Jobs and Taxes: The Obama and Romney Plans
Today’s unemployment numbers from the Bureau of Labor Statistics were a mixed-bag including some statistical anomalies that spawned the 7.8% rate published this morning. The Wall Street Journal sums up the circumstances well in Unemployment Rate Falls to 7.8%, noting in the last paragraph:
A broader measure of unemployment – which includes job seekers as well as those in part-time jobs held steady at 14.7% in September.
The bottom line is job growth continues at an anemic pace and actual BLS rates since January 2010 have come nowhere near what the Obama administration projected with and without their stimulus package.
The chart below shows the BLS Actual rates and the rates projected in January 2009 by Obama.
Clearly neither projection from Christina Romer and Obama’s Council of Economic Advisers have even come close to reality, with deltas of more than 2% in both scenarios. That’s greater than a 25% margin of error but it is also about what has, or more accurately has not, happened in the past.
Looking forward, which is what voters care about especially those that are jobless or underemployed, and evaluating the Obama and Romney jobs and tax plans is more relevant today. The differing tax plans are vital because they have direct impact on small business owners and it is small businesses that create the vast majority of new jobs.
President Obama’s tax plan is focused on the elimination of the so-called Bush tax cuts effective January 2013 for all families making more than $250,000. While politically compelling as a sound bite, the truth is nothing could be more devastating to the middle class, and the reason is quite simple.
Small businesses that actually create jobs and employ people, not one-person sole proprietorships, are mostly taxed via income pass-through to the business owners. According to a study performed by top accounting firm Ernst & Young, commissioned by the National Federation of Independent Business, and taking into account the new 3.8% tax created by Obamacare, these small business owners would see their effective tax rate escalate from 35% to nearly 45%.
This double-whammy supported by President Obama would simply be devastating to small business owners who will be forced to slow, even stop, the hiring of new employees. Worse yet, given the poor economic climate and uncertain future that still exists, they will in all likelihood have to reduce staff and eliminate jobs to cover their new tax burden.
Even the Washington Post recognized the importance of maintaining a manageable level of taxation on small business owners who earn more than $250,000 in a July 2012 article.
The other issue at hand is how many employees work for businesses that would see taxes rise under the president’s proposal. Earlier this week, Business Insider reported that small business families that earn more than $250,000 per year employ 93 percent of the small business workforce, according to analysis of a report published by the Federal Reserve.
The net effect on the middle-class can be summed up by further findings of the aforementioned study that the tax policies supported by Obama and the new taxation established by Obamacare could result in the loss of 710,000 jobs. Not only does Obama’s plan not stimulate job growth for middle-class Americans it actually could add nearly a quarter-million Americans to the unemployment rolls.
Governor Romney has a different approach founded in his concise understanding of what is takes to build a small business that will create jobs, establish economic certainty so business owners can confidently plan for the future and provide opportunities for those middle-class Americans who simply want nothing more than a chance to provide for themselves.
By reducing the net tax burden on small business owners and effecting policies that stimulate business revenues the Romney plan will create an environment of increased new jobs, rising median household income and even greater tax revenue as new job holders are added to the roster of income taxpayers.
For those Americans who embrace personal accountability and responsibility, simply want a chance to rid themselves of government dependency and earn their own way to a better life, the Romney plan affords them exactly what they seek.
The question for all Americans, and particularly those in the middle-class, is do you want the prospect of a higher-paying job or just a sound bite?
If you’re looking for a genuine opportunity to create a better life for you and your family then you want the Romney plan of action not the obfuscation and fallaciousness of the Obama plan. It’s your choice to make on Election Day, choose wisely.