Navajo-Hopi Nations,Flagstaff & Winslow News
Fri, Aug. 07

Tax hikes aim at “the rich,” fall on small <br>business owners<br>

By U.S. Senator Jon Kyl


Ever since President Bush’s second round of tax cuts was enacted last year, Democratic partisans have dramatically stepped up their rhetorical attacks on upper-income taxpayers.

Such “class warfare” is a common political strategy, although its effectiveness has been inconsistent because Americans are typically less interested in stoking resentment than in joining the ranks of the wealthy themselves.

What sets apart this latest campaign is the evolution of its targets.

Aimed initially at “millionaires,” then broadened to include those in the top tax bracket, Congressional Democrats’ tax hike proposals now target individuals with taxable income above $200,000 a year. Who are these people?

In many cases, small business owners - the engine of growth and job creation in our economy and a group that virtually all politicians claim to want to help.

Of the taxpayers reporting more than $200,000 in taxable income in 2001, the most recent year for which IRS data is available, more than half - about 1.3 million - included income from small business entities, such as sole proprietorships, partnerships, and S corporations.

In his acceptance speech at the Democratic convention, Senator John Kerry promised to both “reduce the tax burden on small business,” and “roll back the tax cuts for the wealthiest individuals who make over $200,000 a year.”

Perhaps he was somehow unaware of the inherent contradiction between the two.

Of course, Senator Kerry has also made campaign-trail promises of $2 trillion in new spending over the next ten years, and even his tax hike would raise only an estimated $300 billion.

Thus it wouldn’t take long for the burden to drop down to lower and lower income brackets.

Raising small business taxes would reverse the success of the 2003 reductions in creating new jobs and prompting higher capital expenditures.

Dr. Robert Berney, then-chief economist for the Small Business Administration’s Office of Advocacy, has testified before Congress that “Every dollar of profit or tax relief tends to be re-invested in the [owner’s] firm.”

The Joint Economic Committee noted last year that “research suggests that cutting marginal tax rates - particularly the top. . . rate faced by many small businesses today - is an effective way of encouraging entrepreneurs to invest in and expand their businesses.”

The Democrats’ tax hike proposal is based on the rather simplistic belief that upper-income taxpayers have more disposable income and, therefore, can easily afford to pay higher taxes.

Besides the fact that more than half of these individuals are small business owners generally operating on razor-thin margins, it’s also worth noting that they already account for more than 37 percent of all income taxes collected in the United States, despite filing fewer than 2 percent of all individual tax returns.

In plain English, they’re already paying their fair share, and then some.

Since the turn of the century, the American economy has weathered a series of economic shocks - the terrorist attacks of September 11, the 2001 recession, corporate-management scandals, and the continuing war on terror, with major commitments in Afghanistan and Iraq.

Despite the potential for such blows to send the economy reeling, the business community has responded with remarkable resilience, generating 11 consecutive quarters of growth through the second quarter of 2004.

With the help of the 2003 tax cuts, small businesses have been the vanguard of the current economic expansion.

Why on earth would we want to tamper with continued recovery by raising taxes on those most responsible for its success?

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