For the perpetual tax-cutters of the Republican Party, last week's surrender on the payroll tax cut extension for 160 million working Americans was an especially damaging one. While tried if untrue GOP talking points that "tax cuts pay for themselves" and "never need to be offset" were thoroughly debunked, new polling shows the large Republican lead on the tax issue has virtually evaporated.
All of which explains why Eric Cantor and House Republicans are now proposing the "JOBS Act," a package of anti-regulatory measures and a whopping 20 percent tax cut for small businesses. Sadly for Cantor, a mountain of evidence shows that customer demand, and not government regulations, is the biggest burden to small business hiring. And with the total federal tax burden having hit its lowest level since 1950, the GOP would deliver billions in budget-busting tax breaks to millions who need them least.
Last year, House and Senate Republicans blocked President Obama's proposal for a temporary reduction in employers' payroll tax contributions because its cost was to be funded by surtax on millionaires. Now, House Republicans are proposing the Jumpstart Our Business Startups (JOBS) Act, as Majority Leader Cantor explained on Fox News Sunday:
"We'll be bringing forward a bill that provides 20 percent tax cut for small businesses -- again, knowing full well that small businesses create more than 60 percent of the jobs in this country."
But host Chris Wallace quickly exposed what would be another GOP windfall for the wealthy. Recalling the GOP's defense of the "job creators" who don't create jobs, Wallace rightly asked, "Does that mean that those small businessmen who file individual taxes would get a 20 percent cut in their taxes?
CANTOR: Well, we know that overwhelmingly, the number of folks who are business people in this country file as individuals. We know that. We want to help the small businesses as defined by the Small Business Administration. That's 500 employees or less.
Those entities will be allowed for 20 percent tax cut straight to the bottom line -- and that's what we want to do to make it easier for these small businesses to start up.
WALLACE: But does that mean a lot of folks who are making $250,000 a year are going to get a tax cut?
CANTOR: You know, Chris, you know, that suggestion is somehow that we shouldn't be, and I shouldn't be going home to my district in Richmond, Virginia, and telling a small business person that I can help by providing a tax cut for them so they can grow their business and hire more people just because maybe someone else benefits.
As it turns out, that someone else might be Donald Trump, Oprah Winfrey or, say, the owner of the New York Giants. That's because, as we learned during the GOP's successful 2010 fight to prevent a return to the Clinton-era tax rate for those earning over $250,000 a year, the Republican definition of small business includes tens of thousands of doctors, dentists, lawyers, consultants, athletes - even author Barack Obama - who employ few or no workers. As after Bloomberg, the New York Times, the Washington Post, TPM, CBPP and MSNBC among other documented, that list of the top 2% of small business earners (just 400,000 out of 34.3 million filers) also includes multi-billion dollar firms, partnerships and "S-Corporations", such as Bechtel, Coors, and PriceWaterhouseCoopers.
So much for Eric Cantor's claim that "At the end of the day we are all in this together."
But Cantor's con JOBS Act doesn't end there. The other major component, he announced Sunday, is to "address the regulatory burden that small businesses are facing so we can see them start up again." Pointing to a recent Gallup small business survey, Cantor claimed on Wednesday:
"They cited, overwhelmingly, the reasons they are not looking to hire new workers is because of the fear of rising health care costs coming out of this government and out of the health care law. They also said the reason why they're not hiring is the fear of increased regulation that will make it more difficult for them to keep the doors open and the lights on."
But as Crooks and Liars documented last week, the cost of regulations and health care weren't even in the top four reasons Gallup's small business owners gave for not hiring more workers:
In a new Gallup poll released Wednesday, small business owners revealed that the lack of need for new employees (76 percent), worries over revenue (71 percent) and concern about the state of the U.S. economy (66 percent) were the top three reasons for not hiring new workers. But you'd never know that if you just glanced at Gallup's headline, which instead warned, "Health Costs, Gov't Regulations Curb Small Business Hiring."
As it turns out, the finding that weak sales and flagging customer demand are far and away the leading impediments to small business hiring has been confirmed by the Washington Post, the Wall Street Journal, McClatchy and Small Business Majority, just to name a few. CNN recently reached the same conclusion. Asking "Is government regulation really holding back the labor market?" CNN answered, "Not so much, according to government data and surveys of business owners and economists."
Only a small percentage of employers report regulation as a reason for laying off workers...And a CNNMoney survey of economists conducted in the second quarter delivered similar results. Only a couple of the 16 economists questioned said government regulation was the biggest drag on the labor market.
An analysis by Moebs Services similarly concluded:
The uncertainty plaguing the American economy has nothing to do with government regulations or taxes on millionaires. It's an uncertainty driven squarely by consumers and small-businesses who are worried about their short-term financial prospects. And it's been going on since well before Obama took up residence in the White House.
In his demolition of the GOP's talking points, Larry Mishel of the Economic Policy Institute pointed that small businesses' concerns over taxes and federal regulations are much lower now that it has been in 15 years. Poor sales have been Job One since the onset of the Bush recession in late 2007.
What businesses (and business economists) say in private surveys also does not support the "regulatory uncertainty" mantra one hears from the D.C.-based business trade associations..
The National Federation of Independent Business (NFIB), which describes itself as "the leading small business association representing small and independent businesses," does a regular survey of small businesses. One question that has been asked since 1973, is "what is the single most important problem your business faces?" The answer choices are inflation, taxes, government regulation, poor sales, quality of labor, interest costs, health insurance costs, the cost of labor, and other matters. Interestingly, the single largest response is "poor sales," the choice of 30 percent of respondents since President Obama was sworn in (averaging the 10 quarters between early 2009 and spring 2011). In other words, slack demand appears to be the key concern of small businesses.
All of which is why the Republicans' JOBS Act is a con job. Unlike the Obama payroll tax cut for employers which was never brought to a vote in the House and filibustered by Senate Republicans, Eric Cantor's gambit does virtually nothing to jump-start small business hiring. (It's worth noting that the Economic Policy Institute among others forecast the employer-side payroll tax cut would have less bang for the buck than other elements of Obama's American Jobs Act.) While they have a catchier acronym this time around, Republicans are pushing regulatory reform small businesses aren't worried about and tax cuts they don't need.
(This piece also appears at Perrspectives.)