Democrats support small business while Republicans capitalize on tax confusion

Democrats support small businesses, and the House bill introduced in May of 2011 demonstrates the depth of that commitment to manufacturing in America. House Republicans, however, have exploited Americans’ confusion about marginal tax rates to sow fear about Obama’s proposed tax hikes and have thrust small business to the center of the political fracas over extending the Bush-era tax cuts. Republicans say President Barack Obama's plan to limit future tax breaks to couples earning less than $250,000 would subject 50 percent of small business income to a tax increase, stalling the job creation engine.

Here is a simple explanation: If a person makes $251,000 they would enjoy all the same low income tax rates a person with lower rates has. The first $8,700 would be taxed at 10%, the next $27,000 at 15%, and so on. Under President Obama's plan to raise taxes on the rich, the person making $251,000 would pay that 39.6% top rate on a grand total of $1,000. Only the $250,001st dollar on up would be taxed at the highest rate. This is what “marginal” taxation means. Republicans capitalize on ignorance and confusion by making taxes seem higher than they are.

Democrats understand that manufacturing has suffered a severe recession and prolonged economic hardship during the 2000s. Efforts during this time to create policy solutions have slowed, but one plan by David Cicilline, a Democrat from Rhode Island, has sought to resuscitate the economy through HR 1912, which was introduced last year.

John Hudak is a fellow in Governance Studies at the Brookings Institute, and his research examines questions of presidential power in the contexts of administration, personnel, and public policy. Additionally, he focuses on campaigns and elections, bureaucratic process and legislative-executive interaction.

In a paper, Mr. Hudak investigates the depth of the challenges manufacturing has faced in the last decade and how the Cicilline legislation is an effective way of rebounding the manufacturing sector; however, it faces political obstacles that prevent its passage. There are alternate solutions that strengthen the weaknesses in the proposal and engage federal resources.

HR 1912 is “The Make it in America Block Grant Act of 2011” and is one critical part of Cicilline’s Six-Point Manufacturing Plan for Rhode Island. This legislation provides small-to medium-sized manufacturers with the resources they need to retool and retrofit their operations, and train their workforce in order to transition to the manufacturing of clean energy, high-technology, and advanced products.

The Block Grant Program offers a critical, cost-effective, common sense solution to this serious economic problem. Economic recovery in the United States depends on a thriving, healthy manufacturing sector and resources must be targeted achieve that goal.

Hudak examines the Block Grant Program and offers political and policy recommendations to advance the proposal, including:

· A focus on the size of the manufacturing sector in states represented by Republican governors and legislators.

· Being amenable to lower cost alternatives that may facilitate coalition building while providing (at least) some relief to manufacturers.

· Working with the Department of Commerce to implement a small scale pilot program within the Hollings Manufacturing Extension Partnership (MEP).

· Ultimately seeking to expand MEP to include existing assistance as well as additional block grant resources to state and local governments working to stabilize and revive manufacturing.

“If we’re really going to re-build our economy, we must focus on making things again in this country, and we will, when we give our manufacturers the incentives and tools they need to do it,” Cicilline said. “What we need now are the strategies, programs, and the will to support that resurgence and set in place the policies that will bring stability and growth to this sector of our economy. The Make it in America Block Grant will help retool our area manufacturers who need help adapting to compete in the new economy– a high-tech, alternative energy economy.”

“We must make things in this country because making and selling value added products is part of America’s DNA,” said Leslie Taito, representing the Rhode Island Manufacturing Extension Service, and who spoke today about how the Make it in America Block Grant Act of 2011 can move our manufacturers into the 21st Century economy. “Manufacturing lead the way to America’s dominance in the world and it is what will lead us to our economic recovery. Congressman Cicilline’s Make it in America legislation will provide desperately needed assistance to small manufacturers looking to create the next generation of clean energy products and new technologies.”

“The United States is the world’s largest manufacturing economy, producing 21 percent of global manufactured products, and manufacturing already supports over 18 million jobs in the U.S. That’s one in six private sector jobs,” said Jim Brett of the New England Council, who discussed the need for a national manufacturing strategy to help continue rebuilding the American economy.

In addition to the Make it in America Block Grant, Cicilline has co-sponsored several bills that help form the basis of his Six-Point Manufacturing Plan for Rhode Island which includes the following:

· Make It in America Block Grant (Rep. Cicilline H.R. 1912): Establishes a grant program at the Commerce Department to provide small to medium-sized businesses in communities hardest hit by unemployment with the resources and strategies they need to retool and retrofit their operations and train their workforce in order to transition to the manufacturing of clean energy, high-technology, and advanced products.

· National Manufacturing Strategy Act (Rep. Lipinski, H.R. 1366): Directs the president to work with industry, labor leaders, and other stakeholders to develop a national strategy to increase manufacturing.

· Build American Jobs Act (Rep. Levin, H.R. 922) & Build America Bonds to Create Jobs Now Act (Rep. Connolly, H.R. 11): Extends the Build America Bonds program, provides additional funding for the Recovery Zone bonds program, and makes improvements to existing bond and credit programs to help states and local governments leverage private capital to create jobs today and build the infrastructure that is the backbone of future economic growth.

· National Infrastructure Development Bank Act (Rep. DeLauro, H.R. 402): Establishes a wholly-owned government corporation to facilitate efficient investments in and financing of infrastructure projects—from leading-edge broadband networks and energy delivery systems to modern ports—that foster economic development and keep America competitive.

· Currency Reform for Fair Trade Act (Reps. Levin and Tim Ryan, H.R. 639): Levels the trade playing field by holding accountable countries that create an unfair trade advantage by manipulating their currency.

· Tax Policies that Strengthen Manufacturing: Cicilline has co-sponsored measures (H.R. 871 – Rep. Heath Shuler and H.R. 689 – Rep. Donna Edwards) that expand and make permanent the Research and Development Tax Credit and provide enhanced tax incentives for domestic manufacturing. In addition, Cicilline is a co-sponsor of legislation (H.R. 110 – Rep. Rosa DeLauro) that allows manufacturing firms to establish and make pre-tax contributions to manufacturing reinvestment accounts (MRA), similar to individual retirement accounts (IRA). The amounts distributed from the MRA can be used to purchase equipment or provide job training.

Do not allow the Republican-dominated House of Representatives to obscure the progress of small businesses by their non-support of responsible legislation like HR 1912. Their continued misinformation, rhetoric and confusion about marginal taxation has nothing to do with moving the country forward with policies that give small businesses the resources and strategies needed to transition from a struggling economy to a thriving economy.

Elections for all 435 seats in the United States House of Representatives will be held on Nov. 6, 2012. If you want economic recovery to continue with small businesses being one of the most important factors, then vote for Democrats like David Cicilline of Rhode Island and other Democrats who support small businesses in America--not with obfuscated taxation scare tactics, but with honest legislation designed for growth and prosperity.

Update November 2012: Freshman Democratic Rep. David Cicilline held off first-time Republican candidate Brendan Doherty in Tuesday’s election, notching an easier-than-expected victory against the former head of the state police.

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Resources

http://www.brookings.edu/research/papers/2012/08/14-manufacturing-hudak

http://cicilline.house.gov/press-release/cicilline-introduces-make-it-america-block-legislation

http://www.slate.com/articles/business/small_business/2012/07/small_business_tax_myths_most_firms_are_not_affected_by_obama_tax_proposals_.html

http://www.businessweek.com/magazine/content/10_40/b4197030541676.htm