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Why the Tax Compromise is a Good Thing

One of my HA colleagues wrote a post siding against the tax compromise.  That’s fine and all, but I’m here to tell you why the tax compromise is a good idea*.

First and foremost, the existing tax cuts are extended for EVERYONE.  Not just the upper class, or the middle class or the lower class.  For everyone.  No one is playing favorites.  No compromise then taxes are jacked up for, well, EVERYONE.  I just want to make sure I’m getting my point across here.

Second, as a married father of three, the marriage penalty is also lessened and the child tax credit stays at $1,000 rather than shrinking to $500.  In addition this bill kills the refundable Making Work Pay credit and replaces it with a payroll tax cut for everyone who pays the FICA tax.  There’s that pesky tax cut again!

Third, according to a Wall Street Journal/NBC poll fully 59% favor the tax compromise.  That’s not just a simple majority either.  Of that 59%, 68% of Republicans and 60% of independents support the compromise.  So those who say that the tax compromise isn’t “the will of the people”, this poll actually show that it is in fact the will of the people.

Consider that if the tax compromise doesn’t pass:

FACT: DEMS’ JOB-KILLING TAX HIKE WOULD AFFECT 50 PERCENT OF ALL SMALL BUSINESS INCOME:

According to a report issued by the Joint Committee on Taxation, the Democrats’ tax hikes will affect “50 percent of the approximately $1 trillion” in business income reported each year.

FACT: 750,000 SMALL BUSINESSES WOULD BE HIT WITH DEMS’ JOB-KILLING TAX HIKE:

According to a recent Associated Press fact check, the three percent figure cited by Democrats in defense of their job-killing tax hike “is statistically correct, but misleading.” As the article explains, “that’s because the overwhelming number of small businesses are very small, even tiny. And there are a lot of them – for instance, a house cleaner, a dog walker, an ice cream vendor, somebody who makes money selling things on eBay. In reporting the raw numbers of tax returns that include business income, the Internal Revenue Service doesn’t distinguish between small homegrown businesses and far less common but extremely profitable ventures such as some hedge funds and doctor and lawyer partnerships. That distorts the overall percentages and makes it appear that the impact of the White House plan on small businesses is extremely limited. In fact, it would affect about 750,000 taxpayers who report business profits on individual income returns, according to the congressional Joint Committee on Taxation.”

FACT: DEMS’ JOB-KILLING TAX HIKE WOULD HIT SMALL BUSINESSES EMPLOYING 25 PERCENT OF THE U.S. WORKFORCE:

The results of an NFIB small business survey show 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% of the total workforce.”

FACT: SMALL BUSINESSES ACCOUNT FOR 65 PERCENT OF NEW JOBS CREATED IN THE U.S.:

With the unemployment rate ticking up to 9.8 percent last month, leaving 15.1 million Americans unemployed, it is imperative – now more than ever – that small businesses be given the certainty and incentives they need to create jobs. According to the Small Business Administration, “Small firms accounted for 65 percent (or 9.8 million) of the 15 million net new jobs created between 1993 and 2009.”

Let’s take this a step further. Some conservative leaders would have you believe that conservatives are indeed against the tax compromise, including those within the Tea Party movement. While there are definitely some tea party leaders who do not agree with the compromise (and understandably so) check out what some influential conservative voices are saying (including FreedomWorks)

Americans for Tax Reform (ATR): “The whole point of this tax deal is to prevent taxes from going up on anybody. It would be wrong to leave American employers with a tax increase at a time of nearly 10 percent unemployment. Congress should avert this tax hike on employers.”

Grover Norquist, president of Americans for Tax Reform: A tentative tax deal between President Obama and the GOP is “a much bigger victory than people see” for the Republicans.

Matt Kibbe, President and CEO of Dick Armey’s FreedomWorks: “This is dodging the tax bullet. That’s the grand deal — extend all the Bush tax cuts, a new tax cut on payroll taxes, which I think that Republicans and tea partiers should support in exchange for extending unemployment benefits, which Harry Reid has already demonstrated an ability to pass with the Republican votes he needs. So to me, it’s a no-brainer to not allow taxes to go up dramatically in January so we can then deal with fundamental tax reform.”

Newt Gingrich, Former Republican Speaker of the House: “The agreement to extend the tax code without an increase for two years is a great victory for [the A]merican people and [the GOP] leadership.”

Bill Kristol, Editor of the Weekly Standard: “[T]his is a very good deal from a conservative point of view.”

Larry Kudlow, CNBC Host: “I think conservatives have to keep their eye on economic growth. There’s stuff in the deal that I don’t like, but the overall impact is going to be positive.”

Philip Klein, The American Spectator: “[W]e should still recognize that an overwhelming majority of the deal is stuff that conservatives have either been actively campaigning for or would be perfectly comfortable with.”

Dan Mitchell, CATO Institute Senior Fellow: “On the plus side, we dodge a big tax increase for the next two years. We also replace a goofy and ineffective ‘make work pay’ tax credit with a supply-side oriented reduction in the payroll tax rate…one bit of good news that has not received much attention. The tax deal ends the ‘Build America Bonds’ tax preference, which was one of the most destructive provisions of Obama’s so-called stimulus.”

Are there problems with the bill? Sure, but before the compromise is completely castigated by the right, consider that,according to Ranking Member of the House Ways and Means Committee Congressman Dave Camp “Republicans were able to prevent a long list of existing tax subsidies (estimated at over $100 billion) from being extended– notably stimulus provisions like the Build America Bonds program and grants in lieu of the Low-Income Housing Credit.”

What those on the right need to realize is that this bill, even with its flaws, is good for our country.  It would appear that a majority approve of it (therefore it being the will of the people).  We also need to understand that there is no way the GOP gets a better deal, especially after taxes have already gone up after the first of the year.  Would I have loved for the tax cuts to be permanent?  Yes.  Would I love for the Death Tax to be eliminated like it was this year?  Heck yes, but 35% is better than the 55% it was going to be or even the 45% Democrats wanted it to be (on income of $3 million or more instead of the $5 million Republicans negotiated for).

Let’s rally behind this compromise and roll back the perks first thing in the next congress.  It’s easier to move on from victory rather than battling from behind.  And this compromise is indeed a victory.

*With all do respect to those who have already indicated that they are against the compromise

(Originally posted to HoosierAccess)

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