For a small business owner like me, the math is simple: I'm currently bidding on a big contract - if I get it, I'll hire two new workers; if I don't, I won't. Notice there is nothing in that equation about federal tax rates. That's because what drives business expansion and job creation is economic demand, not taxes. If more politicians in Washington understood that, we could end these mind-numbing budget debates and get on with the real job of growing our economy.
I don't discount the significance of higher taxes because I'm not paying them, because I am. Even though 99.3 percent of the American public saw no income tax increase from the so-called "fiscal cliff" budget deal last New Year's Day, I was among the 0.7 percent of top earners who saw their taxes go up. No one likes paying higher taxes, but I supported the hike as part of a balanced approach to reducing our debt and getting our economy moving again.
What I don't support is the current approach to deficit reduction called the "sequester"- and I say that based again on real-world experience. My colleagues and I on the St. Petersburg City Council have been warned by the federal government that because of this indiscriminate, across-the-board budget cut, we'll be losing funding for dozens of social service agencies in our city, agencies that provide housing for the mentally challenged, legal services for the poor, and a variety of programs for children.
The sequester is bad for business, too. Recent economic reports confirm what those of us who run companies or oversee public budgets already know: our economy is under-performing. Although getting our federal finances in better order is a worthy long-term goal (in fact, deficits have been dropping the past few years), job one should be restoring robust economic growth. Luckily, we can achieve both goals with the right decisions on taxes and spending.
Let's fix corporate taxes so huge multinational firms stop dodging what they owe. My company is proud to be headquartered and pay our taxes where we actually do business, here in St. Petersburg. But a lot of big corporations avoid paying their fair share of taxes by claiming headquarters in a post office box in the Cayman Islands. According to a recent article in the nonpartisan Tax Notes, this international shell game costs us $90 billion a year - enough cash to completely cancel this year's sequester, with money left over to pay down debt.
Despite the complaints of big corporations and their lobbyists, government's figures show our corporate giants on average paid only one-third the official income tax rate last year, and corporate taxes as a percentage of total federal revenue are the lowest they've been in over half a century. Profitable household names such as General Electric, Verizon and Wells Fargo have gotten away with paying zero federal income taxes in some recent years. Besides reducing our deficits and stabilizing our economy, ensuring big business paid what it actually owed in taxes would also level the competitive playing field for small businesses like mine.
But I'm not just advocating collecting more taxes from corporations. According to the U.S. Treasury, we could raise $529 billion to reduce debt, bolster public investments such as Social Security and Medicare and regain the confidence of the marketplace if we restricted the income tax deductions available to folks like me to no more than what our middle-class neighbors can use.
Right now, those of us in the highest tax bracket can write off almost 40 cents of every dollar we spend on deductible expenses such as mortgage interest; middle-class families can deduct no more than 28 cents. Let's make the system fairer and raise revenue we need by capping the value of everyone's deductions at 28 percent.
While ideologues in Washington fight over pet economic theories, small business owners and community political leaders have to deal with the day-to-day consequences of misguided federal budget policy. As a representative of both groups - as well as someone personally impacted by increased taxes on high incomes - I urge Congress to end the bickering, continue deficit reduction, and most importantly invest in our economy and create jobs by requiring big corporations and the wealthy to pay their fair share of taxes.
Karl Nurse is president of Bay Tech Label Inc., and chairman of the St. Petersburg City Council.