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Hutchison on Taxing Small Businesses

Taxing Small Businesses
by Senator Kay Bailey Hutchison

Last week, I set out on my annual bus tour in Texas.  I have taken a tour of Texas every year since I entered the Senate, taking me thousands of miles across this glorious state and every one of our 254 counties. This is my last year as a US Senator, and nothing highlights the reasons I chose to represent my great state better than spending time with our people.  Texans are strong, resourceful, innovative, self-reliant, kind, open and world-famous for friendliness.  Texas is a destination for everything from barbecue to cutting-edge science and technology, and that is a reflection of the people – richly diverse in so many ways, but sharing an inimitable and unique Texas spirit.

But this is not an easy time in Texas, which, though not as bad as many other states, still has a sluggish economy with high unemployment.

I went to Washington to ensure that the American Dream would stay alive for every Texan.  But we find ourselves in a new era, where the promise that hard work and dedication will translate into success is in jeopardy.   The economy is sluggish, recovery is stagnant and unemployment numbers won’t budge – they haven’t been below 8 percent in three years.  And now the Administration is proposing a tax increase that would slam small businesses when they can least afford it – and when we need them the most.

Small businesses drive our economy, providing some 55 percent of private sector jobs.  In the midst of the most uncertain economic environment in recent memory, punishing them with higher taxes is incomprehensible.  Even talk about raising taxes paralyzes business, as the uncertainty about economic burdens stops owners from hiring and reinvesting capital to grow their businesses.  Our economy can’t sustain that kind of deprivation of revenue, and the 23 million underemployed and unemployed Americans can’t afford a longer hiring freeze.

The people I met with – families, small-business owners, veterans – are the people I think of as I try to secure tax fairness.

On my tour, I met with members of the community in a number of small businesses: in Marble Falls at the Blue Bonnet Café, in Fredricksburg at the Clear River Soda Fountain and in Uvalde at the famous Vasquez Restaurant, where I had a wonderful afternoon with my hosts, Enrique Vasquez and Donald McLaughlin of DKM Enterprises, a local steel salvage and distribution company.

Vasquez Restaurant is the perfect example of a great American small business.  It was founded in 1935 by Enrique’s parents, Mr and Mrs Jesus Vasquez.  Enrique took over and has kept it a Uvalde institution.  Sergeant Major Enrique Vasquez served in the US Army and fought in the Korean Conflict – pictures of his time in Korea and Japan adorn one of the restaurant walls.  He is one of Uvalde’s most recognizable locals and can be found in his restaurant every day working the lunch shift.

The tax increases proposed by the Administration will hit businesses like Vasquez Restaurant.  Why?  Because 75 percent of small businesses pay taxes at an individual rate, as they are organized as “flow-through” businesses, such as partnerships, S Corporations, LLCs and sole proprietorships.  The Joint Committee on Taxation estimates that 53 percent of all flow-through business income will be subject to the top two individual income tax rate increases scheduled to take effect in 2013.

This increase is an unfair burden on hard-working Americans.  Sergeant Major Vasquez’s parents started a business, worked hard and made it a success.  Sergeant Major Vasquez served his country, took over his parents’ business and made it an even bigger success that provides jobs to locals and is a fixture in the community.  It survived the Great Depression and 11 recessions and is working its way through a 12th.  These tax hikes punish businesses like Vasquez Restaurant in already tough times, starve the American economy of revenue and deprive job-seekers of opportunities.  I hope that the Administration will heed calls from both parties to re-think this tax on our job-creators.

Hutchison, a Republican, is the senior U.S. senator from Texas.