If the Republicans don’t pass a tax bill before the 2018 election, they’re toast.
In 1994 there was a swing of 54 Democratic House members and eight Democratic senators to the Republican side. It would take years for the Republicans to regain control if they don’t pass the tax bill. Recently I heard the brand-new Georgia Republican Representative Karen Handel’s victory speech. One of the main issues that she ran on was a substantial tax cut for the middle class. Trust me, Republicans, a substantial tax cut for the middle class is a winner.
I also heard Speaker Ryan reveal more details about the Republican tax reform plan. He is calling for a permanent tax law, which means they will have to find at least eight Democratic senators to switch sides. Good luck, Paul, on finding eight Democratic senators that will vote for a Republican tax plan that cuts revenue. “Tax and Spend” is the battle cry of the Democrats. Pardon the pun.
Alternatively, the Republicans could pass tax reform under “reconciliation.” Reconciliation only requires 51 votes in the Senate to pass a law and the Republicans have 52 senators. But here’s the hook: If you pass a law under reconciliation, it has to be revenue-neutral. If you cut taxes $1 trillion, you have to cut spending $1 trillion, and what politician wants to do that?
The rhetoric that has been spilled by the Republicans in support of their tax plan says that businesses want the taxes to be permanent so they can plan on what to do in the future. As a small-business owner, I don’t need to know what to do in the future; I just need to keep the doors open and make payroll. Could it be possible that Speaker Ryan is playing games with us and really doesn’t think a good tax plan can be passed and needs fodder to protect his Republican colleagues in 2018?
For decades, I have been watching the rhetoric of our politicians that covers up what they are really saying. When they say they want to cut the budget, that doesn’t mean they’re going to spend less money. It means they are going to spend less money than proposed in the presidential budget. Say you hear seven political elites say, “We are going to cut the defense budget 8 percent.” What they should say, in order to be truthful, is, “The president wants to increase defense spending 15 percent and we only want to spend 7 percent more.”
Excess taxes don’t grease the wheels. As a matter of fact, they can stop a motor vehicle right in its tracks. I know it’s hard to contemplate, but an American small business that’s either a partnership or a Subchapter S corporation, can pay an effective tax rate of 29 percent. Amazon, Google, Walmart, General Motors, Tesla, Microsoft, Apple and other large businesses pay an effective rate of 14 percent. Could this be a reason why big businesses pay their employees better than small businesses? The top rate for an administrative assistant at Google is $64,048. The top-rate of an administrative assistant at a small business is $44,689.
Let’s look into our crystal ball. I believe that small businesses are going to become the future of U.S. industry. Small businesses, if given the right tax environment, can whip the pants off of large businesses. I can see an entrepreneur put together a whole bunch of small businesses and build a car. My children and grandchildren, if they’re in small business, could compete with any large business in the world. Speaker Ryan, pass the tax reform plan under reconciliation and at the same time cut spending.
Robert S. Pembroke is chairman of Pembroke’s Inc. and describes himself as a small-business owner on permanent sabbatical.