Yesterday, Barack Obama responded to criticism of his plan to hike taxes on those earning as little as $250,000 a year — a class which includes a large number of small-business owners — by claiming that those entrepreneurs have no greater friend than the current President. He pointed to a number of tax breaks and credits he championed for small businesses, and dismissed the effects of hiking their taxes now:
Now, we can already anticipate — we know what those who are opposed to letting the high-end tax cuts expire will say. They’ll say that we can’t tax “job creators.” And they’ll try to explain how this would be bad for small businesses.
Let me tell you, the folks who create most new jobs in America are America’s small business owners. And I’ve cut taxes for small business owners 18 times since I’ve been in office. (Applause.) I’ve also asked Congress repeatedly to pass new tax cuts for entrepreneurs who hired new workers and raised their workers’ wages.
But here’s the thing that you have to remember. The proposal I make today would extend these tax cuts for 97 percent of all small business owners in America. In other words, 97 percent of small businesses fall under the $250,000 threshold. (Applause.) So this isn’t about taxing job creators, this is about helping job creators.
Apparently, job creators aren’t buying that argument. The latest report from the National Federation of Independent Business shows a drop in optimism to the lowest level in eight months among small-business owners, and the inclination to hire falling even further:
The National Federation of Independent Business’s Small Business Optimism Index fell to 91.4 in June, down 3 points from May, according to data released Tuesday. Economists had predicted a milder fall to 93.
A sub-index that tracks expectations about economic and business conditions over the next six months sank eight percentage points to -10%, after rising three points to -2% in May. (Overall optimism slipped in May, but only slightly.) Another sub-index that tracks plans to hire dropped three percentage points to 3% in June after rising one percentage point in May.
Small businesses said “weak sales” were their most pressing problem and that they weren’t adding a lot of jobs and not planning to in coming months. “After a somewhat promising start, owner optimism has reversed trend solidly,” the NFIB’s chief economist William Dunkelberg said. “The June results were an economic downer.”
The NFIB notes that confidence dropped in nine out of ten categories — with credit being the only upside:
There was no good news in the June survey. The Small Business Optimism Index posted a decline of 3 points, falling to 91.4. This is a clear indication of slow growth. Only one of the ten Index components improved, expected credit conditions. Labor market indicators, spending plans for capital equipment and inventories took a drubbing, accounting for about 40% of the decline. Neither the Supreme Court’s decision on healthcare nor the highway spending bill effects are included in the June data….
The 10 Index questions lost a total of 30 percentage point in net favorable responses. The impact of the SCOTUS decision on health care will show up in the July survey as it occurred late in the month, ditto for the transportation bill which didn’t make much of a news splash. The health care decision was probably not what most owners expected, so “disappointment” over that will be reflected in the July survey responses. With over 20 new taxes ($800 billion) and most of the regulations yet to be written by HHS, the implications for employee costs remain unclear.
Pile onto that a President looking for a tax hike down to the $250K level, and it’s no wonder small businesses are feeling a lot more pessimistic. Given that even Obama acknowledges that the engine of job creation is small business, one might think that a President who needs to start seeing better jobs reports ASAP would try to reduce the fiscal and regulatory burdens that these entrepreneurs face rather than escalate them. Unfortunately, Obama seems more inclined to play class-warfare games than to get job creation back on track — and these small business owners know it.