NCPA - National Center for Policy Analysis


May 19, 2009

When small-business owners meet in Washington, D.C., this month, they need to send a message to our policy leaders that more regulations and more taxes from Washington create barriers for our small businesses.  Instead, we need policies that are personal, portable, flexible, fair and voluntary, says Terry Neese, a Distinguished Fellow with the National Center for Policy Analysis (NCPA).

We need policies that encourage small-business owners to invest in their businesses, hire more people and continue to grow their businesses.  Unfortunately the administration's proposal to raise taxes on those earning $250,000 or more will create burdens and barriers to small-business growth and success, says Neese:

  • Under those new tax plans, 1.3 million small-business owners would pay more taxes.
  • These small businesses are not subject to the 35 percent corporate income tax rate.
  • Instead, they report "flow-through" income from sole-proprietorships, partnerships, and S-corporations on individual tax returns.
  • The total tax bill for small businesses as a result of these tax increases would be $30.1 billion.

If this small-business tax increase becomes reality, many small-business owners will not be able to expand their businesses.  Not only will they not be able to hire more people, in many instances they will be forced to lay off workers.  They won't be able to buy new equipment.  They won't be able to invest in their communities, says Neese.

At the National Center for Policy Analysis, we have been working on some solutions that can encourage success now:

  • Make income tax cuts permanent; for example, lower tax rates, especially at the margin, encourage work, investment and reduce tax avoidance.
  • Cut payroll taxes; taxes eat up one-third or more of a small business's income -- reducing the payroll tax will have an immediate impact on small businesses, enabling more investment to grow the business.
  • Health insurance portability; health insurance is a major expense for businesses, so Congress should allow people to carry their health insurance from job to job by allowing small-business owners the opportunity to purchase individually owned health insurance with pretax dollars.

Source: Terry Neese, "Ways to Ensure Success of Our Small Businesses,", May 16, 2009.

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