Tax Cuts Crucial to Economic Recovery

Facing declining polls and an all but certain electoral disaster in November, President Obama recently indicated a willingness to extend the Bush tax cuts for taxpayers with income under $250,000 -- while letting massive tax increases go into effect for American small businesses. Although extending a portion of the Bush tax cuts is good news -- and, not coincidentally, good politics -- the decision to allow tax hikes on businesses demonstrates that the Obama administration has learned nothing after a year of failed economic policy.

The true engine of American economic growth and job creation is small businesses. In the last decade, small business created two-thirds of the net new jobs. The success of these organizations is tied directly to individual tax rates. According to the National Federation of Independent Businesses, 75 percent of small businesses are organized as pass-through entities, meaning their taxes on business income are based on individual tax rates. In the state of Oklahoma, small business accounts for 97.4 percent of the state's employers.

When uncertainty exists in any market, business is reticent to build capacity or additional jobs. Over the past year, this Democrat-controlled Congress has completely rewritten the rules for the financial services and healthcare industries, with years of rulemaking left to go. This, in addition to the looming expiration of the Bush tax cuts, certainly creates an economic environment of uncertainty.

The president has also proposed yet more spending. His proposals, from an additional $50 billion for infrastructure spending to the 100 percent expensing of research and development for large corporations, once again demonstrates the wrong approach toward bringing our country out of this economic malaise. Since the passage of the $787 billion "stimulus" in February of 2009, unemployment has continued upward and now sits at 9.6 percent. What could this additional $50 billion do that the $787 billion could not?

The problem with stimulating our economy will not be addressed by simply having the government throw more money at the problem. In fact, according to economists Jason E. Taylor and Richard K. Vedder, "stimulus efforts of modern times, perhaps most notably that of Japan during the 1990s...actually led to reduced economic growth and long-term higher unemployment."

To get the economy moving again, Congress should permanently extend all of the tax cuts due to expire at the end of this year. Raising taxes on businesses while the economic recovery is still fragile could have disastrous consequences for job creation. The American people deserve -- and economic conditions require -- a straight up-or-down vote on extending tax cuts.

###