In less than five weeks, tax hikes will go into effect for virtually all tax brackets unless Congress takes action. Despite public and bipartisan support for maintaining the current tax rates, President Obama and Democratic leaders in Congress have repeatedly refused to bring the issue to a vote. President Obama insists that his plan to raise taxes on the highest tax brackets will not affect job creators, but the facts indicate otherwise.
Writing in the Wall Street Journal, leaders of the National Association of Manufacturers and the National Association of Home Builders point out that a majority of their members pay federal taxes at individual income tax rates. If Obama has his way, tax rates for these small businesses will increase from 35 percent to 39.6 percent. A survey of NAM’s small business owners found that 82 percent of them are concerned about tax hikes, including 62 percent who are “very concerned.”
Their concern is well-founded. The manufacturing and construction industries have been among the hardest hit by the recession. According to NAM, small and medium-sized manufacturers have lost more than 850,000 jobs since 2007. The residential construction sector has lost 1.4 million jobs, and NAHB projects that home construction rates will not return to normal until 2013. The road to recovery for these industries is difficult enough without the federal government raising their business costs, which is exactly what these tax hikes would do.
In order to bring down the 9.6 percent unemployment rate, we need these businesses to pump money into the economy through new hires and capital investments — not send it to the federal government. If President Obama’s failed stimulus plan has taught us anything, it is that the government is incapable of creating private sector jobs through spending even when it spends $787 billion in taxpayer money.
The most effective way to promote economic growth is to allow businesses and families to decide for themselves how to spend and invest their money. Unfortunately, Americans’ earnings and savings are about to be worth a lot less due to the Federal Reserve plan to print $600 billion in new currency. Known as quantitative easing, this plan to buy bonds from banks using money created out of thin air is intended to inject cash into the economy.
However, this experiment in economic engineering did not work when the Fed tried it in 2008, and it is a dangerous policy now. Reducing the value of the dollar means it will take that many more dollars to purchase things like food, gas and clothing. This risky plan could hurt already struggling American families in the short-term and lead to spiraling inflation that will continue to threaten the economy in the years to come.
Government interference like that demonstrated in the failed stimulus and the Fed’s quantitative easing policy is no substitute for American drive and ingenuity. Congress and President Obama need to get out of the way and let these assets flourish. They can start by renewing the current tax rates before the end of the year.
CONGRESSMAN TOM COLE represents Oklahoma’s 4th Congressional District.