While the Economy Sucks, Obama Proposes Tax Hike On A Million Small Businesses

Today in Washington, D.C. - July 10, 2012:
The Senate reconvened at 10 AM today and following morning business, they will take up the Jon Tomas Fowlkes, Jr. to be United States District Judge for the Western District of Tennessee. At noon, senators will vote on the Fowlkes nomination.

Later today, they will resume consideration of the motion to proceed to S. 2237 - Small Business Jobs and Tax Relief Act, Senate Democrats’ latest stimulus proposal. At 2:25, senators will vote on cloture on the motion to proceed (i.e. whether to take up and begin debate on) the bill.

The House reconvened today and will debate and consider H.R. 6079 - To repeal the Patient Protection and Affordable Care Act (aka ObamaCare)and health care-related provisions in the Health Care and Education Reconciliation Act of 2010.

Yesterday the House passed the following bills:
HR 4155 (369-0) - To direct the head of each Federal department and agency to treat relevant military training as sufficient to satisfy training or certification requirements for Federal licenses.
HR 4114 (voice vote)- To increase, effective as of December 1, 2012, the rates of compensation for veterans with service-connected disabilities and the rates of dependency and indemnity compensation for the survivors of certain disabled veterans, and for other purposes.
HR 4367 (371-0 ) - To amend the Electronic Fund Transfer Act to limit the fee disclosure requirement for an automatic teller machine to the screen of that machine.
HR 5892 (372-0) - To improve hydro-power, and for other purposes.
S. 2061 (voice vote) - Provides for an exchange of land between the Department of Homeland Security and the South Carolina State Ports Authority.

An important vote is coming up in the House either Wednesday or Thursday, on H.R. 4402, The National Strategic and Critical Minerals Production Act, H.R. 4402. This bill would take steps toward streamlining the excessive regulations on domestic mining activities and providing our manufacturing community with valuable materials it needs. With the recent news that US manufacturing is in steep decline, its essential that we make moves to roll back red tape. And this legislation would reduce our dependence on China. More on this bill was presented yesterday.

At the end of 2012, many tax policies are set to expire. With the expiration of these tax cuts quickly approaching, yesterday,  President Obama called for Congress to extend these tax cuts for another year—but this time with a caveat: letting the tax cuts expire for households with incomes of more than $250,000. However, since some small businesses file their taxes as individuals, some have raised concerns about this proposal impacting the taxation of small business. Get the facts behind the President's call and the pending tax increases by visiting Bankrupting America's latest fact sheet.

Public Notice, independent non-profit dedicated to providing facts and insight on the economy, identified, "The country’s economic problems are a result of irresponsible government overspending, not under-taxing. First and foremost, we must first fix Washington’s addiction to spending well beyond its means. This is the root cause of the country’s debt burden that is jeopardizing a fragile recovery and sustained economic growth.

• Most agree the tax code is overly complex and in need of reform.  Don’t take our word for it.  The independent Congressional Research Service called the U.S. taxation on business “complex and difficult to administer.”
• However, this must not distract from the country’s most pressing economic problem: Washington’s inability to budget and spend responsibly.
• Many have proposed raising taxes on those making over $1 million a year as a way to address our growing debt burden. But the numbers make the futility of the exercise clear. If Washington taxed the wealthy at a minimum rate of 30%, it would only lower the debt by .2% over the next 10 years.
• The primary drivers of our debt are big-ticket items like defense spending and spending on entitlement programs like Medicare and Social Security. Washington must focus on reforming these to make them solvent in the long-term while working to prevent tax increases on hard working Americans.

As The Wall Street Journal editors reflect, “So the 2013 tax cliff is a big enough economic problem that President Obama now wants to postpone it for some taxpayers. But it isn't so big that he's willing to curb his desire to raise taxes on tens of thousands of job-creating businesses. That's the essence of Mr. Obama's announcement Monday that he wants Congress to extend current tax rates for a year, but only for those making less than $200,000 a year.”
Nearly two years ago, President Obama signed an extension of tax rates for everyone, arguing that tax increases then “would have been a blow to our economy.” But the economy today is performing even worse than it was in December 2010. At that time, real GDP growth over the prior four quarters was 3.1%, but today real GDP growth over the four previous quarters is only 2%. If tax hikes would have hurt a struggling economy then, why is the president pushing for them now?

The WSJ editors note, “Mr. Obama is demanding tax increases, not tax cuts, and large increases at that. If the Bush tax rates expire as scheduled on December 31, rates on the top two income brackets will jump to 39.6% from 35%, and 36% from 33%.” Importantly, they explain, “Congress's Joint Tax Committee — not a conservative outfit — estimates that in 2013 about 940,000 taxpayers will have enough business income to meet Mr. Obama's tax increase threshold. And of the roughly $1.3 trillion in net business income, about 53% will get hit with the higher tax rates. This is because millions of businesses report their income as sole proprietors and subchapter S corporations that file under the individual tax code.”

No wonder the AP reports today, “The economy and uncertain political climate are taking a toll on small business owners' optimism, making them hesitant to expand. The National Federation of Independent Business said its index of small business owners' sentiment fell 3 points in June to 91.4 after edging lower in May. The index, compiled from a survey of NFIB members, shows that business owners are concerned about the economy. The number of owners expecting business conditions to improve in six months fell 8 percentage points and the number expecting their sales to rise slid 5 percentage points. . . . Owners said they are scaling back plans to hire and to buy equipment. That's a troubling sign for the U.S. labor market, which is struggling to gain traction.”

As Senate Republican Leader Mitch McConnell said on the floor this morning, “For three and a half years, this White House has shown an utter lack of imagination when it comes to jobs and the economy: if the solution doesn’t involve more government, they’re not interested. That’s all they’ve got. So yesterday, . . . After three and a half years of more government, more debt, more spending, more taxes, more regulations, . . . the President issued an ultimatum: raise taxes on about a million business owners to fund more government, and I won’t raise taxes on the rest of you. That was his considered response to this crisis.”

McConnell added, “As far as I’m concerned, there shouldn’t even be a debate here–– government doesn’t need any more money. It’s government that should be answering to us for the tax dollars it’s wasted and misdirected. . . . The President has already admitted that the last thing you want to do in the middle of a recession is raise taxes. He knows yesterday’s proposal would only make the economy worse. His goal isn’t jobs; it’s income distribution. It’s his idea of fairness — which means you earn, he takes.”

The American public seems to agree! In recent polling by right, left and centers, the results tend to send the same message - the economy sucks! According to:

• RealClearPolitics average, which covered early June to early July, 30.2% think the country is headed in the right direction while 61.3% think it is headed in the wrong direction.
• Daily Beast/Newsweek: 26% of likely voters think the country is headed in the right direction and 59% think it is headed in the wrong direction.
• DailyKos: 33% of registered voters (25% of Independent registered voters) think the country is headed in the right direction and 60% (65% of Independents) think it is headed in the wrong direction.
• Economist, 23% of adults think the economy is getting better; 38% say it is getting worse; and 32% say it is staying the same.
• Economist, 42% of adults believe the economy is the top issue facing the country. 84% of adults say it is a “very” important issue to them.

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