[Vision2020] More Help for the Wealthy

[Art Deco]

  [image: The New York Times] <http://www.nytimes.com/>


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April 14, 2012
More Help for the Wealthy

Taxes are never popular, especially in April of an election year. But the
Republicans’ latest effort to tilt the tax code in favor of the wealthy,
and starve the government of needed revenue, is particularly cynical.

This week, the House Republican leadership is expected to bring up the “Small
Business Tax Cut Act <http://www.govtrack.us/congress/bills/112/hr9>,” a
bill to let most business owners deduct up to 20 percent of their business
income in 2012 — a $46 billion tax cut. Despite the Mom-and-Pop label, it
is designed so that nearly half of the tax cut would go to people with
annual income over $1 million, and more than four-fifths would go to those
making over $200,000, according to the Tax Policy
Center<http://www.taxpolicycenter.org/numbers/displayatab.cfm?Docid=3342&DocTypeID=1>.


The bill’s proponents, led by Majority Leader Eric Cantor, say that lower
taxes would lead to more hiring. But the economic reality is that
employers, big and small, are hesitant to hire because of slow or uncertain
demand for their products and services, not because of their tax burden.
And companies would receive the tax cut even if they did not hire new
workers — making it a windfall, not an incentive.

The bill is predicated on an overly broad definition of “small business” —
one with fewer than 500 employees, which can include multimillion-dollar
partnerships and corporations. It is also based on a willful denial of the
reality that small
businesses<http://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/OTA-T2011-04-Small-Business-Methodology-Aug-8-2011.pdf>are
not
the big job creators <http://www.nber.org/papers/w16300> politicians often
say they are.

If “small” were set at 50 employees, small businesses would be credited
with creating less than a third of the new jobs over the last 20 years. And
many such jobs are soon lost as small businesses struggle or fail. The best
way to encourage their success is with continued government spending to
support demand and by building a well-regulated banking system that is not
prone to the busts that devastate small businesses.

As for the broader economy, the Congressional Budget Office
analyzed<http://www.cbo.gov/sites/default/files/cbofiles/attachments/11-15-Outlook_Stimulus_Testimony.pdf>13
policies last year for their potential impact on economic growth and
job
creation in 2012 and 2013. The option of a business tax cut along the lines
of the Cantor bill ranked next to last in bang for the buck. More effective
options include fiscal aid to states and increased safety net spending,
which create jobs by bolstering consumer demand — and which Republicans
fiercely oppose.

Another immediate step Congress could take to create demand and jobs would
be for House Republicans to drop their objections and reauthorize the
highway bill, at least for two years, as the Senate has done. That would
help private-sector contractors and suppliers, as well as government
workers, boosting local businesses in areas where jobs are created.
Extending the research and development tax credit would also help some
businesses, but Senate Republicans have
blocked<http://www.nytimes.com/2012/03/29/business/with-bank-teetering-a-bet-on-the-gop-backfires.html?_r=3&scp=1&sq=Business%20Bets%20on%20the%20G.O.P.%20May%20Be%20Backfiring&st=cse>that.

The business tax cut for not-so-small businesses will almost certainly pass
the House. Senate Democrats have introduced a tax relief
bill<http://www.govtrack.us/congress/bills/112/s2237>that is linked
specifically to companies hiring new employees. They should
stick with that. This doesn’t mean that the tax system doesn’t need fixing.
It does. In the Senate this week, the Democratic leadership will make an
argument for more fairness, by calling for a vote on the Buffett Rule. It
would require the wealthiest taxpayers to pay at least 30 percent of their
income in federal taxes and, in the process, raise some $47 billion over 10
years. Republican senators are expected to block the vote. When you mail
your taxes this week, think about that.


-- 
Art Deco (Wayne A. Fox)
art.deco.studios at gmail.com
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