Published Monday, May 21, 2012 at 1:00 am / Updated at 4:56 pm
Sam Graves: Ease tax burden on small businesses

The writer is a Republican congressman representing northwest Missouri. He is chairman of the House Committee on Small Businesss.

In 1789, Benjamin Franklin famously wrote, “In the world, nothing can be said to be certain except death and taxes.” As many small-business owners recover from the frustration of completing their tax returns last month, some may now have to prepare for a more grim possibility: the death of their business by taxes.

Small businesses are more sensitive to high tax rates and changes in the tax code, since they sometimes don’t have the staff or resources to focus solely on compliance. According to the Small Business Administration, small firms spend three times more per employee on tax compliance than their largest counterparts. Small firms are also anxious about future tax policy because they must make important, long-term decisions today on investment, hiring and expansion for tomorrow.

This week marks the 49th annual National Small Business Week, a time to recognize the contributions of small businesses to the economic well-being of America, but the small-business tax forecast for the next several years is an ominous one. Small firms have to comply with a great deal of new health care law taxes, such as the Medicare payroll surtax on investment income and the comprehensive health insurance plans tax, among many others.

And if Congress allows the 2001 and 2003 tax rates to expire at the year’s end, it will result in a massive tax increase next year and the possible loss of up to 2.9 million jobs, according to an American Action Forum study.

Last month, the Committee on Small Business held a hearing to examine upcoming new taxes on small companies and their economic effect. We heard from small-business owners that they won’t feel comfortable about hiring or expanding until they have more certainty about future tax rates.

Leonard Steinberg, a New Jersey small-business owner and tax preparer, whose clients are small firms, testified, “You raise the amount of tax that they’re going to pay, those small businesses are not going to be able to employ the local people. So how are they going to stay in business if you take more money from them?”

Congress should heed this man’s warning.

Instead, policies to increase taxes on small businesses continue to be proposed. The House and Senate each voted on separate bills to maintain lower student loan interest rates — an idea with bipartisan support.

However, where the parties disagree is how to pay for it. Senate Democrats proposed to pay for it by raising taxes on small businesses organized as S Corporations. This is a bad idea because S Corporation small businesses employ 31 million Americans. This tax increase would take more money out of the economy and further discourage entrepreneurial growth.

The goal of the legislation is to help college students, but taxing small firms ultimately will have a negative effect on these young people. Half of young college graduates are already either jobless or underemployed in positions that don’t fully use their skills and knowledge. The Senate’s legislation would have dimmed the job prospects of recent college graduates even more, considering small businesses create about 65 percent of the new jobs in America.

Taxing job creators during a time of frail economic recovery makes zero sense. Senate Majority Leader Harry Reid’s determination to increase taxes on small business further shows how out of touch his tax-and-spend agenda is. Constant threats of new and higher taxes continue to bog down our economy and paint a discouraging picture for small firms and future generations.

Instead of taxing the productive part of our economy to death, we need to provide relief for our small businesses so they can grow and create jobs.

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