Looming Tax Hikes Preventing Economic Recovery

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The danger of higher taxes in the future is thwarting economic recovery today. Businesses make investment and hiring decisions based on their expectations of future profitability. If they expect to be more profitable in the future they will hire. If they do not they hold back on expansion. They base their expectations of future returns on estimates of their sales and costs years down the line. Uncertainty in either makes predictions difficult and causes them to put off decisions until they have a better idea what their bottom line will be.

Taxes are a major cost for businesses and all year President Obama and Congress have threatened to raise them. This has had an especially large impact for small business and created a large degree of uncertainty for them. According to the National Federation of Independent Business’ (NFIB) monthly survey of small and independent business owners:


‘[A] major concern [for small businesses] is the level of uncertainty being created by government