Posted on August 18, 2010 in Augusta Free Press
Congress should do the responsible thing and let tax cuts for high earners expire at the end of this year.
As someone who has benefited from these tax cuts, I believe we must restore balance to a federal tax system that has been tilted in favor of the wealthiest 5 percent for a generation.
I’ve had a lifelong interest in the vital role of social entrepreneurs, the local heroes who take risks to lead innovative nonprofit organizations to solve problems at the local level.
I’m a big believer in the importance of mentorship, of helping the next generation of business and community leaders find their way.
But I also view efficient government and adequate tax revenue as essential ingredients in a fostering the fertile soil for business development and healthy communities. Just as a healthy farm or garden needs a balance of nutrients, our country needs a balanced and fair tax system.
Yet the overheated anti-tax rhetoric is alarming. There are loud voices that will object to any tax and claim that raising taxes on higher income people will destroy economic growth and punish success. They argue that we don’t need additional revenue, that we can simply reform entitlements, cut spending and root out waste.
We should obviously press for greater government efficiency and accountability. But it is irresponsible to suggest that we can proceed without increasing tax revenue. No gardener or farmer would expect their crops to grow year after year without regular additions of fertilizer.
We have racked up over $13 trillion in national debt, thanks to borrowing to pay for two wars and a decade of tax cuts. Yet, we have long overdue investments in education, reducing our dependence on foreign oil, and public infrastructure, such as roads, bridges, broadband access, and market protections. Where will the money come from?
Generous tax cuts for the wealthy, passed by Congress in 2001 and 2003, are due to expire at the end of this year. Between 2002 and 2009, households with incomes of over $250,000 received more than $700 billion in tax cuts, according to the Center on Budget and Policy Priorities. This was essentially added to our national debt.
The higher income people I know didn’t lobby for these original tax breaks and recognize the need to allow them to expire. If we retain these tax cuts, we’ll add another $700 billion to the debt over the next decade. These are funds better spent in deficit reduction and targeted investments.
The retired business leaders I serve with on community boards are thankful for the opportunities we’ve had to do business and grow wealth in this remarkable nation and free market economic system. None of us exist on an island and no wealth can be created without a society that provides a fertile ground of opportunity for everyone.
In the 30 years after World War II, 1947 to 1977, we taxed ourselves at significantly more progressive tax rates than today. The highest earners paid twice as much of their income in taxes in 1960 as they do today, according to a new study by Wealth for the Common Good. With that money we made investments in public infrastructure, affordable homeownership and expanded education at all levels. These far-sighted leaders supported policies that propelled millions of Americans into the stable middle class.
Today, young people are graduating from college with $100,000 in school debt, as undergraduates. We’re coasting along on previous generations’ investments in water treatment facilities, bridges and other essential infrastructure – and we’re leaving too many talented young people behind. Our failure to make investments today will undercut prosperity for the next generation.
Congress will be under tremendous pressure to continue providing tax breaks to high income groups. Let’s hope they have the fortitude to let mine expire. The fertility of our economic soil depends on it.
Peter Heegaard is retired from banking and a former Managing Principal of Lowry Hill, a subsidiary of Wells Fargo. He is founder of Urban Adventure and author of “Heroes Among Us: Social Entrepreneurs Strengthening Families and Building Community” (Nodin Press)
by Chuck Collins
Huffington Post, October 14, 2010
“Expecting high-end tax cuts to trickle down as job creation is about as reasonable as pouring gasoline on your hood and expecting it to fuel your car.”
– Lew Prince, owner, Vintage Vinyl, an independent music store.
Congress left town in early October without addressing the future of the Bush-era tax cuts that are scheduled to expire at the end of 2010. This sets up a “lame duck” session debate over their future in November and December.
After the mid-term election, anti-tax legislators will press to extend tax cuts for households with incomes over $250,000. Anti-tax activist Grover Norquist argues that allowing these tax cuts for higher incomes to expire would be a “body blow to the small business community.”
This isn’t the first time small businesses have been used as a prop by anti-tax lobbyists. The impact on small business is routinely used in arguments against policy that would require wealthy individuals to pay higher taxes.
Enter several refreshing new voices in this debate — the American Sustainable Business Council and Business for Shared Prosperity — networks of enterprises rooted in their localities. In their recent report, “Restoring Top Tax Rates Makes Sense for Small Business,” they make a business case for allowing the top tax rates to expire.
These business organizations point out that very few small businesses are effected. Less than 3 percent of tax filers with any business income earn over $200,000 as individuals or $250,000 as couples in a year — and many of these are Wall Street investment partners, big business CEOs paid to sit on boards of other big companies, and wealthy folks renting out investment properties and vacation homes.
If Congress wants to help small business, they argue, Congress shouldn’t spend $700 billion over the next decade in poorly targeted tax cuts.
“Letting high end tax cuts expire is a good business decision,” said Frank Knapp, CEO and President of the South Carolina Small Business Chamber of Commerce.
“Boosting our local economy by helping real small businesses create jobs should be our goal. We can either cut taxes for CEOs or Wall Street traders, or we can invest the money to generate more customers for small business by keeping teachers, police officers and other Americans on the job rebuilding the crumbling transportation, water, and energy infrastructure small business depends on.”
This longer view is echoed by other small business leaders who lament the decline in public infrastructure and investment that strengthens local economies. They challenge the tired orthodoxy that cutting taxes for high-income households always has a positive impact on economic growth and job creation.
Hiring decisions for small business are driven by consumer demand, not tax cuts. “As a fellow businessman once told me,” said Rick Poore, owner of Design Wear, an apparel manufacturer based in Lincoln, Nebraska, “Give me more customers and I’ll be forced to buy equipment and hire people to meet demand. Give me a tax break without more customers and I’ll just go to Aruba.”
Under President Obama’s plan to extend the 2001 income tax cuts for families with incomes under $250,000, all taxpayers will get a share of tax cuts. Higher-income taxpayers would get thousands of dollars more in tax cuts than middle-income households. The congressional Joint Committee on Taxation estimates that extending just the middle class tax cut would provide more than $6,300 in permanent tax relief for families earning more than $200,000, on average, compared to just $916 in tax relief for families earning between $40,000 and $50,000.
Restoring tax rates for high-income households won’t fix our economy. But it is a step in the right direction to fiscal sanity and being able to make investments that move us toward a sustainable economy. That’s good for businesses that are committed to their communities.
Originally published at YES! Magazine online.