By Sen. Kay Bailey Hutchison
President Barack Obama has been crisscrossing the country including a recent stop in Texas to rally support for his latest economic stimulus plan. Unfortunately his plan relies again on increased government spending and higher taxes to boost the economy.
The Obama administration should have learned a very expensive (for taxpayers) lesson about the effects of massive government spending on job creation. There are 1.7 million fewer jobs since the first nearly trillion dollar wave of stimulus spending the president got more than two years ago.
Obamas latest jobs" proposal calls for about $450 billion in new taxes. The bulk of the proposed new taxes would fall on job-creators small businesses and those who invest in new technology and fund business start-ups.
Why are small businesses crucial? They account for more than half of all private sector jobs and virtually all new jobs.
Start-ups in the technology sector are particularly important. Of the top 10 private employers in Texas a third are in the tech industry. One of our largest private-sector employers Dell Computer is a high-tech company that traces its start to a college dorm room at the University of Texas less than 30 years ago. Today approximately a half-million Texans work in the tech industry second only to California.
Last year the Texas high-tech industry had a combined payroll of $38.7 billion with an average wage of $84800 per employee. These are good jobs that support families and communities across Texas.
How would the presidents tax hikes specifically effect small businesses and tech start-ups in Texas?
What the White House has erroneously described as a millionaires tax" would fall on small business owners who file their businesses income taxes as individuals.
The presidents tax hike plan would also change the tax rate on capital gains for those critical investors who supply necessary capital for entrepreneurs. T
his would effectively decrease the pool of financial capital available for early-stage investments in start-ups. A lower capital gains tax rate is what attracts and enables many investors to take risks on small start-up companies particularly in high-tech.
Investors put their money into a wide range of companies knowing that some will fail and hoping that some may become the next Dell. The earnings from those that become successful must be enough to balance investors losses and enable them to continue funding more start-ups. This cycle allows entrepreneurs to flourish and create jobs.
The Obama tax hike would guarantee a lower rate of return for investors which could mean fewer entrepreneurs will have a shot at innovating starting a business and creating jobs.
The presidents insistence on hundreds of billions of dollars in new taxes on private sector investment as laid out in his economic proposals demonstrates how he continues to be tone deaf to common sense.
As Charles Schwab noted recently in The Wall Street Journal Behind every job is an entrepreneur."
Limiting investors ability to provide the capital to fuel the innovation of our entrepreneurs is the last thing leaders in Washington should be doing during this struggling economy.
While no industry has been unscathed by the recession the tech industry has been resilient and continues to be one of the strongest sectors of our economy particularly in Texas.
Maintaining our competitive advantage globally and ensuring we remain on the cutting edge of technological innovation requires a competitive tax system. Rather than bludgeoning small businesses with higher taxes the president should champion comprehensive tax reform to simplify the tax code remove special interest provisions and make income tax rates lower flatter and fairer.
Private sector investment in innovation is what will help pull our economy out of the doldrums and get Americans back to work. Ultimately a plan that would make it more difficult for entrepreneurs to start and expand a business is simply not a jobs plan nor a debt reduction plan.
Sen. Kay Bailey Hutchison (R-Texas) serves on the Senate Appropriations Committee.
