For all their talk of creating jobs, the Administration and Congress has done little for our small businesses – those who are actually in a position to create jobs.  More government spending doesn’t result in more jobs, just look at the so-called stimulus bill that was passed earlier this year.

What we need from our leaders in Washington is less taxes and less regulations so that our small businesses have the resources they need to invest in new jobs and grow their business.  We aren’t seeing any of that coming out of Washington and we probably won’t anytime soon.

• Instead of a payroll tax holiday, why don’t we just reduce or eliminate the payroll tax?
• Why doesn’t Congress and the Administration look at our overall tax structure and look for ways to decrease our taxes instead of imposing new ones to pay for health care or other government programs?
• Let’s do more to accelerate depreciation of costly equipment, especially those used by manufacturing companies? 

It is going to take more than a summit to kick start our economy.  Instead of talking to people “Inside the Beltway,” policy makers would be wise to talk to and listen to those who are actually in a position to create jobs.  If they listen, they might learn a thing or two about job creation.   

Tell me what you think?

• ANTI-family- Does not allow parents to pass their hard work and wealth on to their children
• ANTI-farm- Farms are especially vulnerable because they hold vast amounts of land which are subject to the estate tax as they are passed from generation to generation
• ANTI-small business- Hurts small businesses that don’t enjoy the same tax shelters and benefits as large corporations

Small business owners and family farmers have large investments in infrastructure and many don’t have the large capital assets they need to pay the tax, and many times are forced to sell the business just to meet their financial obligations. 

Our small businesses are struggling.  They are struggling to keep their doors open, their employees paid and access to capital flowing.  They don’t need any more taxes – not now and not when they die.   What do you think?

Unfortunately some of the people that will take the biggest hit are working families and small business owners.

Just a few of the CBO's recommendations:

• Increase the individual income tax rates.
• Eliminate tax subsidies for child care.
• Eliminate or limit eligibility for the child tax credit.
• Require self-employed and employees to pay the same amounts in payroll taxes.

At a time when we should be providing more opportunities for working families, removing the tax credit for child care and raising individual income tax rates is not the answer.

For the first time in our history women now outnumber men in the workforce.   You see it everywhere you look in today's workplace.  It is clear that today's workforce isn't what it used to be – especially when it comes to working families.  In 1950 less than 12 percent of mothers with children under age 6 were in the labor force.  Today, more than 60 percent of them work outside the home.

For decades millions of women have successfully balanced work and family – many because they have to, some because they desire the challenges and rewards of a career outside the home.  In 1955 only 27 percent of mothers in the workforce had kids under the age of 18, today that number is over 70 percent. 

Given the important impact women are having in the workforce, our policies need to encourage, not discourage, women to enter and remain in the workplace.  Removing tax credits for child care is not the answer.  Our policies should focus on giving working families more flexibility and opportunities, not higher taxes, more mandates or new regulations.  

We need more flexible work arrangements.  Working parents are struggling to balance competing demands from care-giving responsibilities and their careers.  Let's offer private sector employees the option to take time off in lieu of overtime pay, a unique perk that government employees have enjoyed for 30 years.    

Working parents, especially women, are often forced to make difficult choices about their careers. Oftentimes this choice comes down to taking a full-time position with benefits and a 9 to 5 straightjacket schedule or taking a more flexible part-time position. For this reason, many primary caregivers go without the benefits provided by full-time positions.

If a parent needs a flexible schedule and comp time is not yet an option, the employee should be able to trade taxable wages for workplace benefits like health or retirement benefits. Our tax code currently makes this difficult.

And, if we get rid of the child care tax credit that is going to make it even more difficult for families to afford child care which will further discourage women from working outside the home.

At the National Center for Policy Analysis we believe strongly in getting our fiscal house in order and balancing the federal budget.  But it should be done by cutting wasteful government spending and not increasing taxes on those who make our economy work.  Our policies need to make it easier for working families and small business owners – the proposals outlined by the CBO do little to achieve that goal.

How do we pay for expanding coverage to over 40 million uninsured people?  The Senate Finance Committee recently released 40 pages of revenue raising options.  They include cuts to providers and new taxes.   

The Finance Committee report says, "Many proposals expected to reduce health spending in the long run may not produce sufficient savings in the short run to finance reform.  Other proposals to generate revenue for health care reform could include taxes that affect lifestyle choices and taxes that generally target loopholes.

Let's look at what congress is thinking:

• Soda pop tax would apply to drinks sweetened with sugar, high-fructose corn syrup or other high-calorie sweeteners. That includes iced tea and noncarbonated drinks such as punch. But diet drinks would escape the tax man. Can you believe this?
• The tax increase on alcoholic drinks would hit beer and wine the hardest. Per ounce of alcohol, hard liquor already faces the highest federal tax rate. The Senate option would raise the current tax rate, and then apply the same rate to all types of alcoholic drinks.
• Health insurance provided by employers isn't taxed RIGHT NOW! Senators are considering several options, including taxing health insurance benefits for individuals making more than $200,000 a year or $400,000 for a couple.
• Potential revenue raisers include doing away with flexible spending accounts, limiting the income tax deduction for out-of-pocket medical costs, and charging upper income seniors more for their Medicare drug plans.

Are you scared yet?  Are you talking to your federal legislators yet?  We better be paying attention.  NOTHING is more important than our families and their health! 

President Bush's 2001 tax act gradually raises the value of estates that are exempt from the tax while simultaneously lowering the estate tax rate until the tax is eliminated in 2010. Prior to the act, estates were taxed up to 55 percent on inherited assets above $1 million, or $2 million for married couples. In 2009 the rate would be 45 percent for assets above $3.5 million, or $7 million for married couples.

Without congressional action, the tax would revert to 2001 levels in 2011, and Bush and his GOP allies in Congress have tried unsuccessfully to make the repeal permanent. Democrats have argued that the tax affects very few people and that repeal would cost the Treasury some $500 billion over the following decade, or double that if interest on the additional national debt is included.

Obama has proposed freezing the tax at the 2009 level. "The estate tax would be effectively repealed for 99.7 percent of estates," according to Obama's campaign Web site. "This policy would cut the number of estates covered by the tax by 84 percent relative to 2000."

The Tax Policy Center estimated in August that Obama's proposal would result in $284 billion in lost revenues over the next decade. It said GOP presidential nominee John McCain's plan to cut the rate to 15 percent with a $5 million exemption would be twice as expensive.

One of the biggest issues is how hard the tax hits farmers and small business people who want to keep their businesses in the family.

The Congressional Budget Office, in a 2005 study, said that in 2000 there were 1,659 farm estates subject to the tax, and, of those, 138 had insufficient liquid assets to pay the liability. The CBO estimated that only 65 farm estates would have been subject to the tax and only 13 would have lacked the ability to pay had the exemption been $3.5 million, which is the 2009 exemption amount that Obama proposes to keep.

Supporters of the tax also argue that farms and family owned businesses get additional breaks to lessen the burden, including the ability to spread out payments over 14 years.

But opponents of the tax say those worried about losing their businesses must shell out large amounts in life insurance, accounting and estate planning fees. "The current estate tax system can deplete the estates of those who have saved for their entire lives, force family businesses to liquidate and lay off workers, and motivate people to make financial decisions for estate tax purposes rather than for business or investment reasons," said the U.S. Chamber of Commerce, which supports permanent repeal.             

Every year I review my estate plan to make sure everything is in order.  It's a somewhat morbid but necessary task. My tax accountant for the past 30 some years says this about the situation, "2010 no tax,  2011 exemption to 1 Million unless congress does something………my look on this is anyone terminal in 2009 with large estate keep on life support till 2010!

What say you?? 

Women make up more than half the national electorate. Women will be watching to see where the two leading presidential candidates stand on issues that effect their earning power, and their families' economic status. Marriage penalties hurt working women and hurt the economy. Existing tax laws, and Obama's "new" plan, favor single-income households and punish dual-income couples. The second earner has little incentive to work because she keeps so little of her earnings.

Both spouses should have the choice to file in whatever method is most economically beneficial; they should be able to file in ways that keep the most money in their pockets.

This matters because women-owned businesses account for 31.8 percent of all privately-held firms in New York, according to the Center for Women's Business Research. The Empire State ranks second among the 50 states in the number of women-owned businesses. These firms generated more than $132 billion in sales, and employed 740,548 people, as of 2006. Small business is the engine of our economy. Why kill the engine?

As for employees, women who work for even modest wages outside the home pay effective tax rates higher than Bill Gates! That doesn't argue for higher taxes on Microsoft's founder, but it demonstrates the complexity of tax systems.

People need a level playing field under tax law, so those who save for retirement, purchase insurance, pay for long-term care and other benefits receive just as much tax relief as those who obtain such benefits at work.

Women and men need not only fairer tax policies, but also flexible benefit systems, work systems that fit child care and elder care, equal treatment for retirement, insurance portability, Social Security taxes that do not raise marginal rates, and no earnings penalty for seniors.

Terry Neese, NCPA Distinguished Fellow

Obama's War on Women, II

"Absolutely outrageous" is how Senator Obama's economic adviser, Jason Furman, described our editorial of Thursday, "Obama's War on Women," about the effect the Democrat's tax plan would have in penalizing highly educated married women who work outside the home. Mr. Furman was asked about it (not by us) in a conference call of the national press corps.

"There is a feature of current law that especially for high-income people, some people get marriage bonuses, some people get marriage penalties. Those same people would continue to get those bonuses or penalties under both the McCain plan or the Obama plan. The Obama plan doesn't add any new people," Mr. Furman said. "What is important, though, is to look at the overall agenda that these two candidates have for working women and what they would do," he said, speaking of, among other things, Mr. Obama's plan to raise the minimum wage.

Mr. Furman and another economics adviser to Mr. Obama, Austan Goolsbee, followed up with a letter to the editor of the Sun, reprinted on page 8. "Your editorial today accusing Barack Obama of creating a new marriage penalty in his tax plan and declaring a 'war on women' was an outrageous distortion," they wrote. "The truth is that under Obama's tax plan not a single new couple would get a marriage penalty because they have high incomes. Not one."

Well, speaking of distortions, we did not write in the editorial that new people would be subject to a marriage penalty under the Obama plan. What is true is that the penalty will become a lot more punitive. An analogy to the 65-mile-an-hour speed limit can help explain the issue. Suppose Mr. Obama announced a plan to punish speeders by confiscating their cars and throwing them in jail rather than simply giving them tickets. And suppose we wrote an editorial criticizing the plan. Then suppose Mr. Obama's transportation advisers then wrote us a letter accusing us of an "outrageous distortion," because under the Obama plan, no new people are subject to penalties for speeding, and because penalties for speeding are already a feature of current law.

It's true Mr. Obama isn't proposing to change the boundaries of the tax brackets, just as our hypothetical Obama speeding crackdown doesn't change the speed limit. But the Obama tax plan does change the marginal rates, so that a married couple that had been paying a 35% rate on their income above about $357,000 a year would be subject to an increased top federal income tax rate of 39.6%. On top of that, as we pointed out last week, Mr. Obama would impose a new payroll tax on those top earners of between 2 and 4 percentage points, bringing their marginal tax rate to as high as 43.6%. Add to that the top New York City income tax rate of 3.648% and the top New York State income tax rate of 6.85%, and the nominal marginal income tax rate mounts to a staggering 54%.

The speed limit analogy is instructive in another way, as well. At least speeding is an activity the government has an arguably legitimate interest in discouraging, because it involves consuming more foreign gasoline, enriching our enemies, and because it can lead to more deaths in car accidents on our highways. In contrast, earning more than $357,000 a year is something that the government should want to encourage. It's a sign of industriousness and prosperity, of having created something of significant value though hard work.

Now, Mr. Furman and Mr. Goolsbee are some of our favorite Democratic economic policy types. We've long admired Mr. Furman for his forthright defense of Wal-Mart, and Mr. Goolsbee caught our eye as the emissary Mr. Obama sent to assure the Canadians that the candidate's anti-Nafta rhetoric in the Ohio primary was just a lot of campaign trail talk, not to be taken seriously. But on this one, all the indignant bluster mustered by Messrs. Furman and Goolsbee can't hide the fact that a rise to 43.6% from 35% would be a 24.6% increase in the federal marginal income tax rate. And, as we predicted last week, the consequence is that a lot of highly educated working women, faced with the prospect of turning over 54% of their income to the government (not to mention the cost of child care), will just stay home.

For Messrs. Furman and Goolsbee to counter this criticism with the news that Mr. Obama favors an increase in the minimum wage is just insulting. Most of the women who are going to be paying Mr. Obama's 54% nominal marginal income tax rate are not minimum wage earners. They are doctors and lawyers and writers and bankers and accountants and teachers and small businesswomen. It used to be the Republicans who were stereotyped as wanting women to stay home with the children. Not that there is anything wrong with such a decision, which may be the best decision for some families. But it is a decision a lot of women would prefer to make on the merits, rather than in the face of a government threatening to seize more than half of their earnings.

To add to the insult, the Obama campaign call convened to address this criticism contained, in addition to Messrs. Furman and Goolsbee, another man, Lawrence Summers. At least the McCain campaign's tax conference call of the day included a woman, Carleton Fiorina. Mr. Summers, after serving as Treasury secretary at the end of the Clinton administration, became famous as the Harvard president who was ousted after idly disparaging women's "intrinsic aptitude" in science and engineering. We defended Mr. Summers at the time. But it is worth noting that in the same discourse that got Mr. Summers in so much trouble back in 2005, he reported on a colleague who had told him that of 22 women in a section of the Harvard Business School class that graduated in 1994, "there were twenty-two women, of whom three are working full time at this point."

On Thursday, Mr. Summers blithely assured questioners on behalf of the Obama campaign, "The idea that a return to the tax policies of the 1990s would harm the economy is supported by neither theory nor evidence nor the longer-term history." Does it not harm the economy to usher 86% of Harvard Business School women graduates out of the full time workforce? Does the Obama campaign really think these women are going to be lured back into the workforce by an increase in the minimum wage?

Don't just take our word for it. Peter Orszag is a Ph.D. economist who is the director of the Congressional Budget Office for the current Democratic-controlled Congress and who served as an economic aide to President Clinton. He wrote in a 2001 paper for the liberal Center on Budget and Policy Priorities, "Numerous economic studies have found that lower tax rates do little to encourage work effort among working-aged males – who already are generally working full time – but do provide some additional incentives for women to enter the labor force." If the Obama camp really understood these incentives, it would be talking about lowering marginal tax rates rather than increasing them. With all due respect to Messrs. Summers, Furman, and Goolsbee, Mr. Obama may want look for advice elsewhere.