The Administration inaccurately claims that these tax increases would only affect 3% of small business owners, but this number does not account for the number of small business owners who report small business income on their personal income tax returns. About 35% of all business taxes are paid in this manner.

Small businesses are especially important now given the economic downturn, because they were the ones who jumpstarted the recovery in the 2001 recession, generating 100% of all new jobs in that time. Small business owners are our biggest jobs makers, responsible for creating 70% of net new jobs over the past 10 years. Additionally, they represent 99.7% of all employer firms, employ half of all private sector employees, and contribute more than half of nonfarm private gross domestic product (GDP).

Health care budget

2010 Proposal: $821.7 billion
Increase/Decrease from 2009: +7.5% increase

Main areas of spending:

• $453 billion for Medicare
• $290 billion for Medicaid
• $78.7 billion for discretionary spending, including::
• Funding to increase health care providers in certain areas
• Funding to detect, prevents and treat HIV/AIDs domestically
• $6 billion for cancer research at the National Institutes of Health (NIH)
• $211 million for research on Autism Spectrum Disorder
• $1.1 billion for the President's Zero to Five plan which provides health care to children in need
• $1 billion to expand the Head Start program
• $2 billion to expand the Child Care and Development Block Grant
• $3.2 billion to help low-income families heat and cool their homes
• $4 billion to improve healthcare for Native American and Alaskan Natives
• $73 million to improve access to and quality of health care in rural areas

The increases in health spending would be funded in three primary ways:

• Stricter limits on the itemized deductions that "wealthier" people can take on their tax returns.
• Tax increases on individuals making $200K and couples making $250K a year while increasing the capital gains and dividends tax from 15% to 20%.

The additional funds raised by these measures will comprise $318 billion of the health reform "reserve fund" of $634 billion, which Obama says will act as a down payment on his goal to provide universal health care. The rest of the reserve fund will be financed by cost-savings in Medicare and Medicaid.

Of course this government reserve fund is a first step in the direction of government-run health care, a proposal that will consolidate major health decision-making in the hands of the federal government. Instead we should improve our system of private insurance by bringing the individual back into the decision-making with individually-owned health plans, not government programs. Doing so would increase the accessibility and affordability of health care for American families without ceding control of some of our most important health decisions to the federal government.

Environment

Environmental Protection Agency (EPA)
Total spending: $10.5 billion
Increase/Decrease from 2009: +34.6 % increase

Main areas of spending:

• $3.9 billion to fund 1,700 clean-water programs
• $19 million to build a greenhouse-gas emission inventory, the first step in establishing a cap-and-trade system
• $475 million to a Great Lakes restoration program to control pollution and attack damaging invasive species in the area

The money in this budget triples (to $3.9 billion) the previous year's funding going to states, local governments and tribes to improve sewage treatment and drinking water systems, despite already having received a separate $7.2 billion to these programs in the stimulus package.

The Cap-and-Trade system, which would be implemented in 2012, sells permits to businesses allowing them to exceed caps on pollution. This system amounts to an effective tax on energy consumption, and the increased cost would be passed on to anyone who uses electricity, drives a car, or relies on energy in any way.  Obama would ideally auction off these credits but has recently acknowledged a potential need to give some away to energy companies. A system like this, in which permits are auctioned off and/or given away, lacks transparency and would require a massively bureaucratic framework that is vulnerable to political influence.

The EPA budget actually acknowledges expected increases in energy prices for American families and provides a refundable tax credit of up to $400 for working individuals and $800 for working families to offset the higher energy prices.

Department of Energy
2010 proposal: $26.3 billion
Increase/Decrease from 2009: -0.4% decrease

Main areas of spending:

• Increased funding for scientific research at the Office of Science, despite having already received $1.6 billion in the stimulus
• Loan guarantees on projects to bring solar, wind, geothermal and other renewable energy sources to market
• Additional funding to the Office of Electricity Delivery and Energy Reliability to modernize the nations' electric grid
• Increased funding for low-carbon coal technologies
• Increased funding for helping low-income families improve the energy efficiency of their homes

Labor

2010 proposal: $13.3 billion
Increase/Decrease from 2009: +4.7% increase

Main areas of spending:

• Increased funding for Unemployment Insurance (UI) benefits
• Expansion of the Saver's Tax Credit which would offer a 50% government match on the first $1,000 saved by families making up to $65K
• Require employers offering 401Ks and pension plans to automatically enroll employees
• Increased funding to government programs that enforce worker protection laws

The Administration's budget for the Labor Department includes an increase in funding to Occupational Safety and Health Administration (OSHA) to better enforce workplace health and safety conditions as well as an expansion in the government program of Unemployment Insurance. Additionally, employers would be required to automatically enroll their employees in retirement plans (assuming a plan is offered). Employees would have to opt out of these types of plans.

While encouraging retirement savings through individually-owned plans like 401ks and IRAs can be a good thing, the government should not dictate to employers how to go about doing so, as would happen with an auto-enrollment requirement.  The idea of auto-enrollment grew out of employers' ability to experiment to find innovative ways to get their employees to save; any attempts to restrict employers' choices could have harmful, unintended consequences down the road.

Defense

2010 proposal: $533.7 billion
Increase/Decrease from 2009: +4% increase
War spending (addition to annual budget): $130 billion for 2010, $75.5 billion for 2009

Main areas of spending:

• $130 billion in war spending for 2010; $75.5 million for the rest of 2009
• Increase in soldiers pay to keep pace with private sector
• Expansion of military retired pay and Veterans Disability Compensation to retirees receiving disability retired pay
• Expansion on integrated mental health professionals with deployed units
• Improved medical care and housing for wounded, ill and injured service-members
• Quality of life improvements for soldiers, sailors, airmen and marines include modernization of barracks

Obama's defense budget has signaled a general decline in defense spending over the next several years, placing baseline defense spending at 3.7% of GDP, down from just over 4% for 2009.

More interestingly, Obama has claimed that there will be $1.6 trillion saved in the budget over the next 10 years by reducing troops and the costs of war, but written into the budget is the assumption that war spending would continue at the same level over the next decade. Because of this, the claim to $1.6 trillion is deceptive considering that the Administration plans to withdraw most troops sometime in the next 19 months.

Housing and Urban Development

2010 proposal: $47.5 billion
Increase/Decrease from 2009: +18.5% increase

Main areas of spending:

• $4.5 billion for Community Development Block Grants to bring businesses into communities
• $1.4 billion for the HOPE for Homeowners program (up from $225 million) for mortgage refinancing
• $1 billion to start a trust fund to rehabilitate housing for the poorest families
• An unspecified increase in funding for rental-housing vouchers for poor and moderate-income families

One of the problems with programs like these is that once they are enacted, they are hard to take away, no matter how little they actually work. Take the HOPE for Homeowners program, which was signed into legislation in the summer of 2008, which provided government guarantees for refinanced mortgages. The program estimated that it would assist 400,000 individuals struggling to pay their mortgages, but as of February 2009, only 451 applications had been received and just 25 of those were eventually finalized. Instead of scrapping a clearly non-functional program, Obama is instead dropping $1.4 billion more into it.

Education

2010 proposal: $46.7 billion
Increase/Decrease from 2009: +12.8% increase

Main areas of spending:

• $2.5 billion for a fund that rewards states with innovative strategies that improve the college graduation rates for low-income students
• Increase Pell Grant loans by $500 to a total $5550 per student every year, while guaranteeing access for all applicants, turning it into an entitlement program
• Eliminate the system of private student loans guaranteed by the government and replace it with a direct student loan program run by the Education Department

Commerce

2010 proposal: $13.8 billion
Change from 2009 estimate: +48% increase

Main areas of spending:

• $7 billion to conduct the Census, which will include hiring approximately half a million people
• $1.3 billion for weather forecasting and global climate monitoring
• $50 million to create new businesses in distressed areas
• $70 million to a technology innovation program

Mr. Chairman and members of the Committee, I am Terry Neese, Distinguished Fellow at the National Center for Policy Analysis, a nonprofit, nonpartisan public policy research organization dedicated to developing and promoting private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector.  I welcome the opportunity to share my views in writing regarding HR 3963. 

This is a critical time in our nation. It's only January, and people are already tired of the 2008 presidential campaign. In fact, only 20% of voters bothered to vote in the Michigan primary.

What can we do about it? Well, I am convinced that one person joining together with the voice of many can make a difference.

As Distinguished Fellow at the National Center for Policy Analysis, I am focusing  on real kitchen table issues making an impact on women, families, businesses and entrepreneurs. We are focused on the economic impact of public policies on the lives of women, businesses and entrepreneurs. That's our agenda, simply put.

I can't cover all of our concerns in this testimony; but I can raise major concerns and ask for your help to make life better.

The time has come to examine why our government continues to "leave women behind." It is time to examine how a variety of our institutions came about in an age when most women did not work outside the home, and how they have not kept pace with our modern world.

Most of these laws I am talking about were written in the 1930's. Women rarely worked outside the home. It merely describes the lives of most of us here to say that the single most important economic and sociological change in our society in the past 60 years has been the entry of women into the labor market:

• Between 1950 and 2000 the labor force participation rate of women between 25 and 55 years of age more than doubled; today, more than 75 percent of these women are in the labor market.
• Less than 12 percent of mothers with children under 6 were in the labor force in 1950; today, more than 60 percent are working.
• These changes have had a major impact on family life. For example:
• In 1940, two-thirds of all working households were one wage-earner and a stay-at-home spouse; today about one in five households fit that pattern.
• Dual-earner families – with both spouses in the labor market – now constitute almost two-thirds of all married couples.

Despite these remarkable changes, public policy and major institutions have never kept pace.

Tax law, labor law and a host of other institutions are still designed from top-to-bottom for an Ozzie and Harriet lifestyle. I don't say this to marginalize the life many of our grandparents and parents lived. It's merely a direct observation. Our major economic institutions – including tax law, labor law, and employee benefits law, as well as Social Security, and retirement policies – reward families with a full-time worker and a stay-at-home spouse and by comparison punish every other arrangement.

Women who work for modest wages outside the home pay effective tax rates higher than Bill Gates! Consider that hypothetical case of Ozzie and Harriet, a middle-income couple.

• Harriet is taxed at Ozzie's income tax rate when she enters the labor market, even if she only earns the minimum wage.
• And even if Ozzie has maxed out on his Social Security payroll taxes, Harriet must pay Social Security taxes on every dollar she earns (up to the same maximum), and she will get few, if any, extra benefits in return.
• Further, when all taxes and all costs are considered (including the cost of child care and other services she was previously providing as a homemaker), the second earner in a middle-income family can expect to keep only about 35 cents out of each dollar she earns.

The labor market does not provide women with the flexibility they need for the life-style most of us live in the 21^st Century.

Take Katherine for example. She is a divorced mother of two who has held several jobs in her career. Early on, most of her jobs did not provide retirement benefits. Of those that did, she was rarely there long enough to become "vested." Now in her late forties, Katherine is frantically trying to save as much as the law allows, but it's unlikely she will ever be able to save enough to provide true security when she retires.

That is just one of many examples of how our nation's employee benefit system needs to be reformed in order to meet the needs of women in the 21st Century. Consider:

• Women are more likely to work part-time so that they can look after children or elderly family members; therefore, women are less likely to qualify for employer-provided benefits.
• Women move from job to job and in and out of the labor market more frequently than men; therefore, women are more likely to be burdened by employee benefit programs that penalize job switching.

In addition, women raising children or caring for an ailing parent have other reasons to want flexibility in working hours. However, rigid labor laws may deny them the opportunity to attend a child's soccer game or take a parent to the doctor one week and make up the hours the following week. Our old-fashioned labor laws will not allow them to have that flexibility.

Women are not asking for a wave of new government entitlements, we just don't want to be penalized when we exercise our liberties. Women want to be free, under law and in the economy. There's no reason to leave laws or policies in place that impede our economic choices. But the truth is that many changes are needed to bring aging institutions into sync with the way people are living their lives in the 21st century.

At the NCPA, we  intend to be a voice for women, families, small businesses and entrepreneurs. We need your help. We need your leadership. Together, we can make a difference.

Let me pose some questions, then offer just a few suggestions. Tell me, tell us, if there is a better way to approach these challenges facing American women and their families.

• Why can't we have a fairer tax system for two-earner couples? At a minimum, both spouses should be able to file completely separate tax returns, if that helps them in terms of tax liability and economic equity.
• Why can't we have a flexible employee benefit system that makes it easier for dual-earner couples to obtain higher wages rather than unneeded, duplicate benefits, and for part-time workers to accept lower wages in return for more valuable health and retirement benefits?
• Why can't we have flexibility in labor law, making it easier for workers (especially parents with young children and caregivers for elderly parents) to choose alternatives to the traditional 40-hour work week?
• Why can't we have a level playing field under the tax law? People who save for retirement, purchase health insurance, long-term insurance and/or day care should receive just as much tax relief as people who obtain these benefits at work.
• Why can't we have portable health and retirement benefits, so that people are not penalized when they switch jobs?
• Why can't we have a completely new approach to the treatment of spouses under Social Security? Earnings sharing (where payroll tax contributions are divided like community property) could easily be applied to any new system of personal retirement accounts.
• Why can't we have a new approach to the taxation of Social Security benefits? If benefits must be taxed they should be taxed in a way that does not raise marginal tax rates and there should be no earnings penalty for seniors who work.
• Why can't we have the ability of everyone to protect assets by buying long-term care insurance, using Medicaid only for catastrophic costs?

While I'm at this, let me share some points on small business and entrepreneurship, reflections on problems facing all of us, women and men, working in smaller enterprises.

• Why can't small businesses have better access to affordable health insurance? As a small business owner, I want to provide health insurance for my employees. In fact, I want to provide Fortune 500 benefits to my employees. But I am not a Fortune 500 firm. Corporate America and Labor Unions can purchase health insurance across state lines in economy of scale and lower costs. Small business owners can't because they are not allowed.
• Why can't we bring an end to our government's discrimination against small businesses run by women or men?
• Why are small businesses not allowed to have access to affordable health insurance just like labor unions and corporate America?

I do not raise these issues to denounce our nation. I love my country. I can never adequately repay America for the opportunities she has given me. I raise the voice of reason, and for compassion and care for those who work, pay taxes and obey the law.

There are shrill voices in the media every day who talk about discrimination against women. But they never seem to talk about how women have been left behind by our outdated labor laws.

We plan to speak for those who have been left behind. We plan to provide the alternative voice, to amplify the voices of women for economic liberty, opportunity and freedom.

There's a lot of talk about new government programs or benefits to "help" women. But why not let women help themselves? Instead of growing government, with its notorious cookie-cutter approaches, what about simple solutions to empower women and working families to live their economic lives according to their personal needs and preferences?

To distill this again, our suggestions are:

• A fairer tax system for two-earner couples; at a minimum, both spouses should be able to file completely separate tax returns.
• A flexible employee benefit system that makes it easier for dual-earner couples to obtain higher wages rather than unneeded, duplicate benefits, and for part-time workers to accept lower wages in return for more valuable health and retirement benefits.
• Flexibility in labor law, making it easier for workers (especially parents with young children and caregivers for the elderly parents) to choose alternatives to the traditional 40-hour work week.
• A level playing field under tax law, so that people who save for retirement, purchase health insurance, long-term insurance, day care, etc., receive just as much tax relief as people who obtain these benefits at work.
• Portable health and retirement benefits, so that people are not penalized when they switch jobs.
• A completely new approach to the treatment of spouses under Social Security; earnings sharing (where payroll tax contributions are divided like community property) could easily be applied to any new system of personal retirement accounts.
• A new approach to the taxation of Social Security benefits: If benefits must be taxed they should be taxed in a way that does not raise marginal tax rates and there should be no earnings penalty for seniors who work.
• The ability of everyone to protect assets by buying long-term care insurance, using Medicaid only for catastrophic costs.

If it's possible to tie all these concerns together in one tidy package, it seems to me the primary focus should be on tax fairness, flexible benefits, portable benefits, flexible workplaces, and health care for small business.

As we move forward on these issues, we don't want to replace outmoded patriarchal models or assumptions with equally outmoded models or assumptions that big government approaches will make life better for American women.

Women want, and need, to be free.

America needs policies that work for people who work. American women – and all American workers — need flexibility, portability, and security. They deserve no less.

NCPA intends to be a voice for such policies. With your help, the voices of women entrepreneurs — mothers, wives, sisters, daughters, lovers, partners and friends — will reach into the homes of millions, to transform and re-form the policy impediments I've sketched here today.

• Our opinions, our solutions, our voices, need to be heard.
• Let's stay in the business of making a difference for women and their families.
• Let's change the world. Why can't we?

Thank you for the opportunity to submit testimony. I look forward to working with the Committee as this debate continues.