Friday, March 20, 2009

Isn’t the Obama ‘Tax Break’ for New Business Like Being ‘Half-Pregnant?’

I am a little confused.

Does the Obama Administration believe in lower taxes to stimulate economic growth or not?

On the one hand, we keep hearing about how they want to raise taxes on the top 2% of the income wage earners in this country by allowing the Bush tax cuts to expire on their own in 2010. More corporate tax hikes are in order from the Obama Administration and Congress, especially on large companies but also on small businesses to the extent they are exposed to estate tax hikes and the like.

Oh, and don’t forget, they want to tax everyone with the proposed (indirect) tax on carbon. If adopted, that tax will increase the cost of food, gasoline, home heating oil, electricity generated from coal, (most electricity), and all the products that are produced using carbon-generating energy, as well as the cost of products moved by ship, rail, and truck.

But on the other hand, we hear this week that that they are offering significant tax breaks such as allowing small companies that earn up to $15 million to write off losses for the past five years in the current tax year; write off up to $250,000 in investments; take higher depreciation deductions within the first year of property purchases and the kicker: a 75 percent capital gains exclusion for those who invest in small businesses.

Isn’t that like saying you are just a little bit pregnant?

The problem is the discrimination between raising taxes on large corporations because they are inherently “bad” for some reason -- almost always political, not economic -- versus cutting taxes for small businesses because they are ‘good’ by comparison.

What gives? What makes it the duty of the federal government’s Chief Executive Officer and Congress to make such a Solomonic decision? If the President thinks it helps stimulate economic activity to reduce taxes on small business (and it does), why hinder economic activity by increasing taxes on those with the funds to invest and the corporations that engage in international trade?

We have been offering the concept that now is the time to abolish the corporate tax code completely, which would totally remove the levers that politicians push to their advantage to get elected or stay elected.

Businesses should be started and sustained by economic decisions based solely on the fundamentals of the business and industry in which it participates, not because of a tax advantage they received by getting something through Congress.

There is nothing about being “half-pregnant” if the corporate income tax is just abolished.

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