Geithner spins tax increase but it will hit small businesses hard

It’s easy to understand how a wonk can be removed from the real world the rest of us live in. US Treasury Secretary Tim Geithner agrees with the Democrats in Congress on a tax increase. Geithner appeared on ABC on Sunday and he said a tax increase “will not affect growth.”

In reality any tax increase will hit small businesses hard and this vital economic sector is struggling.

First it is important to clear up a political myth. [Article continues after video.]


Democrats talk about ‘letting the Bush tax cuts expire’ and hardcore Party members as well as liberal media call them the ‘Bush tax cuts for the wealthy.’ Even Fox News’ Chris Wallace, possibly the most objective interviewer in the U.S.,  used that term on Sunday during an interview.

Fact is President George W. Bush pushed through cuts that benefited every American, and there was a very good change for married couples because the so-called ‘marriage penalty’ was eliminated. That penalty was especially nasty if two middle-class earners had similar salaries.

The marriage penalty is one example of negative effects on Main Street.

But what’s important is to dismiss Democrats’ spin—changing the tax rates means a tax increase. Period. There is no other honest way to phrase it.

Americans for Tax Reform explains this in an easy-to-understand manner: “Unlike corporations, small businesses usually don’t pay their own taxes.  Rather, business profits flow through to the business owner.  The business owner pays taxes on her small business by adding the profits to her income tax form. Therefore, personal income taxes are the same thing as small business taxes.”

Many Americans file as a sole proprietorship. ATR said, “There were 22 million tax returns reporting sole proprietor income in 2008.  On net (profits reduced by losses), these owners reported business profits of $264 billion.  A large chunk of this net profit--$90 billion—faced taxation in households making more than $200,000 per year.  34 percent of sole proprietor profits will face a tax rate hike under the Obama-Pelosi-Reid tax hike plan.”

It’s also important to point out that a good businessperson knows markets fluctuate. Smart managers tuck aside something to get them through down markets. Taxes are never friendly to small businesses for this reason.

If  you’ve never run a small business, it may be hard to understand, especially for someone like Geithner. He’s been a government or institutional employee all his life. His own taxes were a mess, one that according to McClatchy newspapers spanned a decade.

When President Barack Obama appointed Geithner to his post, The Sydney Morning Herald (Australia) called the new US Treasury chief a “gigantic fool.”

Former Australian prime minister Paul Keating said Geithner “fundamentally misdiagnosed” problems when he wrote the International Monetary Fund program for Indonesia in the 1990s.

Geithner’s approach also contributed to the world financial system going helter skelter. Keating said, “Geithner was responsible for the build-up of tremendous imbalance in the world financial system. This imbalance, in turn…contributed to the global financial crisis which has since devastated the world economy.”

Keating isn’t alone in his criticisms. Professor Bill Black, author of ‘The Best Way to Rob a Bank Is to Own One’, testified before the House Financial Services Committee after the economic meltdown Obama compares to The Great Depression.

Black pointed out that there was an effort in 2004 to stop what he called ‘liars’ loans’ that were key in causing the meltdown. As an aside, there was a Republican Congress and a Republican president pushing to stop those loans that year. Regulatory heads killed the proposal.

Black, who is sometimes described as a ‘progressive,’ told the committee about those fraudulent loans, “All regulatory agencies were complicit. The Federal Reserve Bank of New York found this is ‘3-card monte’…they continued business as usual.”

Who was president of the Federal Reserve Bank of New York at that time? Geithner.

ATR believes if Democrats get the tax increase they want, the majority of small businesses will face higher taxes.

It is useful to acknowledge Democrats almost always resort to tax increases. President Bill Clinton passed a whopper of a tax increase during his term. And when Bush took office, the US was sliding into a recession.

There is scant honest reportage from liberal media about this.

I grew up in a small business and I worked in small businesses. When I began my writing career, I produced content not only for publishers but also for small businesses.

A tax increase never helps Main Street. Don’t be fooled by wonks. Geithner has never created a private sector job (other than his immigrant-domestic help he ‘forgot’ to pay Medicare and Social Security taxes on).

There is only one way to address the deficit. That is to cut spending, not only new spending but existing spending. Despite our government’s expectations for Americans to do with less, those controlling our government are certainly not willing to do with less.

It does appear, however, that in the vein of Geithner and people like Rep. Charles Rangel (D-N.Y.) and Sen. John Kerry (D-Mass.), liberals are quite willing to pay less in taxes. And they are quite willing to stand by, apparently eagerly, as small businesses take a hit from their policies. (--Commentary by Kay B. Day/July 27, 2010)

 Video shows Republicans in Congress in 2004 attempting to address problems with Freddie Mac and Fannie Mae. Democrats refused to 'reach across the aisle.' The U.S. currently faces a financial disaster with these government sponsored enterprises. Democrats refuse to accept responsibility for billions in losses.