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Uncertainty of Bush tax cuts affects hiring, study states

September 02, 2010

Congress’ inability to make a decision about the fate of Bush-era tax cuts is contributing to the unemployment crisis facing the country, according to the Labor Day 2010 report by the National Association of Manufacturers (NAM).

“Small businesses are America’s job creators, responsible for 60 percent of the net new jobs created in the last decade,” the report states. “But uncertainty about looming tax hikes has stunted employment growth and until Main Street begins to hire, the unemployment rate will remain unacceptably high.”

The manufacturing sector is one of the industries that is sitting on the sidelines of hiring. Nearly 70 percent of its companies are “pass-through entities” that pay taxes at individual rates, which will be affected by whatever Congress does about the Bush tax breaks. 

NAM President John Engler says growth in the manufacturing sector is key to the recovery as the U.S. looks to increase demand by boosting exports. He also warns that — if handled poorly — the Bush tax cuts, along with increased regulation, could have significant repercussions on American workers.

“Americans want jobs, but proposals that expand government, increase taxes and impose new regulations will make business in the United States less competitive,” he said in prepared remarks. “These proposals will stifle the already weak recovery and destroy manufacturers’ ability to create jobs.”

Senate Majority Leader Harry Reid (D-Nev.) is expected to propose a way forward on the Bush tax cuts when Congress returns in September and complete work on it by the November elections.

President Obama and Democratic leaders in Congress have repeatedly called for the expiration of tax cuts benefiting individuals earning more than $200,000 per year and couples making at least $250,000. But economic uncertainty has prompted several rank-and-file Democrats to side with Republicans in calling for at least a one-year extension of all the tax breaks.

The disagreement could set up a showdown this fall when lawmakers return to Capitol Hill — trillions of dollars in expiring tax cuts will hang in the balance as Congress debates their fate.