Yesterday, the Senate narrowly voted (51-48) to raise taxes on 1.2 million small businesses, which will likely kill more than 700,000 jobs at a time when nearly 13 million Americans are out of work. Senators Joe Lieberman (I-CT) and Jim Webb (D-VA) joined all Republicans in bipartisan opposition to the tax hike.
This is President Obama’s economic plan. This is what he asked Congress to do. And he recently told a fundraising crowd that his economic plan has been working.
“Just like we’ve tried [Republicans’] plan, we tried our plan—and it worked,” he said.
But Obama’s Treasury Secretary, Timothy Geithner, said yesterday that “the economy is not growing fast enough,” acknowledging that “unemployment is very high.” “The institutions with authority should be doing everything they can to try to make economic growth stronger,” he said.
The President’s plan, now endorsed by the Democratic majority in the Senate, has little chance of going anywhere in the House of Representatives. But it has put the 51 Senators who want to raise taxes on record.
Perhaps the biggest lie in the tax debate is that this vote affects only “the rich.” That’s simply not true. Many small businesses, known as flow-through businesses, pay their taxes through the individual income tax. Ernst and Young estimates that these types of businesses “employ 54% of the private sector work force.” This tax hike squarely hits 1.2 million of these businesses that hire workers and have incomes above $200,000.
Rather than punishing just “the rich,” as Heritage’s Curtis Dubay notes, “By pinpointing his tax increase on incomes over $200,000, President Obama has maximized the detrimental impact that his tax increase would have on job creation.”
The Ernst and Young study on the impact of this tax hike showed that it could kill more than 700,000 jobs. This isn’t surprising, since the businesses it targets are some of the country’s most robust job creators. But it is surprising that a majority of the Senate would go along with this plan when the country is suffering from 8.2 percent unemployment.
As if that weren’t enough, the Senate’s actions would also raise the death tax from 35 percent to 55 percent. This confiscatory rate would hit small businesses and family farms exceptionally hard. Dubay explains:
The death tax is often portrayed as a tax that only rich heirs pay. In reality, the death tax hits family-owned businesses hardest. These businesses are valuable on paper because they have many assets that they need to make and sell their products. But the businesses’ book values are not representative of the families’ liquid assets. When a family member passes on, these families often have to sell all or part of the business to raise the cash to pay the death tax. This slows the growth of these businesses and in some cases forces them to lay off existing workers.
The Senate’s vote means we are no closer to preventing Taxmageddon, the nearly $500 billion tax increase scheduled to hit Americans on January 1. It is difficult to imagine the economy sustaining such a blow. Families will be hit with an average tax increase of more than $4,100 next year if Congress allows this to go forward. Instead of preventing this calamity, the Senate voted to raise taxes. It simply boggles the mind.