America’s jobs growth engine is being choked to death.
A record 25 percent increase in the taxes against US small businesses — from costs associated with new health care law, to an increased Medicare tax, increased capital gains taxes and higher state and city taxes — is repealing any ability of these entrepreneurs to add jobs to their payroll.
And the numbers for New York’s small- to medium-sized business are just as harrowing.
By one estimate, the effective tax rate on the 26 million small businesses across the country — which in the past have accounted for more than half of the job growth in the US — has jumped to 50 percent from 40 percent, sucking valuable cash from the businesses.
These dollars could have been used to add to payrolls or make capital improvements — but instead will be siphoned off by Uncle Sam, state and municipal governments.
“The impact of these higher taxes and reduced hiring will be a recovery cycle that will be much longer, be slower to take hold and be without much job growth,” said Al Angrisani, founder and CEO of Angrisani Turnarounds and former US Assistant Secretary of Labor under President Reagan.
A survey of 200 small businesses across the US by the economist found 51.5 percent of business owners in March were concerned about the viability of their businesses — up from 49.5 percent in February. More than eight million jobs have been lost during the current 28-month recession.While a healthy 162,000 jobs were added in March, it was accomplished with the help of heavy government stimulus. Meanwhile, the average length of joblessness rose to 31 weeks and hourly earnings were down, albeit slightly.
In New York, interviews with more than a dozen small business owners by The Post found a group of owners hurting under the weight of the new taxes.
Teresa Kramer, co-owner of Northside Bakery in Greenpoint said she is scared.
“We’d really need to raise our prices by 20 percent to stay even because our profit margins are shrinking as costs keep rising everywhere — for garbage and services, commuter taxes and other taxes,” said Kramer, a Polish immigrant who operates the two-store division of Old Poland Foods. The business employs 20 and rings up annual sales of about $2 million.
Kramer has stopped short of raising prices, at least for now. She added: “We’re producing more bread and product — but we’re still making less and less profit.”
In Manhattan, Robert Schwartz, the CEO of a three-unit shoe store chain, said he has never seen the tax burden this bad.
“This has been as hard as we’ve been hit in my 36 years of running this company,” said Schwartz, owner of Eneslow Shoes, which employs 50 people, including part-timers, on annual revenues of under $10 million. “It’s a tough economy and our costs continue to rise.”
Schwartz, who says he’s putting his salary back into the business in response to the environment, adds that overhead from taxes and other outside charges have become unbearable. “I certainly don’t think the new health care law will save me any money,” he said. “Now New York City wants to develop this paid sick leave legislation that would give employees up to nine paid sick days. It’s ludicrous. It takes the oxygen out of the blood.”
Fran Biderman-Gross, CEO of Advantages, a branding, mass communications and marketing company in Fresh Meadows, said with health care becoming mandatory she envisions more companies switching to independent contractors — who don’t require pricey health benefits — in order to stay in business.
“We created 16 million jobs during the recovery in the Reagan administration by cutting taxes and offering incentives to hire,” Angrisani noted. “Small business tax cuts are not compatible with the philosophy of this administration.”
Jobbing small business
The 26 million small businesses in the US — like Eneslow Shoes, headed by CEO Robert Schwartz— are getting buried under an avalanche of new taxes, which include:
* An increase of 4.6% in federal taxes from 35% to 39.6% (expiration of Bush tax cuts)
* An increase in capital gains taxes from 15% to 20% (expiration of Bush tax cuts)
* A new tax of 3.85% on investment income, dividends, rents, royalties mandated in the new health care bill
* An increase in the Medicare payroll tax to 2.35% as mandated in the new health care bill
* In states like New Jersey and others, state and municipal taxes have been raised by the average of almost 2%