The rhetoric at the White House radically changed on September
27. The event was the signing by President Obama of the Small
Business Jobs Act.
Until the afternoon of that ceremony in the East Room, the
party line expressed by President Obama and Congressional Democrats
was that the income tax hikes on “the rich” that they were
proposing for January would not have any negative impact on job
creation.
Stuck with the fact that we need millions of new jobs and
the reality that nearly 70 percent of the nation’s jobs are created
by small businesses, President Obama and the Democrats had been
dancing for a year around the obvious link between job creation and
their proposed tax hike on job-creating individuals with incomes
above $200,000 and on married couples with incomes above
$250,000.
They said the proposed income tax increase would apply to
only a tiny sliver of America’s small-business owners, a small
group of people who “can afford it,” and therefore any effect on
job creation would be negligible, an impact not important enough to
be worth considering.
Adding specific numbers to the party line, House Speaker
Nancy Pelosi declared that “98% of American families and about 97%
of small businesses” would be exempt from the planned higher taxes
on incomes above $200,000 and $250,000.
Vice President Joe Biden echoed Pelosi’s numbers, stating
that only 3 percent of small businesses would have to pay the
higher tax rate.
The continual repetition of those numbers was supposed to
create the belief that the Democrats’ proposed income tax hikes
wouldn’t take a dime from 97 percent of the nation’s small
businesses and that the number of jobs being created in the economy
would be basically the same with or without the tax
increase.
The distortion that’s inherent in repeatedly citing the 97
percent figure, the intentional falsification, is explained by Alan
D. Viard and Kevin A. Hassett, a resident scholar and the director
of economic policy, respectively, at the American Enterprise
Institute: “According to IRS data, fully 48 percent of the net
income of sole proprietorships, partnerships, and S corporations
reported on tax returns went to households with incomes above
$200,000 in 2007. That’s the number to look at, not the 3
percent.”
Last Monday, September 27, the tone at the White House
completely changed. Gone was the talk of raising taxes on “the
rich.” Instead, President Obama, speaking before signing the Small
Business Jobs Act, said that government “can create the conditions
for small businesses to hire more people, through steps like tax
breaks.” Tax breaks, not increases.
Continued Obama, sounding not unlike an advocate for free
markets, “Government can’t guarantee success, but it can knock down
barriers to success.”
He didn’t mention any of the numerous “barriers to
success” that he and his Congressional allies have advocated over
the past year, his own set of proposed costs and controls that have
produced high levels of uncertainty and low levels of business
expansion and job growth — higher energy costs via Cap and Trade,
higher business costs by way of new health-care mandates, more
barricades to business growth via a broad expansion of federal
regulations, higher levels of unionization via “card check,” a
measure designed to strip workers of their right to a secret ballot
in unionization drives, and higher federal taxes on dividends,
inheritances, capital gains, and income.
Obama also promised billions in new loan money for small
businesses, something that would be less needed if the government
simply didn’t confiscate such a high and growing level of business
income in the first place.
Bottom line, taking more and more income from small
businesses via higher taxes, more mandates and more regulations and
then offering more loans to those same businesses isn’t exactly the
most efficient or rational strategy for job creation.
