JOBS Act: A Meaningful Step in the Right Direction, We Can’t Stop Here
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U.S. Senator Kay Bailey Hutchison
In a rare moment of bipartisanship in Washington, The Jumpstart Our Business Startups (JOBS) Act beat the odds and was signed into law recently, after passing both Houses of Congress by overwhelming margins.
The JOBS Act reduces burdensome and outdated regulations, and will help small businesses, entrepreneurs, and start-up companies to do what they do best: innovate, grow, and create jobs. I authored one of the key sections of the JOBS Act. My JOBS Act provision will enable community banks to raise more capital that can be loaned to small businesses, by increasing the number of bank shareholders permitted to invest from 500 to 2,000, without costly approvals by the Securities and Exchange Commission.
When President Obama signed the JOBS Act into law a couple weeks ago, he emphasized the importance of America’s entrepreneurs and small businesses, saying, “America has always had the most daring entrepreneurs in the world... when their businesses take off, more people become employed.” And he pledged that, “We’re going to have to keep working together so that we can keep moving the economy forward.”
Nevertheless, five days later, the President went off in the wrong direction -- championing the so-called “Buffett Rule” tax, and pushing the Senate to approve that tax as soon as possible. Ironically, the Buffett Tax would punish the very job creators that the President said we should encourage to expand and hire more people.
Unlike the JOBS Act, which encourages more opportunities for start-up businesses and entrepreneurs, the Buffett Tax would do just the opposite. If the Buffett Tax becomes law, what could be the next Google, Dell Computer, or Facebook might never get the chance to move beyond a business plan or mom’s garage.
The Buffett Tax is a roundabout way of raising the capital gains tax on investors who are willing to take the risk of providing seed money for early-stage start-up businesses, particularly for tech start-ups. If and when one of these new enterprises becomes successful enough to be acquired or go public, the Buffett Tax would take a much bigger bite out of investors’ profits. This would discourage risk-taking, and drain away private investment capital that entrepreneurs and start-up businesses must have.
The President argued initially that the Buffett Tax is needed for deficit reduction. But the U.S. Treasury Department estimates that the Buffett Tax would raise no more than $5 billion annually. That’s less than one half-percent of this fiscal year’s $1.2 trillion deficit, and barely a drop in the $15+ trillion ocean of national debt. But it’s a crucial $5 billion that the President would drain from the pool of private capital available to help entrepreneurs.
Even after the President conceded his tax proposal would have no impact on deficit reductions, he has continued to argue the Buffett Tax should be enacted as a matter of “fairness.” In other words, big tax increases on small businesses and on investors who fund start-up companies -- the same businesses that he described when signing the JOBS Act as responsible “for almost every new job created in America.” That doesn’t seem “fair” to the millions of Americans who are looking for jobs.
Our economy has been the most dynamic job-creating machine in world history. One of biggest problems holding it back now is an incredibly complicated, inefficient tax code that imposes some of the highest taxes in the world on businesses and job creation.
Bipartisan cooperation is needed to enact comprehensive tax reform. Lower, flatter tax rates and a fairer, simpler tax code would unshackle job creation in the private sector. That’s what we should be working on now, not an election-year ploy that would make our economy worse.
Hutchison, a Republican, is the senior U.S. senator from Texas and Ranking Member on the Senate Commerce, Science, and Transportation Committee.