Sunday, September 5, 2010

Democrats' Suggested Tax Cuts

I saw the chairman of the DNC, what's-his-face, on some program today talking about tax cuts. He claimed that the Dems want to expire the Bush tax cuts to replace them with new tax cuts to help small businesses. I guess I've been too busy to keep up on things-- the weather is nice, so I just want to play with my kids-- because this is the first I've heard of it.

Anytime I hear that the Dems want to do something that sounds halfway decent, I check it out. Usually (and I would say always, but I'm sure I'd be overlooking something) what they say they are proposing is nothing like what they are proposing.

So, these fantastic tax cuts they want to give to small business are a research-and-development tax credit (R&D) and a payroll tax holiday. The payroll tax holiday means:
Employers get out of paying the (Social Security) tax for the rest of the year for each unemployed worker they hire at a salary under $106,800. To qualify as unemployed under the terms of the bill, the employee must have been out of work for at least 60 days before being hired. If new employees stay at the job for at least 52 weeks, employers can cash in a $1,000 tax credit on their 2011 tax return.
This is not an across-the-board tax cut. And, it will not do what it's supposed to do-- this won't create a single job; no one is going to hire someone just for a tax break-- they are going to hire someone because they need more help and can afford to pay that person's salary. Plus, employers hire the best person for the job-- not someone who meets the requirements set by the Dems.

The R&D tax credit is also not across-the-board-- it's only for companies who develop or improve products or processes. I'd like to know how many small businesses can even claim this tax credit. I read that it's difficult for small companies to get even if they have better support to show the IRS than bigger companies.

By the way, the fine print says they are simply raising other types of taxes to account for their lost revenue.

These tax cuts are a bad joke compared to the Bush tax cuts. If the Bush tax cuts expire, capital gains taxes increase by 33%, and income tax rates will rise to nearly 40%. The taxes on dividends will go up by 164% from 15% to almost 40%. Many small business owners live on dividends because it's difficult to set a salary when you have good months and bad months, so this is a nightmare.

Just by raising the dividend tax the federal government will profit about $200 billion--in other people's money. I can't even wrap my head around why the government thinks it's entitled to steal 40% of a citizen's earned money. How much more money does the government need?

Here's an idea: how about we try some bi-partisanship and do both party's preferred tax cuts?

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