FROM THE OFFICE OF PUBLIC AFFAIRS

April 12, 2004
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The Honorable John W. Snow Prepared Remarks:
Small Business Administration's Economic Growth Tour Kansas City, Missouri
April 12, 2004

 Thank you so much for having me here today. Hector, it’s great to be with you in your hometown.

Working with Hector is truly one of the highlights of my job. The President certainly found the right person to represent America’s small-business owners. There is no better spokesperson than someone who really knows small business on a personal level, and that’s Hector Barreto. And it speaks to the President’s dedication to small business that he appointed Hector.

Many of you already know Hector’s story of growing up in a small business, a restaurant here in Kansas City. Because of his job, that’s part of his official “bio.” But maybe small-business experience should be part of the “bio” of every government official – because I think exposure to the small business life makes a difference in how we approach decisions in government.

I was also raised in a small-business environment. My father was self-employed, a CPA, and through his business we were exposed to hundreds of the small-business owners in our community.

I bet you can guess why… especially this week, with tax day on Thursday. Yes, I remember well the stacks and stacks of 1040 forms that my father had in his office, preparing them for all of his small-business customers.

Looking back, I guess I learned something very early on that many people don’t know or appreciate – and that’s the fact that most small businesses file their taxes with 1040s, with the individual forms.

But there is someone else in Washington, DC right now who knows that, and appreciates it… and that’s President Bush. That’s why his tax cuts really focused on helping out businesses like yours through lowering marginal income tax rates, as well as increasing business expensing and trying to bury the death tax.

The President understands that your business income is filed on individual forms, so a reduction in the marginal rates helps your business.

He understands, and I understand, that letting you keep more of your company’s income means that you will be able to invest in your business – by buying new equipment, expanding operations, increasing salaries, offering health care, or hiring new employees.

And we also understand that you are where the new jobs come from. In fact, on behalf of the President, I want to thank each and every one of you for being part of the small-business engine of economic growth.

We want to thank you for the sacrifices you’ve made:

• The weeks, or months, when you went without a paycheck so that your employees could still get paid.
• The credit card debt and the debt to family members that you incurred to make your business dream a reality.
• The struggle to afford health insurance for yourselves, your children, your employees and their families.

We want you to know that we think it’s unfair that a single abusive, baseless lawsuit could put your business at risk, and how the aggregate of abusive lawsuits in this country have increased the cost of and necessity for your liability insurance!

And we want you to know that we think it’s wrong that the death tax threatens your ability to leave the family business, your legacy, to your children.

The President knows all of that. And he’s looking out for your interests in every economic decision he makes.

Which brings me back to the 1040 form, and the fact that business owners like you often use the 1040 to file your business income.

The fact that you do so means that reductions in the top marginal income tax rate impact you directly. That’s why the president accelerated the lowering of that rate. And you may have heard – two-thirds of the benefits of the reduction in that top rate went to folks like you, the owners of flow-through entities, in 2003.

The other major element in the President’s tax relief that was designed with you in mind was the increase in the amount of investment that you can deduct. We quadrupled the allowable deduction for business expenses, from $25,000 to $100,000. I hope that you were able to take advantage of that this past year, perhaps buying computers or another piece of equipment vital to the viability and productivity of your business.

We estimate that about 440,000 business taxpayers like you, here in Missouri, benefited from those tax cuts.

So this Thursday shouldn’t be as bad a day as I know it has been in the past for you. I hope we’ve made it less painful.

Small business has been a priority every time the President proposes tax cuts for very simple, common-sense, but also very powerful reasons: You are the backbone and the engine of our economy. You create the jobs. You are the most innovative, creating new products and services. You are the essence of the American Dream and the American free market.

And government doesn’t remember to give you a break, to just get off your backs, nearly often enough.

I often tell people that the economic impact of tax cuts is simple: tax cuts work. They spur economic growth.

Just look at our current economic picture to see the proof: The economy added 308,000 jobs in March, the biggest monthly increase in four years, bringing total job growth since August to 759,000. Strength is apparent across the board, including strong job growth in construction, retail and business services. And economic growth is likely to continue at a robust rate. The manufacturing sector has continued to improve, homeownership levels are at an all-time high, and American families are keeping more of their hard-earned money in after-tax income.

Nowhere is there better proof of the efficacy of tax cuts than in small business. No other sector puts that saved money to work like you do.

Tax cuts benefit you more… but unfortunately the drags on our economy can have a disproportionate impact on you as well, and I want to talk about a few of those things that slow you down.

You can probably guess what words I’m going to say next: health care. Everywhere I go, every small-business owner I speak to, I hear the same question: “what can you do to help us afford health insurance?” I heard it at our roundtable this morning.

While you work and sweat to run your business, create jobs and give our economy such a solid underpinning, our health-care marketplace leaves you in the cold. Premiums are going through the roof, you don’t enjoy economies of scale or large risk pools that insurers prefer… and in many states you only have one or two companies that even offer small group plans.

Your lack of ability to offer affordable health coverage to your employees reduces your ability to be competitive. And that’s bad for our economy.

It’s not right, it’s not fair… and President Bush is dedicated to changing it.

We started with the creation of Health Savings Accounts (HSAs).

HSAs will allow you and your employees to save tax-free dollars for your medical expenses, much like an IRA helps you save for retirement.

The ability for both individuals and employers to contribute to the accounts provides a lot of options, a lot of flexibility for a small group struggling to keep costs reasonable for both parties.

Employer contributions to employee HSAs are not subject to FICA taxes, and individual contributions can be deducted on their taxes.

It’s an important tool that this administration wanted you to have in your health care toolbox. Another one is Association Health Plans (AHPs). AHPs would allow you to purchase health insurance through your trade association – something like NFIB or the Chamber of Commerce – bringing you economies of scale, larger risk pools and exemption from expensive state mandates. In other words, lowering your health insurance costs significantly.

We need Congress to pass AHP legislation – so don’t let your representatives on the Hill off the hook on this one. Remind them how important it is to you, to your family, and to your employees.

Reducing the amount and the cost of abusive, frivolous lawsuits would help your ability to afford health insurance as well.

Talk about a drag on our economy – the lawsuit system is costing a lot of money. The costs amount to a “tort tax,” paid in the form of lower wages, higher product prices, and reduced investments, of $809 for every individual and more than $3,200 for a family of four.

It has put your businesses, and our health care system, at particular risk. As of 2002, 58 percent of physicians reported that they had been the target of a lawsuit, and their malpractice insurance typically rose between 30 and 75 percent over three years, from 2000 to 2002.

Many doctors I know have thrown in the towel. Retired early. Taken their life-saving abilities out of the medical system, because the risks of staying in are just too high, and because they’ve had enough.

Does anyone really believe that 58 percent of doctors are negligent? Of course not. Some members of any profession are going to turn out to be bad apples… but when 58 percent of them are being sued… well, that explains why the term “ambulance chaser” is part of our national vocabulary.

That increases the cost of your health care, which is hard enough to afford.

The threat of frivolous suits is also a drag on your innovation and your willingness to hire new employees. You are least able to bear the cost of the tort tax, yet you are an easy target.

Lawsuit abuse is bad for you, and it’s bad for the American economy.

That’s why the President is dedicated to reducing the number of frivolous suits. For example, he wants to protect restaurants from being sued over the ridiculous claim that they are responsible for obesity. He’s called on the Senate to pass class action reform and he supports immediate medical malpractice reform as well.

Because it’s time we took serious steps to make civil justice about justice again – not about making personal injury lawyers rich.

The last thing I want to mention today is the drag on your businesses, and our economy, that is caused by the impending threat of the death tax.

The President’s tax reform got us a reprieve from that terrible tax, but because of a legislative technicality it is scheduled to return in 2010.

It’s a tax that is an affront to family businesses, and it’s got to be buried permanently.

Some would argue that your taxes should be raised, that making the death tax and other tax cuts permanent is the wrong course for our economy.

I strongly disagree with those claims.

We have choices to make in this country regarding our economy. And I believe that we must choose a path that we know will lead to growth.

We have to choose between higher taxes and lower taxes. We have to choose between economic isolationism or embracing the opportunity of the world’s markets. And we must choose between our historic national attitude of “can do” and the attitude that personal injury lawyers have encouraged, and that is: “can sue.”

The choice is between continuing to grow the economy and create new jobs as the President's polices are doing; or raising taxes on American families and small businesses, hurting economic recovery and future job creation.

These are the choices that most impact the decisions you make in your businesses, and the choices that ultimately most impact the future of our economy.

President Bush and I are proud to choose the path that is good for your businesses.

Before I leave here today, I want to let you know that the Treasury Department will be back in Kansas City in the next few weeks. We will be gathering with experts and law enforcement people to conduct a workshop on something that is important to business owners, and all Americans: identity theft, and how we can use recent legislation to combat it. As we all have seen, identity theft is a growing problem. An estimated 10 million Americans were victims last year. The workshop will highlight leadership in the fight against identity theft by the President, the Congress, financial institutions, technology companies, and law enforcement. It will be full of practical information about how we can work together to reduce the cost and incidence of identity theft.

Thank you so much for having me here today.

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