Today, Secretary Geithner visited Baltimore’s own Marlin Steel Wire Products, a manufacturer of wire baskets and sheet metal – and also a small business. During his trip, the Secretary discussed how the President’s policies have supported small businesses and called on Congress to enact proposals that would help small business owners create more jobs. Marlin Steel is a powerful example of how small employers and manufacturers can be important engines of private sector growth.
Marlin Steel Wire Products has taken advantage of several small business measures that the President signed into law – for example, by fully expensing its investments in advanced robotic equipment. As a White House report released yesterday details, the President has enacted a number of specific measures – including 18 business tax cuts – that benefit small firms. And Baltimore-based businesses like Marlin Steel would stand to further benefit if the President’s new proposals are approved by Congress.
As one of the five points on his “To Do List,” the President has urged Congress to pass two small business proposals. The first would extend 100 percent expensing through 2012, allowing business of all sizes to immediately deduct the full cost of investments in equipment and machinery this year. One hundred percent expensing was initially put in place through 2011 as part of the bipartisan December 2010 tax compromise and has acted as a powerful motivation for businesses like Marlin Steel to pull forward investment.
The second would create an incentive for small businesses to hire new workers and give current workers raises by providing a 10 percent income tax credit for small firms that create new jobs or increase wages in 2012. This tax credit in particular provides an illustrative example of the President’s approach to supporting small businesses. It is targeted toward actual small businesses with employees, not just anyone with any sort of business income. It goes to those who hire new workers or expand their payrolls, providing a powerful incentive for growth. And it focuses on middle class workers that power our economy, because the credit doesn't apply to wages above $110,100.
In contrast, some alternative proposals being debated don’t target increased hiring or increased wages but rather go to anyone who draws “pass-through” income, regardless of whether they are hiring or firing, raising or cutting wages, and even if they have no employees at all. Under the loose definitions of “small businesses” used in these proposals, anyone from hedge fund managers to law firm partners to reality TV stars potentially qualify for a small business tax cut. In fact, half of the top 400 highest income taxpayers in the country – with incomes averaging in the hundreds of millions – would be considered “small business owners” under many of these proposals. And half of the benefits included in some of these plans would go to Americans with incomes of more than $1 million per year.
In comparison, the President’s proposal would focus on creating middle-class jobs and raising middle-class wages. That’s why in a recent analysis, the nonpartisan, independent Congressional Budget Office rated policies like the President’s proposal – which reward incremental hiring and wage increases at real small businesses with real employees, just like Marlin Steel – as one of the most effective ways to support the economy and job growth.
Jenni LeCompte is Assistant Secretary of the Treasury for Public Affairs.