People know that raising taxes in a recession is a bad idea.  Even Barack Obama acknowledged that, in 2009:

http://www.youtube.com/watch?v=8glbYVk3WSo

But why is it a bad idea to hike taxes in a recession, especially on people with capital at work in the economy?  Meet Arnie Kaufman, an Ohio small businessman who runs his pipe manufacturing business as an S-corporation, and whose business will get hammered by Obama’s proposed tax hike.  Kaufman explains that businesses can’t print their own money, and that capital seized by the government is capital that won’t be put to use in expanding the business.  It’s either expansion or taxes, as Kaufman explains:

Eh, what’s he complaining about?  It’s not like he and his father built that business.

The office of the House Majority Whip, Rep. Kevin McCarthy, put this video out this morning, along with this press release:

Founded in 1958 by Arnie’s father Martin Kaufman, Woodhill is one of 940,000 family owned and operated small businesses that would be hit with higher taxes under the President’s proposed plan, according to the National Federation of Independent Business.

“It’s a snowball effect.  If the taxpayer doesn’t have the money in his pocket he’s not going to spend it and that dampens sales,” Kaufman continued.

A recent report published by Ernst and Young, confirms the far-reaching devastation that the President’s plan would have on the economy: 710,000 fewer jobs and economic output reduced by 1.3% in 2013.  The report continues on to conclude: “Specifically, this report finds that the higher rates will have significant adverse economic effects in the long-run: lowering output, employment, investment, the capital stock and real after-tax wages when the resulting revenue is used to finance additional government spending” (Executive Summary, Page i).

“With the economy already at a near stand still, the President’s proposed tax hike on American small businesses comes at the work possible time for job creators,” Majority Whip McCarthy said.  “Independent reports confirm that raising taxes on more than 900,000 small businesses threatens 710,000 jobs and would reduce economic output by 1.3%.  It just doesn’t make any sense to punish American families and small businesses already struggling to make ends meet in this tough economy.”

BY THE NUMBERS: Looming Tax Hikes and the Obama Economy

• $2,679 – Average Ohioan’s tax increase per tax return if the Obama tax hike goes into effect
• $2,183 – Tax increase on a family of four earning $50k per year if the Obama tax hike goes into effect
• 41 – Record number of straight months with unemployment at or above 8%
• 39.9 – Average number of weeks that it takes to find a job
• 23.4 million – Americans unemployed, underemployed or have given up looking for work

On July 27, Majority Whip Kevin McCarthy will lead House Republicans in Stop the Tax Hike Day – a day of district focused events drawing greater attention to the fact that the President’s tax hike plan would put the brakes on what is already anemic economic and jobs growth.

Before the August recess, House Republicans plan to vote on extending all the current tax rates for one year to ensure greater economic certainty for hardworking American families and small businesses during this tough economic time.

One year doesn’t bring a lot of certainty, of course, but there is little hope that the Democrats in the Senate or Obama himself will take 2009 Obama’s own advice, even as the economy slips toward recession.  In 2010, a Congress controlled completely by Democrats joined forces with Obama to fight the election on the issue of economic fairness, and then punted the question two years after getting humiliated in the midterms.  Now they want to fight the same battle and expect a different outcome, but the longer they wait to extend the current tax rates, the more businessmen like Kaufman have to prepare for the possibility theywon’t — and that means Kaufman and other small businessmen won’t put any risk into expansion, which then means that we won’t see any significant job creation for perhaps as long as another year … if then.

That’s why raising taxes in a recession is a bad idea.  Too bad 2012 Obama doesn’t consult a little more closely with 2009 Obama.