ObamaCare Will Drive Unemployment Higher

Small businesses that create most of the new jobs in America would be hammered by the House version of ObamaCare, which includes a new 5% surtax on taxpayers with more than $1,000,000 of income.

When combined with state income taxes and the federal Medicare tax, this would drive the top tax burden, for the most successful small businesses to well over 50% in most of the nation.  Here in California it would be 58%.  The only possible result is fewer jobs, at the very moment when unemployment is at its highest rate in almost three decades.

The Democrats claim there will be no real cost in jobs because some 98% of small businesses don’t generate a million dollars in annual income. They contrive this deceptive statistic by herding every taxpayer who completes the IRS forms for income from a business activity into a single category they call “small business.”

What they aren’t disclosing is this category includes millions who don’t employ anyone.  They engage in “side jobs” and part time ventures, like selling t-shirts on Ebay.  They are one-person businesses.  They are self-employed contractors.

Creating Jobs by Reinvesting After-Tax Profits

The businesses that will be hit by the surtax are the larger “small businesses” that DO create jobs, such as construction, or restaurant, or technology  firms.  These businesses create new jobs by  reinvesting profits. Every dollar of increased taxation, is one less dollar available to reinvest in expansion and job creation.

Here are some data – verified facts – from the IRS Statistics of Income Division for 2006, the latest available:

• 74% of taxpayers reporting more than $1,000,000 in income, the taxpayers targeted for bearing much of cost of ObamaCare, were small businesses.

• There were 264,000 small businesses in this income bracket.

This segment of the “small business” category creates nearly all the new jobs in America, year after year.

The Bottom Line

• More small business expansion is funded by reinvesting after-tax profits than by borrowing.  Since banking crisis last summer small businesses have suffered dramatically reduced access to credit.  Therefore, after-tax profits are even more critical if they are to expand and hire more people.

• Since the government has no system to identify and count the jobs that won’t be created as a result of tax increases on small business, the Democrats figure we won’t blame their surtax for continuing unemployment and economic misery.

• Government will be seizing from the private sector some of the resources that empower free people to use their liberty to create prosperity.  These resources will be used to expand government power and reward special interest constituencies with political connections.

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