At The American Stan Veuger writes Obama’s Big Tax Increases on Small Business.

Excerpts:

President Obama has touted his treatment of small businesses repeatedly over the course of the campaign, and last week’s presidential debate was no exception. “I also lowered taxes for small businesses 18 times. And what I want to do is continue the tax rate — the tax cuts that we put into place for small businesses and families,” argued Obama.

While in the strictest sense it is true that the president has lowered taxes for small businesses 18 times, this does not accurately reflect the totality of his small-business tax policy. In fact, on net, the president’s policy proposals will inflict significant harm on small businesses.

First, to the 18 times. Note how the president corrected himself after he accidentally mentioned tax rates. There is a clear reason for this: his “tax cuts” for small businesses have not been across-the-board marginal rate cuts, but instead have been targeted and often temporary deductions, tax credits, and subsidies. (It’s easier to cut taxes 18 times if your cuts are temporary.)

Of the 18, only 10 of them are still in place. Half of these 10 are extensions of programs first enacted by President George W. Bush or even before his time in office. (I assume that these are not “the failed policies of the past” to which the president does not want to return.)

So we started with 18, but now we’re down to 5. Estimates from the Congressional Budget Office, the Joint Committee on Taxation, and the U.S. Treasury Department suggest that the sum total of the tax breaks created by the remaining five will amount to at most $3 billion in 2013.

Nope. In addition to keeping the $3 billion in cuts, the president has proposed and even enacted several tax increases for 2013 that would apply to small businesses that are organized as pass-through entities, firms that have their income taxed at the individual, not the corporate level — for example, partnerships and S corporations. (The overwhelming majority of small businesses are organized as pass-through entities.)

Specifically, the president has proposed the expiration of the Bush tax cuts, which will increase taxes by 4.6 percentage points on incomes above $250,000. Obama will increase taxes by a further 3.8 percentage points on these same incomes through the Unearned Income Medicare Contribution. (Is it unearned because “you didn’t build that”?) And we shouldn’t forget the reimplementation of the Pease provision, also scheduled for January 1, which adds an additional 1 percentage point to the effective tax rate for these businesses.

According to a report by the Joint Committee on Taxation, approximately $690 billion of business income will be reported on tax returns subject to the marginal rate increases. A very conservative estimate based on IRS figures of the distribution of partnership and S-Corp income shows that only about 80 percent of this income is actually subject to the highest marginal rate, which puts the size of the tax hike at around 9.4 percent of 80 percent of $690 billion, or about $52 billion.

That $52 billion is much more than the sum of all tax breaks, which was about $3 billion. So it’s quite a stretch for the president to argue that he wants to cut taxes for small businesses. In fact, he wants to raise taxes on small businesses by an order of magnitude.

What does this mean for the affected firms? On average, an additional tax bill of $48,000. That’s a stunning increase.

HKO

On the surface 18 tax ‘lowerings’ under this administration just sounds preposterous. And of course it is.

Tax rates and programs do not include all of the true costs businesses encounter from the government. This is why I refer to “friction costs”. Regulations, mandates, new bank rules under Dodd Frank, uncertainty, and poor monetary policy all affect business decisions. When you add these to the actual tax increases coming the impact is in fact disastrous.

Short term programs do not improve business climates. We need a long term policy. Short term thinking only make the climate worse. Logically, if a short term program is going to stimulate anything then when it expires it will destimulate.

The more they talk about facts and details the more they use them to obscure their real policies. It is the principles that matter. Short term incentives that are part of a long term policy of government control, higher taxes for producers, larger deficits, and crippling bureaucracy and regulation is not good for business. Details in isolation will not make bad policy and bad governing principles good.

As I noted in The Biggest Lie it is the denial of the basic truths that are doing the most damage.

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