If Barack Obama gets his way and a $72 billion tax break for businesses comes to an end, he will effectively be biting the hand that feeds America.
Consider only that according to the U.S. Small Business Administration, private businesses in America pay 44 percent of all total private payroll in the country and have generated 64 percent of net new jobs over the past 15 years.
We know how important paychecks and jobs have become in the stagnant growth period after the Great Recession of 2008.
Granted, many companies benefiting from the tax loophole the President wants to end are not small businesses, but small businesses are the ones that can least afford a hit right now, and they are the ones that will be hurt the worst.
Sure, the U.S. has a major debt problem,and a big one at that, totalling more than $46,000 for every citizen including millions who don't earn wages and can't contribute to the federal budget. That's why talks such as the bipartisan efforts going on now in Washington are critical to America's future, since history has shown you can't solve a debt problem with a debt problem, for long anyway.
But ending the so-called LIFO tax break, a last-in-first-out accounting for inventory provision whereby the less expensive inventory remains on hand in the books for calculating taxable income will be a hard blow to businesses already struggling after the recession's big bite.
Small businesses, as President Obama has said, are already under the constraints of unavailable credit after the recession. Obama noted last year himself that the pendulum had swung too far in terms of tightened credit. Since, there's been a lot of talk in Washington about relaxed credit for businesses and many banks suggesting in promotions they are actively lending as well, but reality tells a different story. Conditions may have improved, but only slightly.
Walloping American businesses by taking away the LIFO tax break will be a hefty blow at just the wrong time, considering nearly 10 percent of those who want to work in the U.S. remain unemployed and government officials say the economy is not growing as fast as once thought. Since private businesses are providing the majority of what job growth there is, ending the tax break as Obama wants to do is a big mistake.
We've learned the hard way that when businesses get pinched, hiring gets tight. Already, private businesses have been slow to resume aggressive hiring, fearing the unknown - such as this push by President Obama to end the LIFO tax break.
They never know what's coming around the corner. Give them more. Take away that. Most are just trying to hold on and get through till it's all over. If it ever ends.
But that's what the White House reportedly wants to do, as several people familiar with the bipartisan budget negotiations have confirmed that as one of the options presented by White House officials during seven weeks of negotiations, led by Vice President Joe Biden. The premise held by the White House is that something has got to give, and businesses owners get enough breaks. Republicans are pushing for a multi-million dollar debt-reduction package as part of the looming vote that's needed by Aug. 2 to increase the nation's $14.3 trillion borrowing limit.
Taking money out of the hands of American businesses is not how Republicans want to get the budget reduced, however, creating tension in the bipartisan talks. The White House doesn't want to yield cuts on programs like Medicare. Republicans don't want to take $72 billion dollars away from businesses. The White House, though, claims businesses need to give back.
We're never going to solve our debt problem if we ask only those who are struggling in this economy to bear the burden and let the most fortunate among us off the hook, said Biden, speaking at the Ohio Democratic Party's annual dinner in Columbus late last week. Not only is it unfair to do what they're calling for, but I think it borders on immoral.
Maybe Joe is out of touch, but most business owners I know are completely on the hook.
At issue is whether what appears to be immoral on the surface really is. One can argue in theory that businesses are run by cat cats just getting fatter by such tax loopholes as LIFO. It's true that some big businesses benefit greatly from the provision, but reality also tells a different story since the vast majority of American businesses benefiting from the provision have used those dollars simply to remain in business, and employ Americans so they can pay taxes.
Since the economy has been in a slow growth mode and credit is not readily available as it once was, puling the plug on an existing tax loophole like LIFO that gives a $72 billion benefit to business would effectively be adding a $72 billion tax to businesses. Considering America needs jobs, jobs that benefit all people at all levels of earning, and considering private businesses are the primary source of that hiring, ending LIFO at this juncture seems like a very big mistake.
Cut the budget, but don't cut off America's nose in spite of its debt-ridden face.