The U.S. Senate this afternoon passed up an excellent opportunity help kick-start our struggling economy by providing much-needed certainty and tax relief to a wide range of taxpayers including many smaller manufacturers. Unfortunately, 54 Senators voted against the Tax Hike Prevention Act of 2012, legislation introduced by Sen. Orrin Hatch (R-UT) that would prevent some $200 billion in tax increases hitting the U.S. economy on January 1, 2013.
About two-thirds of manufacturers in the United States operate as S-corporations or other pass-through entities and pay taxes at individual rates. The lower rates enacted in 2001 and 2003 have played a key role in helping these companies—most of which are small and medium-sized companies—survive challenging economic times and retain and create high-paying manufacturing jobs.
The average income for S corp manufacturing companies is $384,000 so limiting the tax relief to taxpayers making up to $250,000 (as proposed by Sen. Reid), isn’t going to help these manufacturers who are working to stay afloat and compete in a capital intensive industry. In fact, raising taxes on these smaller companies is counterproductive, particularly as we face persistently high unemployment rates and stagnant economic growth.
Our advice to these 54 Senators is to reconsider their vote. Without action before the end of the year to extend all of today’s lower individual tax rates, the vast majority of manufacturers in the United States will face higher taxes, threatening their ability to create jobs. At a time when we should be working on ways to reinvigorate our struggling economy, the last thing we should do is increase taxes for job creators.