Democrats and Taxes: Another Nail in their Coffins

In much the same fashion as Nancy Pelosi pushed through the massively unpopular health care bill despite election losses in 2009, she is at it again, this time with a bill to raise taxes on those people who actually create jobs. The message of the November elections was clear: We need to cut spending, reduce the size of government, and return power to the people. On taxes, we certainly should not be raising the rates on anyone when unemployment is still near ten percent. That’s a certain job killer, but Nancy Pelosi and Harry Reid are pushing full steam ahead.

Despite calls to not raise taxes, Nancy Pelosi forced a vote on maintaining the current tax rates only for the so-called “middle class.” By a vote of 234-188, Democrats voted to raise taxes for families earning over $250,000 a year and individuals who earn over $200,000. Everyone knows that these taxpayers pay most of the taxes. They also do the hiring, and if Barack Obama is serious about creating jobs, then the last thing you want to do is raise taxes.

Some Democrats do get the message. As noted in The Hill, “twenty Democrats broke with their party and voted against the bill after 33 had defected in a previous test vote. Most of those who voted with Republicans on the first ballot were members of the centrist Blue Dog Coalition, and many lost their bids to be reelected last month.” The good news is that the bill will now move forward to the Senate, and Republicans have enough votes to filibuster the measure.

Congressional Republicans have a simple plan. Taxes are already too high. The economy is shaky at best. We should not be raising taxes on anyone. Period.

The Wall Street Journal notes that “fully 48% of the net income of sole proprietorships, partnerships, and S corporations reported on tax returns went to households with incomes above $200,000 in 2007. These types of entities pass through their incomes to personal tax returns. Thus, increasing taxes on the top two income brackets directly raises taxes on these small businesses. The The National Federation of Independent Business (NFIB) small business survey indicates that “the businesses most likely to face a tax increase by raising the top two rates are businesses employing between 20 and 250 employees. According to U.S. Census data, businesses with between 20 and 299 workers employ more than 25 percent of the total workforce.”

Small businesses created 2/3 of the net new jobs in the last decade. With small businesses struggling to recover from the recession and unemployment near 10 percent, no small business should face a tax increase.

According to an NFIB poll, 75 percent of small businesses are organized as pass-through entities (sole proprietors, partnerships, S Corps, etc.), meaning they pay taxes on their business income based on the individual tax rates.

And now for the politics of all of this. Here’s John Boehner’s take on the House vote:

And what’s Nancy Pelosi’s opinion? She still thinks that unemployment payouts create jobs!

All of this is simply political drama. The Democrats know the American people have spoken. They have controlled both Houses of Congress and yet have left the tax issue until the last minute just to, once again, pit one economic group against the other. They tap one person on the shoulder and say, “See what that guy has? You deserve it too. But you don’t need to work for it. We’ll take it from him and give to you.” Pathetic.

The Hill reports that a deal is in the works despite the antics of Pelosi and Reid. According to their sources, “all the Bush tax cuts would be extended for two years and unemployment benefits would be extended for one, according to congressional sources. Also under consideration is an extension of the Make Work Pay and college-tuition tax credits that were part of the 2009 economic stimulus package.” However, before we can get to this point, the Senate will likely still go through the motions of voting on bills that will NOT get passed.

Congress needs to act, and what they need to do is permanently extend all the current tax rates. Otherwise, we will simply go through all of this again. The next step is to actually cut spending and LOWER taxes. That is the real way to grow the economy and create jobs. If the Democrats don’t get on board with what the American people want, then they should brace themselves for another electoral nightmare.