As every business leader knows, tax policy plays an enormous role in our economic vitality.  Individuals and families feel the effects of tax policy in every paycheck.  And small businesses, which generate 70% of new jobs in this country, are especially sensitive to tax burdens and uncertainty in tax planning.  That is why President Bush invited business leaders to the White House today to discuss tax policy with a blue chip panel of economists and to press Congress to avoid causing the largest tax increase in American history.

The panel included Dr. Larry Lindsey, former Director of the National Economic Council and Assistant to the President on Economic Policy; Dr. Bob Carroll, former Deputy Assistant Secretary (Tax Analysis) in the Office of Tax Policy at the Department of the Treasury;  Dr. John Rutledge, Chairman of Rutledge Capital; and Dr. Martin Regalia, Vice President for Economic and Tax policy and Chief Economist at the U.S. Chamber of Commerce.  While each participant raised different points regarding the tax cuts, all were strongly supportive of the effects and approach of the 2001 and 2003 tax cuts.

Dr. Lindsey reviewed the historical case for the tax cuts.  Noting former Chairman of the Federal Reserve Alan Greenspan’s comment that the 1929 stock market crash didn’t cause the Great Depression, but the reactions by the Government in 1930 and 1931 (including significant tax increases and increased barriers to trade) caused the panic to spread from Wall Street to Main Street.  In enacting the 2001 and 2003 tax cuts, the government was able to provide additional tools to combat the crisis.

Dr. Rutledge connected the small business beneficiaries of the tax cuts with the global competition for capital that allows our economy to thrive.  Noting that even the Chinese government does not have a death tax or a capital gains tax, he observed that not only is this global competition for capital very real but that corporate managers make decisions based on tax policy because it affects their businesses’ day-to-day operations.

Dr. Regalia and Dr. Carroll followed up with a dizzying review of the effects of the tax increases would be the opposite of the tax cuts: that is, businesses would suffer, families would get to keep less of their hard-earned money, and the damaging distortions would return to tax policy.  Finally, all of the panelists noted that the tax cuts have brought us to a place where the richest Americans are paying the vast share of the tax burden, more than ever before.  The top 1% of taxpayers in this country now pay 39% of taxes, up from 17%.  Before the President spoke, Dr. Lindsey reviewed the four pressures that are already conspiring against real tax reform: bracket creep, the 2010 Congressional tax increase, the AMT, and other attempts by Congress to raise taxes.

The President then joined us to reiterate his administration’s main points on taxes:

"The best way to deal with economic uncertainty is to let people have more of their own money, because we believe that the economy benefits when there's more money in circulation, in the hands of the people who actually earned it."

He went on to state that his administration had acted, and it was now up to Congress not to punish the American people.  He pointed to the 52 months of uninterrupted job growth, the longest in history.  And he noted that a family of four with income of $50,000 will face an increase of $2,155 in taxes. In total, 43 million families with children are facing an average tax increase of $2,323. And he noted that his administration’s position was that individuals and families know better than Congress how to spend that money, especially in tough economic times. 

Many small business owners and families across the country agree.  Just wait until we get the bill.

Brett Coffee is General Counsel of Computer Systems Center Incorporated, headquartered in Springfield, VA, and attended the meeting with the President at the White House.  He is a member of the U.S. Chamber’s Corporate Leadership Advisory Council, and a member of the Fairfax County Small Business Commission.