Column: Tax cuts spur American optimism
In his final State of the State address, Gov. Rick Snyder homed in on one important theme. Although we’ve had our share of ups and downs, today, we’re hitting our stride. Michigan, he said, “offers a case study in the pro-growth potential of business tax reform. Folks, we’re back, and we’re only going to keep going up.”
Snyder’s judgment is spot on. And thanks to the sweeping new federal tax cuts already going to work, the same can be said for America.
The long-overdue overhaul of our nation’s tax code was no small feat. Negotiators transcended petty politics and labyrinthine rules to deliver simple, straightforward relief — especially for the nearly 30 million small businesses that hold the key to taking Americans from recovery to full-on prosperity.
Case in point? The new 20 percent deduction for small businesses. Gone are the rates that topped out at 40 percent before state and local levies. Small firms could hardly be expected to expand operations and create jobs with roughly half their revenue taken off the table. And since all small businesses want to grow, the damper on our economic activity was huge.
Now, small businesses are free to reinvest their precious income in jobs, wages, facilities and equipment. Even last year, most owners said that’s what they wanted to do. This year, as our economy hits its stride, more and more will need to do it to stay competitive and attract the talent they want in the workplace.
Michigan is a perfect example. Most of our businesses are small ones. Despite having some of the world’s largest automakers, half our private sector employment comes from our small firms.
That’s almost 870,000 payrolls, totaling some $2 million paychecks every month. That’s a whole lot of new deductions — and new investments. It’s rocket fuel for the economy. And it’s happening in state after state. Sometimes small businesses are retailers or mom and pop stores. They’re also builders, contractors, farmers, health care professionals, and, like me, part of the service economy. In America, we’ve got ‘em all.
After providing financial services for over 20 years, I know no two small firms are exactly alike. In fact, as a former owner and operator of a Midwestern food processing company, I also know that individuals often find themselves juggling multiple businesses, or moving from one good opportunity to another.
What that means is simply that the economic reach and diversity of small firms is unrivaled in American life. While some policies seek to produce big results by micro-targeting this group or that, the new tax cut is showing that our millions of small businesses form a broad, durable base for growth that lifts us all.
The experts agree. Policy analysts say the vast majority of us will receive tax relief this very year, and top economists predict we’ll see serious growth. Polls, meanwhile, show that people across the country are noticing the positive effect the tax cuts have started to have. As tax withholding shrinks this month, majorities across all political affiliations say they feel good about our economic fortunes. In just over a month, enthusiasm for the tax code has increased by 20 points. The sky’s the limit.
Brian Ellis is president of Brook Tree Capital Management in Grand Rapids.