 2013. Manufacturers have long called for comprehensive tax reform with the goal of a permanent, simplified and competitive tax code. Knowing that cliff is coming up fast, now is the time for the White House and Congress agree to extend current law for another year and chart the course toward tax reform for once and for all.