Fiscal Cliff Deal Was Bad for Small Businesses

Robert Luddy is the founder and president of CaptiveAire Systems, Inc., and a member of the Job Creators Alliance.

America would not be the economic powerhouse today without the innovation of Silicon Valley (largely and thankfully unregulated) and our growing small business entrepreneurs. Entrepreneurs have created the technologies, by risking their own capital, which make our economy efficient and robust. Emerging entrepreneurs are world-class innovators.

Traditional problems facing small business include capital formation and world competition. These have moved into the background because American innovation is under attack from the Obama administration, the federal bureaucrats, and some members in Congress.

Federal regulations and taxes undermine job creation. This basic fact is upheld by the latest Job Creators Alliance national poll of small business owners. As an entrepreneur, who built my company from the ground up with no capital, this survey reinforces my belief that policies emanating from Washington are stifling economic growth and job creation. A key data point in the poll was small business owners’ overwhelming belief that the environment in Washington is becoming more hostile toward free enterprise, and also that they are pessimistic about the future.

It is audacious for the federal government to ask small business entrepreneurs to pay a little more. Instead, I say let the feds live on a whole lot less. And by the way, the pessimism crossed party and gender lines. Small business owners were not happy with the so-called fiscal cliff resolution that did nothing to address our ever-growing national debt or trillion dollar deficits.

Milton Friedman once stated: “We need to rediscover the old truths that the immigrants knew in their bones: what economic freedom is and the role it plays in preserving personal freedom.”

It is amazing that the cliff resolution also rewarded many large businesses with tax credits for schemes, such as green energy and a host of politically favorite but dubious ideas, yet punishes small business job creators with a high marginal tax rate and fewer deductions. General Electric paid a 3 percent federal tax rate, while small business will pay a 41 percent federal tax rate.

We must create an environment which reduces risk for the American entrepreneurs by lowering regulations and the marginal tax rate to 25 percent. Entrepreneurs are every inch the heroes and the job creators. The villain is the federal government right here in D.C. Observe how the feds allocate money. The message from our small business operators is clear: The president and federal government are creating a hostile environment for growth and job creation. This must cease and be reversed immediately.

Ludwig von Mises clearly stated: “Entrepreneurs are best capital allocators and bureaucrats are the worst.”

So why then do we tax job creators and entrepreneurs, Small Business America, at a marginal rate over 40 percent? Why is the government going to take more money away from the nation’s best capital allocators–entrepreneurs–and give it to federal bureaucrats, who are going to waste it by the trillions?

Clearly this poll should be a wake-up call for the Obama administration and Congress. America must return to the traditions established by our founders, both economic and personal freedom.