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October 15, 2012 | By | Posted in Election 2012, General News

Toomey: Obama’s tax hike would cripple manufacturing (VIDEO)

By Eric Boehm | PA Independent

TOOMEY: As the federal government takes more in more taxes, businesses have less money for investment and job growth.

HARRISBURG — In 1989, Michael Leib took out a second mortgage on his home in Hazleton, Pa., to buy the company he worked for at the time.

If he hadn’t, Weatherly Casting & Machine Co. was going to close its doors or be sold.

Leib said he was glad he made that tough decision. Today, after purchasing Hazleton Casting Co. in similar dire straits in 2003, he owns a pair of casting firms in northeast Pennsylvania that employ more than 120 people combined.

But if he faced the same situation today, Leib said he probably wouldn’t take the chance.

It was relatively easy thing to do, in retrospect, when I bought in 1989,” he said.

The problem? The state’s tax and regulatory environment is out of control and could be worsening, he said.

Leib, who owns the two businesses in Luzerne County, joined several small-business owners, who attended an event with Republican U.S. Sen. Pat Toomey on Monday to denounce the call from Democrats for a higher marginal income tax rate.

Toomey said President Barack Obama’s plan to increase taxes on the highest income-earners would eliminate 31,000 jobs in Pennsylvania, according to a 2012 report from Ernst and Young, and hit the manufacturing sector particularly hard.

Manufacturing can be the engine of recovery for Pennsylvania, and beyond,” he said. “But it will only happen if we have the right policies coming out of Washington.”

Obama wants to allow the Bush-era tax cuts to expire at the end of the year for individuals making more than $250,000 annually. Doing so would help generate about $40 billion in new revenue for the government annually, according to the Congressional Budget Office.

The expiration of the tax cuts is part of an overall plan that the president says would cut the deficit by $4 trillion over the next decade.

The plan would see income tax rate for those earning more than $250,000 climb from 35 percent to 39.6 percent.

However, the Congressional Budget Office has warned that the expiration of the tax cuts — combined with a $1.2 billion mandatory cut in spending that was the result of last year’s debt rating downgrade and subsequent fiscal crisis — will cost the nation 0.5 percent in gross domestic product and could push the economy back into a recession in early 2013.

A new report issued by Toomey on Monday indicated that the effective marginal tax rate for Pennsylvania manufacturers would increase from 35 percent to 41 percent, if the president’s plan was put into effect.

Former President Bill Clinton has defended Obama’s tax plan as an attempt to restore tax rates to their levels in the 1990s, when the economy was booming.

Toomey said the tax levels are only one part of the equation. An “avalanche” of new regulations from the Patient Protection and Affordable Care Act to the Environmental Protection Agency also was keeping new investment on the sidelines and hurting small businesses, he said.

William Marsh, president of American Bar Products Inc., in Bucks County, brought along his 2010 tax return — all 100-plus pages of it — as an example of what a burden the American tax code can be to small businesses.

Small businesses are always hit when taxes increases, Marsh said, because big companies can afford to hire lobbyists and gain special exemptions.

Toomey said 80 percent of manufacturers in Pennsylvania are small businesses that are organized as “pass-through” businesses, meaning they have to reinvest their profits to stay competitive.

To the extent that the government confiscates more of that profit, there is less available for that investment,” Toomey concluded.

In a statement Monday evening, U.S. Rep. Allyson Schwartz, D-District 13, said the “Romney-Toomey” economic plan would put millionaires ahead of the middle-income earners.

Schwartz also pointed to the growth of 31,000 manufacturing jobs in Pennsylvania since Obama took office.

Contact Eric Boehm at Eric@PAIndependent.com and follow @PAIndependent on Twitter

 

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Eric Boehm is a reporter for PA Independent. He can be reached at Eric@PAIndependent.com or at (717) 350-0963.

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