Entrepreneurs to Congress: Don’t Hold Middle Class Tax Cuts Hostage to Tax Breaks for the Wealthy

David Chase
California Director of Small Business Majority

The New Year is just around the corner, which means we’re mere weeks away from falling off the so-called fiscal cliff. This impending situation—created by a vast array of tax provisions set to expire Jan. 1, at the same time that across-the-board spending cuts start to kick in—could spell disaster for small businesses and our slowly recovering economy. Unemployment is at its lowest rate in four years, thanks in large part to small businesses. But if lawmakers and the president can’t find a way to avoid plunging over the fiscal cliff, that progress could be reversed—and small business owners and consumers would be hit hard.

The fiscal cliff debate hinges on whether tax cuts for those earning more than $250,000 a year should be allowed to expire, and is arguably the reason we haven’t seen lawmakers settle on a deal yet. Some claim small businesses’ hiring ability will suffer if tax cuts on the wealthiest 2 percent lapse.

But with the majority of entrepreneurs in Small Business Majority’s recent opinion poll saying that tax cuts should expire for high-income earners in light of our budget crisis, we know such claims don’t pass muster. Small business owners do not support holding tax cuts for the middle class hostage to those for the wealthiest 2 percent of Americans.

In small business owners’ eyes, middle class tax cuts are far more important than ones for the wealthiest taxpayers. The crucial role middle class Americans play in the overall success of our economy is plain to see, at least to the nearly 9 in 10 entrepreneurs who are opposed to increasing tax rates for income under $250,000.

However, that doesn’t mean the fiscal cliff in general isn’t extremely concerning to small business owners. Quite the contrary. A number of the tax provisions scheduled to lapse are ones that help entrepreneurs save money, allowing them to grow and hire.

Many of the same tax cuts also put money back into the pockets of middle class consumers, which drives demand for small businesses’ goods and services more than anything else. That’s something that does affect small business hiring decisions. Customers with less disposable income translates into less demand for small businesses’ goods and services, meaning their bottom lines suffer, and with them, their ability to hire.

We can all agree the economy doesn’t need that. And what we especially don’t need is to tumble back into a recession. Yet according to scores of economists, that’s exactly what could happen if the fiscal cliff isn’t resolved. Of course no one likes to raise taxes, but we have a serious budget crisis on our hands. Small business owners understand the gravity of that situation, which is why the majority of them believe expiration of tax cuts for the wealthiest 2 percent should be part of a balanced solution to the problem.

For the good of our economy, lawmakers would do well to focus on a compromise that works for the majority of small business owners and American consumers, not just for the few at the very top. Ninety-seven percent of small business owners are part of the middle class, and 98 percent of consumers are, too. These groups need fiscal certainty right now. Without it, small businesses will lack the confidence they need to invest in hiring, and consumers will be less likely to spend extra cash at the Mom and Pop shop down the street.

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