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New Report Confirms Obama Tax Hike Bad for Small Business

July 17, 2012

Washington, DCDespite a weak economy and lackluster job numbers, President Obama continues to call for tax increases on small businesses, the engine of job creation.  A new report released today by Ernst & Young finds the President’s tax increases will hurt the economy and cost more than 700,000 American jobs.  

In response to the report, Ways and Means Committee Chairman Dave Camp (R-MI) offered the following statement:

“This report is more proof that the President doesn’t understand the economy or what it takes to create jobs in this country.  After more than three years of high unemployment, slow growth and record levels of stimulus spending, the Obama Administration appears ready and willing to further derail our economic recovery by raising taxes on small businesses.  We need these employers and investors creating more paychecks, not paying more taxes.  Rather than double down on tax hikes that will make it harder to get America back to work, it is time to stop the tax hike – for all taxpayers – and move forward with comprehensive tax reform that will provide the certainty these entrepreneurs need.”
Key Findings

Lower wages, fewer jobs and less investment

  • Output in the long-run would fall by 1.3 percent, or $200 billion in today’s economy.
  • Employment in the long-run would fall by 0.5 percent, meaning roughly 710,000 fewer jobs in today’s economy.
  • Capital stock and investment in the long-run would fall by 1.4 percent and 2.4 percent, respectively.
  • Real after-tax wages would fall by 1.8 percent, reflecting a decline in workers’ living standards relative to what would have occurred otherwise.

Every state in the U.S. feels the impact of tax hikes

  • The report, which offers a state-by-state look at the impact on economic output and employment, finds that every state is affected negatively by the tax increases contemplated by the Obama Administration.

About the pass-through sector

  • The economic footprint of the pass-through (referred to in the report as “flow-through”) sector represents a significant portion of the income taxes paid at the individual rates – and a large fraction of pass-through income is subject to the top two individual income tax rates.  These businesses employ 54 percent of the private sector work force and pay 44 percent of federal business income taxes.  Further, more than 20 million workers are employed by pass-through businesses with more than 100 employees.