Tax cuts for the wealthy are no benefit to most small businesses

The truth is I benefit directly from my client’s economic health, not by my tax breaks. If more people who are doing well economically come to my business, I will hire more people. It's as simple as that

Send your comments and news tips to roundup.editor@gmail.com, to Rocky at arrowbiz@texasorp.com or click on the "comments" at the bottom of the story

By Rocky Boschert
Financial Editor

Based on a lot of luck and hard work, I come close to being one of the few small business owners that may actually benefit even a little from the Bush administration's tax cuts enacted during W’s regime.

I figure the tax cuts save me maybe $5,000 a year, compared to what I would pay now – if the Bush tax cuts were never enacted.

But as debates over the federal budget deficit have intensified, I find the political discussion increasingly divorced from the reality of my experience as a small business owner and my client’s ability to save and invest.

Tax cuts for the wealthy do literally nothing to bolster my firm’s success. Tax cuts for the rich won’t affect my hiring decisions and they won’t encourage me to buy new equipment or help me move into a bigger, more image-enhancing office. In fact, of those business decisions, all of them would depend on my client’s economic well-being, not my personal income tax rate.

What I do in my business, which is to manage money for my client’s retirement and life objectives, has very little to do with high net worth tax policy. When my clients do well economically – when they are employed, when they feel like their family’s income needs are met, when they feel they have money to save for their children’s college – they invest more money and I do better as a advisor recipient of their money.

So in reality, if the rich paid more taxes, the economy would have more money to invest for infrastructure, education, job training and leisure, which would mean the economy is growing and my client-invested money would benefit from that growth. The outdated hope and fantasy of trickle down economics is keeping our nation stuck in post-recession recession.

While congressional Republicans and entrenched corporate lobbying groups like the U.S. Chamber of Commerce and the National Federation of Independent Business (NFIB) have been pushing hard to preserve the Bush tax cuts for the wealthy, by falsely touting the interests of small businesses like mine, much of the small business community is demanding that those very tax cuts be repealed.

The tax breaks for the wealthy will add $700 billion to the deficit over the next 10 years, according to the Fed’s Office of Management and Budget. Many small firms say that money would be better spent on direct aid, such as job training and infrastructure projects, for the middle class.

The truth is, I benefit directly from my client’s economic health, not by my tax breaks. If more people who are doing well economically come to my business, I will hire more people. It's as simple as that. If you give me a token tax break, I may just take the wife to the Bahamas. (In reality I would donate it to a worthy children's charity.)

Moreover, the vast majority of small business owners are not among the elite class of small business owners making $250,000 a year or more. Most successful small businesses take in a combined $80,000 to $100,000 net a year from their business. As a result, most small businesses don’t make nearly enough to benefit from the Bush tax cuts for the wealthy. Most businesses don’t pay the top marginal tax rate. Most small businesses won’t be affected at all by a reversal of Bush tax cuts for the rich.

Another fact about small business tax realities is that even the few firms that do qualify and benefit from the Bush tax cuts don't boost their hiring in response to the Bush tax cuts. For decades, small companies have been able to secure tax breaks on the expenses that actually affect their bottom line – labor, rent, equipment and other necessary costs. The Bush tax cuts for the wealthy, by contrast, only affect how much of a firm's total profit owners keep for themselves.

The economic premise that people won’t hire because they might have to pay more taxes if they make more money is laughable. Small business owners only hire when they think there’s a way they can make more money with that hire. The percentage the government takes out of it has almost nothing to do with it.

So what really affects small businesses? The top two variables are high health care costs and limited access to credit. In addition, small business owners are directly affected by federal economic policies that directly benefit the middle class. If extending tax breaks to millionaires means denying aid to the middle class, small businesses will suffer.

All my clients work for a living, except those that are now retired. They are educators, government managers, small business owners and professionals who are more concerned with doing a good job and taking care of their clients and customers than being rich. They’re not these elite and proudly greedy Wall Street bankers or corporate executives making $20 million a year from firing people, taking their business public, or getting corporate welfare from their bought and paid for politician servants. My clients need to work and need the money. If they’ve got money, then I do better.

The upper-end Bush tax cuts are not corporate taxes, they’re taxes on wealthy individuals. Many small firms are not corporations, and owners report their profits as the individual income of their owners. Some firms choose to incorporate, though they never officially report a profit because all excess earnings are paid out to the owners.

The U.S. Chamber and the NFIB say that because these business profits are reported as individual income, allowing tax hikes for wealthy individuals will hurt small business. Neither the U.S. Chamber nor NFIB can prove that claim. In fact, the debate over the Bush tax cuts has been heavily skewed by talking points from the NFIB and the US Chamber.

The US Chamber has a long track record of backing the economic priorities of corporate elites, while the NFIB has increasingly become a partisan wing of the corporate controlled Republican Party.

The Bush tax cuts are like termites; they eat away at our economy and our nation’s future.