As Wisconsin families are getting settled into their fall routine of back-to-school, football, and the political season, we should not lose sight of what is going to happen on January 1, 2013.
In less than three months, current tax rates will expire. House Republicans have already voted to extend all tax rates for one year, and we have voted to provide a path for comprehensive reform of our complicated, loophole-ridden tax code. On the other hand, the President and some Congressional Democrats advocate allowing some current tax rates to expire at the end of the year.
The problem is, as Vice President Joe Biden admitted, “the middle class has been buried the past four years.” If we let these tax rates expire, and ignore the need for tax reform, it’s only going to get worse for the middle class and the unemployed.
The threat of tax increases is already causing problems. According to a recent survey by the National Federation of Independent Business (NFIB), taxes are the biggest problem for our nation’s small businesses. Not low sales. Not competition from larger firms. Not the cost of labor.
It is no wonder.
When small businesses pay more money in taxes they have less available to use for investment, hiring, or expansion. Owners are naturally and understandably less prone to take risks—like opening a new store or expanding production—when they fear that Washington will hike up their taxes in the coming years.
The President’s tax hike will actually hit over 900,000 small businesses, according to the Joint Committee on Taxation. These are the same small businesses that created two-thirds of the jobs in this country in the past 17 years, according to the Small Business Administration. These are the same small businesses that are the backbone of our communities and integral parts of our economy.
The President’s tax hike plan is a job-killer. As noted in an Ernst & Young report, the President’s tax increases on high earners and capital gains investments would kill 700,000 jobs in the long term. Not only would employment fall, but worker’s wages would decline, resulting in a lower standard of living.
This month, we finally saw the unemployment rate drop below 8 percent; after 43 months the unemployment rate is now 7.8 percent. While it is always good news when more people are finding jobs, we aren’t where we should be and the statics hide a growing “invisible” unemployment as Americans are dropping out the work force or taking part-time work.
The Obama Administration promised that if Congress passed his stimulus, the unemployment rate would be 5.5 percent:
(Courtesy of Ways and Means Committee)
Clearly, we are still far from that promise, and that means many Americans are still without jobs. We can’t afford to lose 700,000 more jobs as result of the President’s tax hike.
Every week, I get emails and letters from constituents who are struggling. I hear stories of frustration from folks who have been unemployed for as long as 15 months. They are not alone. If we counted the number of people who are employed part time, but want full time jobs, our unemployment rate would be 14.7 percent.
We shouldn’t ignore the 12 million Americans who are still out of work, or the millions more who are unemployed or gave up looking. The President needs to engage with Congress to give small businesses and Americans certainty for next year and concentrate on long-term tax reform. We should spend less time on celebrating the seemingly statistical victories and more time on stopping tax rates from going up January 1. The clock is ticking.