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1 Scott A. Hodge, Written Testimony of Scott A. Hodge before the House Small Business Subcommittee on Economic Growth, Tax and Capital Access on Adding to Uncertainty: Small Business Perspectives on the Tax, September 13, 2012 1 (2012)

handle is hein.taxfoundation/taxfaaif0001 and id is 1 raw text is: Written Testimony Of Scott A. Hodge President Tax Foundation Before the House Small Business Subcommittee On Economic Growth, Tax and Capital Access On Adding to Uncertainty: Small Business Perspectives on the Tax September 13, 2012 Mr. Chairman and members of the Committee, thank you for the opportunity to speak to you today on the impact of higher marginal tax rates on pass-through businesses. Founded in 1937, the Tax Foundation is the nation's oldest organization dedicated to promoting economically sound tax policy at the federal, state, and local levels of government. We are a non-partisan 501 (c ) (3) organization. For 75 years, the Tax Foundation's research has been guided by the immutable principles of economically sound tax policy that were first outlined by Adam Smith - taxes should be neutral to economic decision making, they should be simple, transparent, stable, and they should promote economic growth. Introduction America's entrepreneurs are facing tremendous uncertainty, thanks to the stalled economy and the impending expiration of the Bush-era tax rates at the end of this year. While there are many in Washington who believe that allowing top marginal tax rates to jump from 35 percent to 39.6 percent will have a minimal impact on pass-through businesses and the economy, this view is badly mistaken. The issue is not how few businesses will be impacted. The relevant economic question is how much business income will be hit with higher tax rates. No matter how you parse the data, the evidence is clear that the vast majority of pass-through business income is earned by high-income taxpayers and they would be disproportionately impacted by such a tax increase. Indeed, past Tax Foundation research determined that nearly 40 percent of any new tax revenue raised by boosting the top two tax rates would come from the top 2 percent of private businesses. These are the most successful, growing, and profitable firms that are key to America's economic recovery. In every sense of the word, this would amount to a Success Tax on our best and brightest entrepreneurs. 1

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