This means everyone would pay less tax. In turn, entrepreneurs would have more money and resources to grow their businesses, which would lead to more new jobs and greater productivity. The net result would be a boost to the overall economy.

The plan also features a permanent tax credit for research and development. This is good news for small businesses, which lead the nation in innovations. The current tax credit is scheduled to expire June 30, 2004. By making this tax credit permanent, research and development would continue to produce product innovations resulting in further economic growth.

The plan would also eliminate the estate tax. This is a significant change because only $675,000 worth of assets may pass tax-free to heirs under the current law.

The new tax plan reaches beyond small business to provide tax relief to Americans in every walk of life by:

• Doubling the child tax credit to $1,000
• Reducing the marriage penalty
• Expanding the charitable tax deduction

Americans Need Tax Relief
As the numbers show, Americans deserve tax relief.

• The existing tax code is unfair. For example, a single mom making $22,000 annually pays a higher marginal tax rate than someone who makes $200,000 per year.
• Federal taxes are the highest they have ever been during peacetime.
• The amount of taxes most Americans pay is greater than the amount of money they spend on food, clothing and housing combined.
• The current tax rates are keeping low-income taxpayers from moving up into the middle class.

Tax Cuts Would Help Stimulate The Economy
Recent layoffs by companies of every size have contributed to a slowdown in the economy. A tax cut would provide a boost.

Tax cuts put more money back in the hands of consumers, allowing them to pay down their debts or invest in their futures. In addition to helping consumers pay down their debts, the new tax plan would also decrease the amount of public debt by leaving a record-breaking federal surplus.

Lower marginal tax rates leave more resources in the coffers of innovative entrepreneurs instead of funding government bureaucracies. Lower rates also provide incentives for work and investment. High marginal rates act as a “success tax,” claiming a large share of the cash flow – the money that businesses need to expand or buy more equipment.

Eliminating the estate tax will allow more families to expand family businesses instead of having to close them because they cannot pay the estate taxes. Estate taxes hit small businesses and family farms the hardest because they are typically land rich but cash poor. Statistics show that nine out of 10 successors whose family business failed within three years of the owner’s death listed the estate tax as a contributing factor.

What Others Are Saying About the Plan
Critics say the proposed plan is a tax cut for the rich. Not so. The plan clearly targets households with lower incomes. An average American family earning $50,000 would have their taxes cut by $1,600 – a 50-percent reduction. Families making $35,000 would benefit even more with a 100-percent tax cut. In addition, one in five low-income, taxpaying families with children would no longer pay any income taxes at all. Clearly, the plan benefits low-income Americans more than any other group.

Critics also claim that America cannot afford this large of a tax cut. According to the most recent bipartisan budget estimates, the U.S. would operate with a surplus of $5.6 trillion. Approximately one-fourth of this surplus would be used for the President’s plan and would provide funding for priorities such as education, Medicare and defense.

Proponents of the plan point out that tax cuts are often necessary to get the economy moving again. Raymond J. Keating, chief economist for the Small Business Survival Committee, says that to create economic growth and opportunity we must put money back into the hands of the people who buy goods and create jobs. 

What You Can Do
It’s important that your elected officials know your position on this and other issues affecting small businesses. Make sure they hear from you. For tips on writing to your elected officials and help in locating their addresses, visit the Advocacy Area of the NASE Web site.