Small business owners like me appear in almost every speech that President Bush makes these days. It is for our sake that he says he has cut taxes for the wealthy. His recovery plan depends on us creating jobs. And jobs are his answer to the rising poverty rates announced by the Census Bureau last month.
I could tell the president a thing or two about jobs and poverty. My company employs 86 workers, all from distressed low-income areas of Philadelphia, and we pay a living wage of $8 to $10. We also provide medical benefits and profit sharing. In the industries we work in – janitorial services, painting and temporary labor – typical wages are much lower than this. It has been a challenge to remain competitive while paying above-poverty wages. Thus an increase in the minimum wage would do more to enable us to create new jobs than any tax cut the president can devise, because our competitors would also have to pay a living wage. Similarly, federal subsidies for employee health care would mean we could use the money we now pay for medical benefits to hire more employees.
Even at the relatively good pay of $340 a week, our employees struggle to afford the basic necessities. Federal investment in affordable housing and public transportation would make their lives easier. Instead, President Bush has pushed through massive tax cuts, which gave my employees back little or nothing in their pockets. Their grandchildren, however, will probably still be paying off the debt from the current deficit. There are now 400,000 more children living below the poverty line, 16.7 percent of all American children, according to the Census Bureau, and though many of them have a working parent, those workers were explicitly left out of the 2003 tax cut because they earn too little.
As an African American business owner with many black employees, I take particular exception to the president’s misguided priorities. The top tax brackets that have received the lion’s share of the cuts are overwhelmingly populated by white investors. Shifting money away from domestic spending and towards high-end tax cuts and the military means, in effect, redistributing money away from people of color. African Americans have been hardest hit by the rising unemployment of the last two years. According to the new Census figures, African American median household income fell about three percent from 2001 to 2002, an astonishing one-year drop. According to the Federal Reserve, while typical white families’ assets grew 37 percent to $120,900 from 1995 to 2001, typical families of color lost seven percent of their net worth, falling to $17,000. This racial wealth gap is a direct result of policies that reward big investors and ignore the working poor.
Now President Bush is proposing another round of budget-busting tax breaks for the wealthy, including permanent repeal of the estate tax. Since only the second million and above is taxable, most small businesses can be passed down without paying any tax. The average black-owned business is only one-tenth of the taxable size. Rather than helping small businesses, the loss of federal revenue from estate tax repeal would harm small business owners and employees by making funding scarcer for the boosts we need in order to compete.
The federal inheritance tax was first proposed by President Theodore Roosevelt in 1906, who said, “The man of great wealth owes a particular obligation to the State because he derives special advantages from the mere existence of government.” Roosevelt recognized that wealthy citizens benefited particularly from government protection of wealth and property rights. The estate tax has helped to limit the concentration of wealth, making it easier for Americans without inheritances to educate themselves, innovate, build new businesses, and prosper. It also gives an incentive for charitable giving. Cash-strapped state and local governments are turning to charities for help in providing education and job training, health, and anti-poverty services.
It is no surprise that the Bush Administration’s “recovery” plan has led to the first job-loss recovery from recession since the Great Depression. Any small business owner savvy enough to stay afloat could have told the President that tax cuts to wealthy investors wouldn’t automatically create jobs. No investor is going to commit money without knowing where the customer demand is coming from. Aid to the states and a full-employment policy, not tax cuts, would revive weak demand and bring new customers to our doors.
So don’t do me any favors, Mr. President. Don’t repeal the estate tax or the dividend tax for my sake. If you want to help small business, invest in the American people.
Tim Styer is the founder and CEO of Service Works in Philadelphia.