Much of the political posturing over the Bush-era tax cuts focuses on how much money one earns – either below the $250,000 threshold or above it. The tax cut debate gets bogged down about whether the individuals who benefit from the tax cuts are middle-class or ultra-wealthy. What’s missing from this discussion is the fact that 23 million of these individual taxpayers are something else, too: they are business owners. While Congressional leaders – and the White House – debate the merits of who deserves these tax cuts, self-employed business owners are depending on this extension for their businesses’ very survival.
Seventy-eight percent of small businesses are self-employed and they collectively contribute close to a trillion dollars to our economy every year. Contrary to government policy that often regards them as home-based “hobby” businesses, the self-employed have real jobs in fields like finance, real estate, manufacturing and healthcare. They aren’t simply sitting at home in their pajamas and bunny slippers. They support their families and their communities. And they create job opportunities and spur economic growth when they are thriving.
Unfortunately, the current economic climate has made the outlook for many self-employed businesses uncertain. Many if not most are just trying to stay afloat until the economic recovery translates into increased sales and business growth. The smallest challenge – from a new paperwork requirement to a higher health insurance premium – can push a self-employed business from the edge to oblivion.
A higher tax bill come April 15th is no exception. The average self-employed business owner makes about $87,000 per year. By letting the Bush-era tax cuts expire, this average business owner will see his or her tax liability increase by about $2,100. This may be small change to a large corporation, but to a small business $2,100 could represent the cost of purchasing new accounting software, advertising their business online or paying their phone bill. It could also be used to hire extra help during the holidays or pay a health insurance deductible.
Small businesses are used to narrow margins, but the fact is some won’t survive a tax hike. While lower taxes means less in the Treasury, what the economy would gain by curbing the national debt could be negated by lost small business growth and job creation opportunities. Raising the debt ceiling in a period of fiscal uncertainly without doubt requires serious consideration, but so should our policies to support the nation’s current and future entrepreneurs.
Creating a job of your own by choosing to be self-employed is just as important and valuable to the economy as being hired to perform an office or factory job. Self-employment deserves to be supported in the same way policymakers support those segments of the economy that spend millions on lobbying and campaign contributions. In these times of economic uncertainty, pulling the rug out from under them by raising their taxes could be devastating.
While a permanent extension of the Bush tax cuts is preferred, the compromise between President Obama and Congressional leaders ensures that the small business community will remain on the road to recovery. Congress must move forward with policies that will help fuel the engine of economic growth – America's small businesses.
Kristie Arslan is executive director of the National Association for the Self-Employed (www.nase.org) which represents the nation’s 23 million and growing self-employed and micro-businesses.