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Do The Small-Business Owners The GOP Claims To Listen To Even Exist?

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Back in September, our own Christina Wilkie teamed up with Shawn Alff of Creative Loafing to talk with some small-business owners in the Tampa, Fla., area about how they were shaping up their operations in preparation for next year's Republican National Convention. The proprietors went into great detail about their small business, the local economic climate, and their overall strategy for both dealing with and profiting from the economic opportunity that comes with hosting a large, historic political convention. One comment in particular, from a Joe Redner, caught my eye:

In the meantime, Redner's got a few bones to pick with GOP policymakers. "[Republicans] keep saying this stuff about how if we tax the rich, then small businesses won't be able to grow. But I'm a small-business owner, and I put all my money right back into my businesses in the form of capital improvements, which I don't pay taxes on anyway. So their argument isn't how reality works."

Now on its own, this is just a stray piece of anecdotal data, wrapped in a complaint. Sure, we take Redner at his word that from his perspective, he is experiencing life as a business owner in the way he describes. And we need to remember that in any survey, there are always outliers. Plus, Redner runs a very specific business -- the Mons Venus strip club -- and that's a pretty unusual entrepreneurial undertaking. (Also, all of the small-business owners Wilkie and Alff spoke with work in the local adult entertainment industry. I was just being coy in the lead paragraph!)

Nevertheless, one might read that comment and rightly wonder if the politicians who make impassioned pleas and frantic complaints about how a piece of policy is going to affect "small-business owners" are speaking from a set of assumptions rooted in ideological leanings, or are they fully informed by the lives of actual human beings? Mr. Redner would probably suggest the former, but a larger data sample would be preferable.

Luckily, the recent debate over whether to extend the payroll tax holiday provides an excellent opportunity to explore this matter. The U.S. Senate has been working for the past few weeks to overcome a partisan impasse over extending the payroll tax cut. The sticking point, at the moment, is the issue of how to pay for the extension. The Democrats have proposed that a small surtax be levied on people who make $1 million or more in income. As you might expect, the Republicans aren't having this, and, according to NPR's Tamara Keith, they have a specific argument against it:

Ever since the idea of the surtax was introduced weeks ago, Republicans in Congress have railed against it, arguing that it is a direct hit on small-business owners and other job creators.

The argument is that many small-business owners report company profits on their individual taxes because of the way their businesses are structured. Sen. John Thune, R-S.D., says the surtax would hurt their ability to hire.

Thune says that this is "just intuitive." And that's where one starts to worry about assumptions taking primacy over reality. But let's be generous -- maybe John Thune does not have the resources at his disposal to do an extensive round of data collection. NPR does, however, and so it decided to undertake this mission. Let's see what it was able to find out!

We wanted to talk to business owners who would be affected. So NPR requested help from numerous Republican congressional offices, including House and Senate leadership. They were unable to produce a single millionaire job creator for us to interview.

So we went to the business groups that have been lobbying against the surtax. Again, three days after putting in a request, none of them was able to find someone for us to talk to. A group called the Tax Relief Coalition said the problem was finding someone willing to talk about their personal taxes on national radio.

So next we put a query on Facebook. And several business owners who said they would be affected by the "millionaires surtax" responded.

"It's not in the top 20 things that we think about when we're making a business hire," said Ian Yankwitt, who owns Tortoise Investment Management.

Tortoise is a boutique investment firm in White Plains, N.Y. Yankwitt has 10 employees and in recent years has done a lot of hiring.

As a result, Yankwitt says he's had many conversations about hiring, "both with respect to specific people, with respect to whether we should hire one junior person or two, whether we should hire a senior person."

He says his ultimate marginal tax rate "didn't even make it on the agenda."

Yankwitt says deciding to bring on another employee is all about return on investment. Will adding another person to the payroll make his company more successful?

NPR says it was unable to find any small-business owner who would testify that Thune's take on the matter was correct. Thune responded by insisting that NPR found "exceptions to the rule." But if the "rule" is correct, why wouldn't a small-business owner want to talk to a reporter about an issue of paramount importance? Why couldn't any of the congressional offices or lobbying outfits that consider this a matter of paramount importance proffer the contact information of anyone willing to offer a testimonial about the adverse conditions this surtax would impose?

Well, either we've entered a new mysterious age in which Americans no longer want to bitch about their jobs and no one told me about it, or we have to consider the possibility that the people who the GOP believe would be adversely affected by this surtax do not, in fact, exist.

This wouldn't be the first time I've had cause to wonder about this. A few weeks ago, Zach Carter and Samuel Wilkes set out to test the assumption that "uncertainty" -- that favorite conservative talking point -- was "a major barrier to American job creation." Carter and Wilkes did find that a certain type of uncertainty was impeding job creation, but it wasn't the uncertainty the GOP was talking about ad nauseam.

But according to banking data compiled by economic research firm Moebs Services, the uncertainty plaguing the American economy has nothing to do with government regulations or taxes on millionaires. It's an uncertainty driven squarely by consumers and small businesses who are worried about their short-term financial prospects. And it's been going on since well before Obama took up residence in the White House.

Since the end of 2007, bank customers have pulled over $900 billion out of certificates of deposits at major U.S. banks, parking their money in checking accounts and money market deposit accounts. Banks pay customers interest to park their money in CDs, but pay out next to nothing for money market accounts, and still less -- usually nothing -- for checking accounts.

"These are enormous shifts," Moebs Services founder and Chairman Mike Moebs told HuffPost. "We haven't seen stuff like this since the 1930s."

Money market and checking accounts offer consumers the ability to withdraw their money quickly, while CDs require the funds to be locked up for years. And that heavy reliance on short-term cash indicates a tremendous amount of uncertainty among the American public about the future -- people with jobs are uncertain about whether they will have one in a year, people without jobs have to pay the bills and don't know how long their unemployment checks will keep coming in.

As Carter and Wilkes note, as this mass migration of money from long-term investment vehicles to cash-at-the-ready checking accounts has played out, it's had an adverse effect on businesses: "When consumers pull their money out of longer-term investments, banks are reluctant to make longer-term loans, which in turn can hamper businesses, which become reluctant to hire without access to credit."

It's fair to say that a large energy conglomerate or a major manufacturing company would have to account for the odd regulation or ruling handed down by the Environmental Protection Agency or the National Labor Relations Board. But are small businesses not hiring clerks or servers or assistant managers because of regulation? Not according to the available data.

Of course, as a general rule, fast money stays fast -- you're more likely to spend the money that's in your checking account than the money locked up in your "jumbo" CD. But when you take long-term wage stagnation and pile on the most dramatic effects of the financial crisis -- widespread home foreclosures and long-term unemployment -- money tightens up, creating a crisis of insufficient aggregate demand. And here's where things get pretty darned certain: If you know your restaurant is going to be full to bursting on a nightly basis, you're going to do a lot of hiring. If you're only seating four tables' worth of customers, you won't.

Of course, this gets you to the broad argument that you hear Democrats making, as they push for the government to be the spender of last resort in an effort to stimulate the economy at a time when interest rates are low. If you're NPR, you have the same requirement: Can you find people willing to testify to the phenomenon of insufficient aggregate demand or the lack of access to credit, or who pooh-pooh the notion that paying additional taxes inhibits their ability to hire? As it turns out, it's a lot easier:

-- Jody Gorran, chairman of Aquatherm Industries: "This mantra that every dollar in tax increases is a dollar away from job creation -- give me a break. ... It's not taxes that affects job creation, it's demand."

-- Kelly Conklin, owner of Foley-Waite Associates: "I don't decide to hire or buy equipment based on tax policy. ... We know how to make shit out of wood."

-- Debra Ruh, owner of TecAccess: "We need to hire people, but we don't have the cash or the credit to do it. ... I don't mind paying taxes. ... I like living in the United States and having the opportunities here. I don't understand why running a business has to be about avoiding paying taxes."

-- Michael Teahan, owner of Espresso Resource: "What we do in business, how we spend our money, how we allocate our resources -- that has very little to do with tax policy. ... I map my business based on my customers and what my customers want to buy and what they can afford to buy."

-- Rick Poore, owner of Designwear Inc.: "If you drive more people to my business, I will hire more people. It's as simple as that. If you give me a tax break, I'll just take the wife to the Bahamas."

-- Lew Prince, owner of Vintage Vinyl: "The economic premise that people won't hire because they might have to pay more taxes if they make more money is beyond laughable. ... You hire when you think there's a way you can make more money with that hire. The percentage the government takes out of it has almost nothing to do with it."

And just to demonstrate that the demand for stimulation has a lesson to teach us about stimulating demand, let's circle back to our strip club owner:

Mons Venus typically closes at 5 a.m., but Redner said he would be willing to keep the club open 24-7 during the GOP convention if demand merits it. That said, he may charge clients a premium at the door. "During the Super Bowl I charge $50 a head. I may decide to do that during the convention, too."

Sounds like he might be in need of some extra -- um, let's say "hands." But there you have it: In the typical partisan fight over taxes and economic relief, both sides make some specific arguments about how small businesses will be affected. But only one argument seems to be supported by people who actually exist. Next week -- perhaps in a timely response to this NPR article -- the House Small Business Subcommittee on Economic Growth, Tax, and Capital Access is scheduled to produce three small-business claimants who may be willing to testify that the millionaires surtax will adversely impact their ability to hire. If they do, it might shore up an argument that seems largely based on imaginary people.

READ THE WHOLE THING:
GOP Objects to 'Millionaires Surtax'; Millionaires We Found? Not So Much [NPR]
Serving the Interests of an Imaginary Group [1115.org]

So NPR, with its pile of Facebook friends and millions of listeners, just couldn't find the right boss. If you're a business owner whose hiring decisions are made based on high-end marginal tax rates, send me an email.

[Would you like to follow me on Twitter? Because why not?]

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