This is no time for Congress and the administration to raise our taxes. We are still deep in a recession and facing a difficult recovery time. Right now, entrepreneurs and businesses, both large and small, need encouragement to invest for growth. Private investment, not public mandates, is what will create more jobs.
Economists forecast a gloomy prospect for the economy and jobs until at least 2012. At the same time, the White House expects unemployment to continue in the nine percent range in 2011. Experts feel that unemployment could even rise to over 10 percent next year, contrary to the administration’s predictions.
Two connected major issues confront us right now, and are likely to affect the outcome in the November midterm elections: One is the economy, the other is jobs. Unless hiring increases, the overall economy will not improve. So what do we need to do to help the economy improve?
We need to avoid a tax increase right now. A lot of businesses are holding back on expansion and new jobs because they are worried about the impact of new or additional taxes.
The Obama administration is determined to eliminate the tax cuts instituted under the Bush administration, even though employment grew substantially before the recession took place in 2008. Treasury Secretary Tim Geithner said last week that the tax cuts should be allowed to expire because “doing so would show the world that the U.S. is willing as a country now to make some progress by reducing the long term budget deficits.”
Many taxpayers take exception to that remark. Our deficit is continuing to increase, with debts from federal programs instituted since 2009. The stimulus program has not created jobs, nor visibly improved the economy. Unemployment continues to grow and last month retail sales were down again.
One example of how even small tax increases can hurt a majority of middle class Americans is on stock market transactions. Incomes from dividends and the sale of stocks are affected by an increase of capital gains taxes from 15 to 20 percent. The sale of homes or commercial real estate held longer than one year will be taxed at the new 20 percent tax rate on any profit above the original purchase price, if the new proposals are approved.
The administration stated it does not feel higher taxes will hurt economic growth, even when taxes go up. But higher capital gains taxes, added to other increased taxes and potential new federal regulation costs on small businesses, will reduce a business’ ability to grow, increase jobs or even stay in business.
Businesses that have, or can get, funds to invest in their businesses are holding off because of the disincentives of a bad economy, and the uncertainties of federal regulations and taxes. When businesses don’t invest, jobs don’t open up.
The Republicans are being joined by some Democratic legislators, to advocate keeping taxes at their 2009 level. Some fear a taxpayer revolt, while others worry about lost jobs and potential increases in home foreclosures if taxes rise.
Small businesses account for the majority of job growth, but businesses are reticent to invest or to hire more workers, unless they can make more money without being taxed more. Increased revenues and profits, not more taxes, are incentives for people to invest in business. Business owners, who will be taxed more if they expand and grow jobs, are understandably reluctant to put more money into their businesses right now.
The administration says it wants to promote small business, but so far there are only words, not actions. It seems the administration is more interested in increasing poor people’s income levels with little, if any taxes, at the expense of both middle class and small business efforts to better themselves.
Rebuilding our economy will be a slow process, taking several years. This is no time to eliminate the tax cuts we presently have. We need to encourage expanded investments for more jobs and to grow the economy. Keeping tax cuts can help do it.
— Bernard Featherman is a business columnist and past president of the Biddeford-Saco Chamber of Commerce. He can be reached by e-mail bernard@featherman.com.
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