Tag: tax rates

It’s a Tax Increase on Small Business

Rep. Paul Ryan (R-WI) appeared on Face the Nation on Sunday, making a basic point about tax rates and the President’s renewed call for higher taxes.

If you have really high tax rates what you end up doing is you penalize small businesses. What you have to remember Bob, most successful small businesses file their taxes as individuals. Most of our jobs come from these small businesses. The president is proposing to raise the top tax rate on these small businesses to 44.8 percent. We don’t think that’s good for jobs, we don’t think that’s good for economic growth, and when we tax our employers a whole lot more than our foreign competitors tax theirs, we lose, they win, and we don’t want that.

Two things, number one: We don’t have a tax problem. Our revenues are going back to where they have been historically. We have a big spending problem…The president’s proposing $1.5 trillion in tax increases, the Democrats in congress are proposing anywhere from $2-16 trillion in tax increases based on the three budgets they brought to the floor the other day…Here’s what we’re trying to get: Spending cuts and controls to get spending under control — because that’s the problem — and economic growth and job creation. We don’t want to give up one to get the other.”

Via The Corner, National Review Online.

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U.S. Takes the Lead — On Global Corporate Tax Rates

Japan officially lowered its statutory corporate tax rate today, making the United States the global leader in taxation of business.

The Heritage Foundation explains what this means for the U.S. economy and job creation. From the Foundry Blog, “Morning Bell: Stop Sending Jobs Overseas.”

In 1989 the developed nations in the Organization for Economic Cooperation and Development (OECD) had an average top marginal corporate tax rate well above the U.S.’s 34 percent rate. Since that time the world’s industrialized nations have dropped their average corporate tax rate to about 25 percent. The U.S., meanwhile, has gone in the opposite direction. We now have a 35 percent rate at the federal level that rises to 39 percent once the average of state corporate taxes are mixed in. And today, Japan is scheduled to implement its own corporate rate reduction, which will officially make our 35 percent rate the highest corporate tax rate in the world.

Owning the world’s highest corporate tax rate is a jobs killer. Imagine you are a global corporation looking to invest in a new factory that will produce goods for American consumers. Do you build your factory with hundreds of new manufacturing jobs in Canada, where the top central government tax rate is 16.5 percent? Or do you choose a location in the United States, where the top tax rate is 35 percent? Is that even a choice? Our high corporate tax rates are a huge manufacturing job repellent.

Liberals have long argued that corporate tax cuts are not necessary since the effective corporate tax rate (calculated by dividing the amount businesses pay in taxes by their incomes) is comparable to other OECD countries. But gaming the tax system to reduce your effective tax rate is not free. It requires a substantial investment in tax lawyers and lobbyists for major corporations to get your tax bill down. So again consider a foreign investor or medium-size corporation looking to expand production. Neither of the firms has the tax lawyers and lobbyists needed to lower their effective tax rate. Do they choose low-tax Canada, where they can focus on their core business and pay low taxes? Or do they choose the U.S., which requires significant resources devoted to tax law compliance and lobbyists in Washington to assure a low tax rate? Again, is this even a choice?

The U.S. economy is slowly beginning to finally add jobs to the economy. But so is the rest of the world, and many economies are growing much faster. If we want to stay competitive, if we want to stop sending jobs overseas, we must lower our corporate tax rate.

Yes, Prime Minister Kan is contemplating returning to the higher tax rate in response to the devastation from the earthquake and tsunami, but that’s no strategy for economic or national recovery.

See also James Pethokoukis, Reuters, “No April Fools’ joke, U.S. now world’s highest corporate taxer.” Earlier, The Tax Foundation, “U.S. Corporate Tax Rate Soon to Be #1

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The Voice of Small-Business Owners on Extending the Tax Rates

If politicos and pundits are going to keep up the incessant attacks against “tax breaks for millionaires” and “tax cuts for the wealthy,” we’re going to continue to repeat the reality: More than 70 percent of manufacturers file as individuals under the U.S. tax code and could be hit by higher taxes if the 2001 and 2003 rates are allowed to expire.

That’s just a trade association spinning? Well, consider these owners of small businesses across the country, speaking from knowledge of their businesses and personal tax status. (Thanks to the office of soon-to-be Speaker of the House John Boehner for compiling these accounts.)

  • “If the tax cuts went away, [W. Shane] Reeves [co-owner of Reeves Sain drugstores] would have had to pay more in personal income taxes on his company’s profits. That would’ve affected plans to invest in information technology, add more space and expand the company’s delivery fleet.  ‘Overall, the environment we’re all in right now has got everybody nervous,’ Reeves said. ‘But with (expiration of) the tax cuts looming, it just felt like it was going to get worse.’” (The Tennessean, 12/9/10)
  • “For small business owners, the uncertainty and stakes are even greater.  … It takes capital to run a business, said Tom Mercier, owner of BOPI, a 60-employee printing and marketing logistics company in Bloomington.  …  With printing industry margins only in the 2 to 3 percent range, higher taxes complicate decisions on whether to give pay raises, and how to cover rising health care costs, he said. … The tax cuts are a hot topic for business and individual clients at Henning, Strouse, Jordan and Stephens, a tax and accounting firm in Bloomington, said managing member Mark Nicholas.  He said months of uncertainty — a bipartisan agreement was roughed out Monday — have delayed important decisions by businesses: Can we expand? Can we buy new equipment? Can we hire?  ‘People are definitely holding off on the answers to those questions,’ Nicholas said…‘The uncertainty — that’s the real problem.’” (The Pantagraph, 12/8/10)
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Heritage Analysis: Lower Corporate Tax Rate Would Spur Growth

From the Heritage Foundation, “The Economic Impact of a 25 Percent Corporate Income Tax Rate,” a WebMemo on taxes:

One way to spur private sector investment in the U.S. and get it into the hands of entrepreneurs would be to reduce the federal statutory corporate income tax rate, which is currently 35 percent.

The Heritage Foundation’s Center for Data Analysis (CDA) conducted a dynamic simulation of a reduction of the corporate income tax rate to 25 percent, comparing it to a baseline forecast of the economy with the current policy of a 35 percent corporate rate.[1] The results of this simulation show the U.S. economy growing faster than the baseline in the 2011–2020 forecast horizon.

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This Gift-Wrapped Tax Increases Comes With an Extra Bracket

Here’s a strange and likely little noticed provision included in H.R. 4853, The Middle Class Tax Relief Act of 2010. The bill, sponsored by House Ways and Means Chairman Sander Levin (D-MI), permanently extends tax rates for those making under $250,000 – de facto raising taxes on those making over $250,000. But, it also goes one step further and creates a whole new tax bracket of 36 percent – increasing the number of brackets from six to seven. Why you ask?

Democrats have promised not to raise taxes on those making under $250,000, but the current bracket of 33 percent kicks in at $209,000. Yikes! What’s a politician to do? President Obama proposed a simple expansion of the 28 percent bracket, giving a tiny break to those who fell into the crack. But that was just a bit too generous for Chairman Levin. So, he created an entirely new 36 percent tax bracket for that narrow window of income.

So much for the Christmas spirit, eh?

The National Association of Manufacturers this morning sent a “Key Vote” letter to the House opposing the bill. That letter is here, and the NAM’s statement is here.

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Circumquacking the Lame Duck

A news roundup, in other words…

Rep. Tom Cole (R-OK), Edmond Sun
, “Obama’s policies stifle economic growth“: “EDMOND — In less than five weeks, tax hikes will go into effect for virtually all tax brackets unless Congress takes action. Despite public and bipartisan support for maintaining the current tax rates, President Obama and Democratic leaders in Congress have repeatedly refused to bring the issue to a vote. President Obama insists that his plan to raise taxes on the highest tax brackets will not affect job creators, but the facts indicate otherwise.” The Congressman cites the recent WSJ op-ed by John Engler and Jerry Howard, “Tax Hikes and the Small Business Job Machine.” Thank you.

Bloomberg, “Return of Estate Tax Looms as Final Impediment to Extending Bush Tax Cuts“: “In the past year trade groups such as the National Federation of Independent Business and the National Association of Manufacturers, alarmed by the possibility of a 55 percent rate in 2011, have pivoted toward urging lawmakers to adopt the approach favored by Kyl and Lincoln.” That’s an accurate assessment.

The Senate voted 61-35 on Tuesday for a motion by Sen. Mike Johanns (R-NE) to suspend the expansions of IRS 1099 reporting requirements imposed by the new health care law, but he needed 67 votes for the measure to proceed. Bloomberg reports the NAM’s opposition in its coverage, “Repeal of Health Law’s ‘Onerous’ Business-Expenses Rule Fails“: “The U.S. Chamber of Commerce and the National Association of Manufacturers, both based in Washington, and the Nashville- based National Federation of Independent Business supported repeal of the 1099 rule, saying the requirement would be cumbersome for business owners.” Cumbersome, yes. Stupidly, insanely burdensome and costly, as well.

A related motion by Sen. Max Baucus (D-MT) to get rid of the 1099 reporting requirement failed 44-53.

Investor’s Business Daily,As EPA Goes Green, Businesses See Red From Lack Of Guidance“: “Big business is bracing for a series of Environmental Protection Agency regulations set to begin in January. The problem is, it doesn’t really know what those regulations are going to be. Neither does the EPA, which has essentially punted that responsibility down to the states.” Meanwhile, Administrator Jackson celebrates the 40th anniversary of the EPA. We suggest the slogan, “Regulatory Excess since the Nixon Era!”

As Singapore Goes, So Goes Spain. Isn’t that a strange concept? The Daily Record of Scotland reports, “Spanish manufacturers ordered to make chewing gum ‘less sticky’“: “Manufacturers have been ordered to change their formula so the gum is easier to clean from pavements. The problem was considered so serious that PM Jose Luis Rodriguez Zapatero held a cabinet meeting to tackle the issue.” We await the bureaucratic battle here in the United States to address the problems: FDA or EPA? What with the streets and nuisance and all, it might make Transportation Secretary LaHood’s priority list, too. Bicyclists hate getting gum on their gumwall tires.

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Sen. Graham: No Tax Increases on Anybody, Millionaires Included

On Fox News Sunday today, Sen. Claire McCaskill (D-MO) called for tax increases on higher income brackets, including small businesses and millionaires, millionaires, millionaires, millionaires. (See post below.) Also on the program was Sen. Lindsey Graham (R-SC) who offered a different point of view about extending the current tax rates beyond their Dec. 31 expiration. From the transcript:

GRAHAM: I’m not going to vote to increase taxes on anybody in America, millionaires included. We’re in a very weak economy. If you want to make it weaker, raise taxes on anybody is a bad idea.

There will be bipartisan support in the lame duck to extend all the tax cuts for two or three years, and I think that vote will be had before the end of the year.

And if the president doesn’t support that, I think he’s running a risk of making the economy weaker at a time where he could help make it stronger through bipartisan support by Democrats and Republicans to extend all the tax cuts. And stop playing class warfare. Let’s get the economy going.

Concise and correct, Senator. Thank you.

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Get Out of Here, You Millionaires, You and Your Jobs! But Leave Your Taxes

Sen. Claire McCaskill (D-MO) and Sen. Lindsey Graham (R-SC) appeared on Fox News Sunday today. Chris Wallace asked both about extending the current tax rates. Sen. McCaskill indicated the Senate Democratic position was shifting from the original proposal — raise tax rates on joint taxpayers earning $250,000 or more — to raising tax rates on joint taxpayers earning $1 million or more.

To drive home the point, she managed to include “millionaire” as a quasi-epithet four times in her first 99 words.

WALLACE: Senator McCaskill, would you support a temporary extension for several years of the Bush tax cuts both for the middle class and for those making more than $250,000 a year?

MCCASKILL: Well, I think we should draw the line in the sand for millionaires. Honestly, with all the talk and the righteous indignation about the deficit, are we really going to hold up tax cuts for all of America just for the millionaires? And I think that’s where we should draw the line.

Our deficit is serious. Anybody who believes that that small tax differential for millionaires is going to make a big difference on job creation hasn’t been paying attention. There’s many things we can do that’s much more stimulative to the economy than taking care of the millionaires.

Class warfare proved such an effective political message in the 2010 campaigns, let’s redouble the rhetoric!

The Wall Street Journal on Saturday published a timely letter from Louis B. Mendelsohn reacting to an op-ed on tax rates by John Engler, president of the National Association of Manufacturers, and Jerry Howard of the National Association of Home Builders, “Tax Hikes and the Small Business Job Machine.”

In his letter, “Create Jobs? I Know How It’s Done,” Mendelsohn relates how he built his software development company founded in 1979 into a multi-million-dollar operation with more than 50 highly compensated employees and customers in more than 125 countries. Indeed, Mendelsohn is President and CEO of Market Technologies, renowned as a pioneer in the application of personal computers and trading software to the global financial markets. He observes: (continue reading…)

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On Taxes, What’s Needed is a Simple, Pro-Business Agreement

Thanks to Jason Becker of Orlando Florida for his letter in The Wall Street Journal today, reacting to last week’s op-ed by John Engler of the National Association of Manufacturers and Jerry Howard of the National Association of Home Builders on taxes. Letting business owners keep their income is NOT a cost to the federal government, Becker reminds us. From his letter, “They’re Not Taking Money Away From the Government“:

Democrats have suddenly become creative in generating ideas that let tax rates on the rich go up in exchange for other tax “giveaways.” Virginia Sen. Mark Warner, for example, proposes letting upper-income rates increase, but he dangles in front of business owners a more generous research-and-development credit, more generous business expensing and fine-tuning of depreciation allowances (in effect, giving businesses back the $65 billion that the federal government takes in higher income taxes). Other bipartisan groups are proposing more fundamental tax reform, with one group urging a 6.5% national sales tax in exchange for lower income tax rates. However, as Mr. Engler and Mr. Howard argue persuasively, what’s most needed right now is a simple, pro-business agreement to let all income tax rates stay exactly where they are for at least another two years.

Tax-planning certainty is a prerequisite for small-business confidence and the side benefit of keeping $700 billion of private earnings out of the hands of Washington isn’t so bad either.

The Engler-Howard op-ed is “Tax Hikes and the Small Business Job Machine.”

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President Proposes Expensing, Would Boost Manufacturing Investment

Manufacturers, the largest sector using expensing, a tax provision that lowers the cost for companies making new business investments, such as in machinery and equipment used on the plant floor, got a boost today by the President’s proposal in support of temporary expensing from September 2010 through 2011. President Obama outlined the plan during a visit to the Stromberg Sheet Metal Works facilities in Beltsville, Md. (Remarks.)

This proposal, if not counteracted by punitive tax increases on business, is a way to boost job creation for the workers needed to build and the workers needed to run the new machinery.

With 2010 3Q GDP today registering anemic 2 percent growth and a relentless unemployment rate hovering at 9.6 percent, increased expensing is a proven, effective tool for powering new jobs. In fact, increased expensing was successfully launched by both a Republican Administration after the 2001 terrorist attacks as well as by the current Democratic Administration in recent stimulus laws. This issue might be just the trick (no pun intended on this eve of the eve of Halloween) to foster bipartisanship consensus at both ends of Pennsylvania Ave — between Congress and the Administration.

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