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News & Press: Arizona Business News Updates

A Summary of Small Business, the White House, Congress and the Fiscal Cliff

Wednesday, December 05, 2012   (0 Comments)
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There is a lot going on in the news rights now for the American public to focus on. But one of the primary discussions, especially for small businesses, is the impending fiscal cliff. The "cliff"refers to $110 billion in automatic spending cuts and, as of November 30, $1.6 trillion dollars in new taxes. (See Trending on CNN or Q&A on The Wall Street Journal for more on the Fiscal Cliff.)

Small business owners are far from unanimous on the discussion of tax cuts or increases, but they are fairly unanimous that they do not want tax increases affecting their businesses. Jerry Gorski, a small business owner in Pennsylvania, where the President spoke on Friday, said, "This notion of $250,000 being the top 2% or the wealthy people in America ignores the way most small businesses work in America." He was supported by Rep. Kevin McCarthy (R-CA). McCarthy claims that Obama is trying to convince Americans "that tax rate increases are the only solution to our nation's economic woes," when in fact, they are not. Business for Shared Prosperity and American Sustainable Business Council see things differently. In a letter to the President, they urged him to "oppose any efforts to extend the Bush tax cuts for income over $250,000.” They are currently taking signatures for the same letter to be sent to Congress. They write in part that:

Huge tax cuts for the richest Americans have not trickled down to increase small- and

medium-sized business investment, broad based consumer purchasing power or job

creation. More budget busting tax cuts for the top won’t help Main Street, won’t lead

to business innovation, more hiring, or more people being educated for the jobs we

have and can create.

Last week, Obama met with small business owners, four of whom signed the above letter. Have a look at what one small business owner had to say about the meeting. House Small Business Committee Chairman Sam Graves (R-MO) had previously criticized the White House for ignoring small business owners in talks regarding the fiscal cliff. The majority of criticism at this point, though, is over a lack Congressional cooperation.

At the moment, Democrats are in favor of tax increases for those making $250,000 a year, with tax breaks for the middle class. Republicans, while in agreement regarding tax breaks for the middle class, do not want to see tax increases for the wealthy; instead, it has been suggested that a limit on deductions and credit be put in place. The GOP argues that many small businesses file taxes on an individual return, so it would increase the rates they pay. In addition, employers making over $250,000 are "job creators”. The President claimed that "97 percent of small businesses fall under the $250,000 threshold", making the GOP argument invalid. (The Washington Wire on the Wall Street Journal website posted this article recently on why Obama is pushing for higher tax rates, rather than deduction limits. It is worth a look.)

But this bickering is two sided. As Jim Kessler, senior VP at Third Way was quoted as saying "we're in a political environment, and there's just a lot of different ways to skin this cat." It is estimated that going off the fiscal cliff could throw the economy into a double-dip recession, reducing its size by an annual rate of 4% in the first quarter of 2013. On the other hand, punting on the fiscal cliff without accompanying debt reduction could contribute to an ever-growing mountain of debt and would likely lead to a credit downgrade from multiple rating agencies (from: Fix the Debt; Congressional Meeting, December 2012).

ASBA is currently pushing for big and bipartisan reform – not one agenda versus another. Jerry Bustamante of ASBA’s Southern Arizona office had this to say: "We expect our Congress to make a compromise.” Otherwise, it "could very easily pull us back into another recession.” With small businesses finally seeing some momentum after the last recession, this could be devastating. Right now, there will be consequences either way, but Bustamante says it’s about which consequences will hurt the least. Presidential aides tweeting the President’s speech in Hatfield, PA on Friday quoted Obama as saying, "Make your voice heard over the next few days. Remind members of Congress to not get bogged down in a bunch of partisan bickering… The sooner congress gets this done, the sooner our economy will get a boost.” Regardless of political agendas or loyalty, these are sentiments that need to reach Congress. This is not about agendas or political identity, but what is best for the American economy.

Whatever happens come January 1, "the most important thing is the confidence of business owners,” Bustamante reminds small businesses. When business owners are confident, they hire more, buy more, and ultimately improve the confidence of the consumer, which means the business owner will sell more.

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