With job creation still lagging and uncertainty holding back many business investments, the Chamber of Commerce is asking Congress and President Barack Obama to extend all tax relief passed in the last decade, at least temporarily, in order to get the economy moving forward and to spur job growth.
The chamber also chastised the federal government, saying it has lost sight of the importance of creating jobs and embarked on a course of government actions that threaten to make the economy worse.
Without action, American families and millions of small businesses will be hit with the largest tax hike in our history on Jan. 1, Tom Donohue, chamber president and CEO, said July 14 at the group's Job Summit conference in Washington.
At the end of 2010, all the tax cuts passed by former President George W. Bush are set to expire. In addition, the dividend rate is scheduled to triple, capital gains taxes are to increase by 30 percent, and the corporate income tax rate is to increase from 35 percent to 42 percent in the president's proposed budget.
What's more, the estate tax which expired at the end of 2009 is scheduled to be reinstated with a top rate of 55 percent, instead of 45 percent, and all estates of $1 million or more will be subject to the tax instead of only those estates with a value of $3.5 million or more.
We understand that the political battle lines have long been drawn over which of the 2001 and 2003 tax provisions should be extended, Donohue said. But our weak economy cannot sustain such massive tax hikes at this time. We therefore urge Congress and the administration to immediately support at least a temporary extension of all the tax relief passed in the prior decade.
To start or allow additional tax increases to go into effect in the short run is a fool's errand, Donohue said. At least for a short period of time, we need to say, 'Let's get people back to work.' If we don't, we will never be able to deal with the federal deficit.
Donohue said the government's role should be to establish the right conditions so that the private sector can invest, compete and create new products and services. But that is not happening, he said.
Very simply, the congressional majority and the administration took their eyes off the ultimate ball creating the jobs America needs over the next 10 years, Donohue said. Instead of continuing the partnership with the business community that was struck when the economic stimulus bill was passed, they attacked and demonized key industries.
They have embarked on a course of rapid government expansion, major tax increases and suffocating regulations, and their spending policies have made the problem far worse, he said.
No matter how well-intentioned or politically popular a suggested law or regulation might be, the question should always be 'What will be the impact on American jobs?' And we fear this question is often ignored in the halls of our government today.
That scenario, Donohue said, has injected tremendous uncertainty into our economy that makes consumers unwilling to spend and banks, investors and companies unwilling to invest.
That's reflected in the unprecedented amount of cash on hand in business coffers at the end of the first quarter, which chamber chief economist Martin Regalia said stood at $1.8 trillion or about 50 percent higher than usual. That is a measure of the palpable fear among businesses. The economy is out of the recession, but we simply are not growing fast enough to create jobs because of all the uncertainty.
Small businesses can't get the capital they need to grow or they don't want to spend the money they have because many are just struggling to survive, added Donohue.
Large corporations have plenty of cash, but they are sitting on it. They cannot, in good faith to their shareholders, incur the heavy obligation of expanding and adding to payroll at this time.
The Chamber of Commerce is not alone in its concern. In an online survey of 300 small-business owners and 800 registered voters, conducted for the chamber by Lombardo Consulting Group, 57 percent of small-business owners surveyed and 62 percent of registered voters surveyed do not believe the federal government has a clear plan for creating jobs.
Sixty percent of registered voters responding to the survey and 68 percent of the small business owners also said the administration's new rules and regulations are expanding the size of government far too much, resulting in a weaker economy and fewer jobs.
The administration and Congress must recognize that the regulatory burden and uncertainty they have imposed on job creators has reached a tipping point, said Donohue. Unless the cumulative effect of existing regulations, new mandates and proposed regulations is seriously addressed, the American economy will stagnate and we will lose our competitive agenda.
The chamber also called for the passage of pending negotiated free-trade agreements, development of more free-trade agreements to open markets for U.S. exports, and controls on government spending and growth. Also, it is seeking a more competitive and rational tax structure, modernization of the U.S. infrastructure including roads, ports, inland waterways, power-generation facilities, and more broadband communications.
If we continue on our current course, Donohue said. We may lose even more jobs and we could end up in a double-dip recession or worse.
Tom Bell, board chairman of the chamber, agreed. These last 18 months have been unlike anything I've ever witnessed with this attack on our free-enterprise system, said Bell, who is also chairman of SecurAmerica, an Atlanta-based national commercial security company, and vice chairman of Goddard Investment Group, a real estate investment firm. For the first time ever, I believe our free-enterprise system is at risk.
Without profits, we can't have investments, Bell said. Without investments, we can't create jobs to get us out of this recession. Too much capital is left on the sideline because business is hesitant. If we continue to let Congress spend, our free-enterprise system will collapse.
Sen. Judd Gregg, R-N.H., concurred. The real problem we face is that we are on an unsustainable path of debt, said Gregg. We are on a path where the amount of debt the federal government is soaking up will dry up capital for business investment. To create jobs, you have to support job creators, and this government is making it very hard for job creators to get that money and credit.