Today President Obama plans to give more details to his plan to allow small businesses to write off investment expenses. In the wake of an announcement of a $50 billion “infrastructure bank” for public works improvements the President is touting this addition as a means to build growth. While as a conservative I’m always in favor of lower taxes this plan has made me stop and think. Let me share with you my thoughts on this newest version of “economic stimulus.”
First, I thought we were told tax cuts didn’t work? The reason we needed to go into debt up to our eyeballs was to prevent the collapse of the economy, sadly that’s according to politicians on both sides (I know it’s pathetic Republicans bought this lie). But, the truth still remains since President Obama got into the Senate, more specifically since he started campaigning, he has seen government as the mechanism for growth. Keynesian policies have thrived in Washington and are fully supported by leading Democrats. Any time Republicans, like John Boehner, bring up tax cuts we are told they are the party of the past. The media is quick to assert the tax cuts only help the rich and will not help the economy; in fact, cuts will only increase the deficit or so the experts say.
The fact that the left, who always assert tax cuts should provide more help to the poor, is now pushing for a tax incentive, which nearly exclusively affects “rich people,” also raises questions. 75% of small business owners fall into the highest tax brackets, the bracket of the “rich.” Does that mean this is a tax cut for the rich? Oh the outrage! If cutting taxes on the rich led to the crisis, why are we doing it again? Why is the administration ready “to repeat the policies of the past”? Think about that for a second. Do tax breaks on the rich help our economy or hurt it? It can’t be both. I think the administration is desperate and willing to make concessions, even if the actions are incongruent with its ideology.
Since the left is always standing against lowering taxes what could be their motive for this change of heart? This plan is coming out very close to the November elections. It’s unlikely the plan will pass before November; however, if President Obama lays out a plan quickly, it will be debated in Congress and will provide something desperate incumbents can take back to their constituents. Democrats are battling for their political lives; in a recent poll Republicans lead the generic ballot 52-47. Pushing a plan calling for tax cuts is an attempt to appear to move to the center. The last 18 months of fiscal irresponsibility and looming tax increases, as the Bush Tax Cuts sunset, leaves embattled Democrats little to stand on this election season. The losses in the House will be devastating and the Senate will not fare much better. I think this push for tax write-offs, not cutting or lowering rates, is a ploy to appear more centrists and is simply an attempt to prevent massive losses in November.
The Democrats also see this as a means to paint GOP into a corner. The GOP is not the party of no, they have ideas and those revolve around tax cuts, this bill puts them in a precarious position. If the Republicans fight, what they know to be a flawed bill, they appear to be the party against tax cuts for small business and the little guy. If the bill passes and fails, like it surly will, the Republicans look bad and tax cuts seem flawed. Republicans also don’t want to give Democrats an easy victory this close to November. All-in-all this is a tactic to reduce losses in the upcoming elections. Do not let this political game fool you; tax cuts work–they are the best means to improve the economy and conservatives are best for business and best for the country.
Finally, don’t be fooled when these “tax cuts” don’t work. It doesn’t mean tax cuts don’t work or that reducing the tax burden on “rich” people won’t help the economy. Let me explain why. First, small business still see the world as uncertain. No one is fully sure how they will be impacted by the healthcare bill, though most think it’ll be negative. Cap and Trade still looms on the horizon, brining more taxes and uncertainty. Unemployment is still high, meaning companies relying on selling things (like most companies) know their consumers are holding onto their cash. This uncertainty makes investing in expansion or R&D very risky. Besides, these rules will just be temporary so there’s little incentive to do things like hire an employee where the cost is continual. Why buy more or expend money if there’s a chance for another collapse or at least dip? Second, there is a certain tax increase coming. While the economy might be shaky, Democrats have made it abundantly clear they don’t plan on extending the Bush tax cuts. This raises taxes on everyone, making it less likely people will spend money, meaning companies can’t recoup expenses. Third, these are write-offs and will function essentially like a credit. There will be little, if any, net impact on the economy. Companies planning to spend, will do so now, those that had no plans still won’t. After the expiration of the “cuts” companies will slow improvements and expansions until more certainty exists. Fourth, these types of write-offs don’t necessarily translate into hiring workers. It may mean buying a new building or buying equipment to improve efficiency (that could actually result in lost jobs—think a factory). Finally, not all businesses have money available to spend right now. Most small businesses are owned by an individual. If the “corporation” doesn’t have the money to spend these tax incentives will not help, the money just isn’t there. Besides, even if the money could be borrowed, the uncertainty still exists and there’s too many variables to worry about. Beyond the lack of money, the red tape required to get the write-off will be long and in the end the savings small (think lawyers, accountants and bureaucrats). Many owners will just not be able to take advantage of these “cuts.”
In the end, this is a ploy to help the Democrats’ chances in the November elections. Even if this bill passes through Congress it will have little or no impact on the economy. I support true tax cuts, but this is a hoax designed for re-election. When this “tax cut” has no impact, don’t listen to the spin doctors trying to tell you tax cuts don’t work and won’t boost the economy. Freeing business to operate, people to spend money and employees to work uninhibited will fix the economy. A true tax cut gets government out of our lives and frees people to make their own choices; that is when the economy thrives. Each time the rate was lowered last century the economy grew (JFK, Regan, Bush). It works, give a true free-market a chance and don’t fall for this political hoax