Sunday, April 15, 2012

Small Business Tax Cut Act

The House of Representatives will consider a new set of tax cuts to small businesses. Those opposed say that the bill will only make those with a great deal of money even richer. There's an editorial piece in today's NY Times here echoing these sentiments. The upshot of this article is:

"...a bill to let most business owners deduct up to 20 percent of their business income in 2012 — a $46 billion tax cut. Despite the Mom-and-Pop label, it is designed so that nearly half of the tax cut would go to people with annual income over $1 million, and more than four-fifths would go to those making over $200,000, according to the Tax Policy Center."

Of course, a common rejoinder is that such cuts will create jobs. But many experts have serious doubts about whether such a cut will actually create jobs (see, for example, this article and this report from the Federal Reserve Bank of St. Louis). Of course, such criticisms are not definitive. What would be nice is if we had some evidence that such a cut would create jobs, but I wasn't able to find anything after a brief search. There are the intuitive sorts of arguments. Here in Bradford we have companies like American Refining Group and Zippo. They employ a large number of residents and greatly contribute to the local economy. But what would a tax cut to such corporations actually do for the economy? Would they hire more workers? Would they reinvest that money in the community? One might have the intuition that tax cuts encourage growth, but it's a difficult thing to predict and measure. And the evidence (at least what I could find) certainly doesn't show that the bill will do what its authors claim.

I wonder what readers of this blog think about the bill and about the strategy of our policy-makers to cut taxes to small businesses.

1 comment:

Kayla Swartz said...

This whole idea of big business tax cuts, to me, is a complete joke. What is the benefit of the rich getting richer? It just seems completely arbitrary to me. They say the biggest concern is to create more jobs, but like you (Jesse) said, where is the evidence that this will actually occur? The thing with big business is that they’re all a hoax. They just want to remain in power, so they do what they can for themselves to keep that power, and I think that’s all these tax cuts will do is provide them with more power. The more power they have, the bigger chances they have in wiping out small businesses, who generally take the toll on bills like this. In the business world, it’s all about power. With this bill, I don’t see how anything is going to change in our economy. Yeah, big businesses may open up a few jobs, but at the same time they’ll be taking away jobs from smaller businesses, so what’s the point?