10.01.2008 0

Small Business Sense

  • On: 10/23/2008 17:07:52
  • In: Taxes
  • By Isaac MacMillen

    Barack Obama has been making a number of bold claims about small businesses lately. But has he ever owned one? Does he know what is involved in building and maintaining a small business? Judging by his tax plans, probably not.

    According to the U.S. Small Business Administration, small businesses make up the largest non-farm portion of the GNP (over half), as well as 45 percent of the total private U.S. payroll which they pay to nearly half the U.S. workforce, for whom they work. 60-80 percent of net new jobs annually come from small businesses.

    Sen. Barack Obama claims that 98 percent of small businesses would escape his wealth-redistributing tax raise on those who make over $250,000. However, he ignores the fact that households which make more than $250,000/year account for $473BN of the $706BN earned by small businesses, according to Americans for Tax Reform.

    By throwing on additional taxes, Obama would be hurting the very core of the American economy. Small businesses will be faced with the unenviable decision of raising prices or laying off/not hiring workers. Unemployment will rise, and the lower-income Americans that Obama wants to reach will end up taking the hit.

    The small businesses that manage to limit their losses to a decrease in profit will have less capital to invest, and thus not expand as rapidly as they would have under normal circumstances. This will in turn hurt the US economy and kill jobs.

    Obama plans to counteract this effect for middle and lower-class workers is by providing them with tax breaks financed by the tax increases levied—including those on small businesses. But with the increased cost of products and services, and possibly less employment, those tax breaks (already shrunk by their journey through the bureaucracy) will provide little comfort.

    If Senator Obama truly wants to help middle and lower-class workers, he should lift taxes on corporations, allowing them to decrease prices, thus giving Americans greater purchasing power at the store. Those same small businesses will then be able to use their increased profits to expand, hire more American workers, and create greater profits.

    This is basic economics, folks. Small businesses are at the center of the economy and targeting them can only hurt the overall economy. When Big Government tries to spread around hard-earned wealth, the recipients end up with less wealth than was originally taken. And the companies from whom the wealth was seized lose the opportunity to create more. Split a dollar into one hundred pennies distributed amongst one hundred people, and it loses its purchasing power. The same is true for business profits.

    Senator Obama needs to learn some basics about small businesses before he implements any of his tax plans. Perhaps then he’ll realize that the best way to help middle and lower-class workers is to give those vital small businesses the freedom they need to accumulate capital and continue to grow—without Big Government looting their bank accounts.

    Isaac MacMillen is a contributing editor of ALG News Bureau.

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