Guest Commentary

4 percent economic growth vindicates tax cuts

Debbie McFarland, owner of McFarland Interiors
Debbie McFarland, owner of McFarland Interiors
Unemployment is below four percent and economic growth is above it.

This month, the Bureau of Labor Statistics announced that the unemployment rate had fallen below four percent, hovering at a generational low. And last month, the Commerce Department confirmed what any Main Street small business owner could tell you: The economy is humming. It revealed that second quarter growth was 4.1 percent.

Over the last five quarters, economic growth has surpassed three percent — a sign of sustained economic growth — significantly higher than the growth during the comparable period of Barack Obama’s presidency. With this level of economic growth you can actually feel the difference in living standards in a year-over-year basis.

While a strong economy is good news for everyone, it is especially good news for the state’s small business owners whose livelihoods are more dependent on the ebb and flow of the economy than other professions. When people feel confident in their economic prospects they spend, which helps business flourish.

Economic strength on Main Street is reflected in strong labor markets as small businesses feel confident to hire and expand. Small businesses create two-thirds of the nation’s new jobs, driving today’s low unemployment rate. In Missouri, the unemployment rate is just 3.5 percent, roughly one-third the rate of earlier this decade. Minority unemployment is at a record low.

The labor market is so strong that it is drawing people who have dropped out of the labor market entirely back into the workforce. These additional workers, in turn, boost economic growth. This tight labor market has caused wages, which have been stagnant for so long, to grow at their fastest pace in a decade.

While the economy has been strong for a while now, good public policy has allowed it to reach new heights. Exhibit A is the recently passed tax cuts that are allowing ordinary workers and small businesses to keep more of their earnings to spend at home and stimulate local economies (rather than Washington D.C.’s).

For small business like mine, we were granted a new 20 percent tax deduction. This means we can protect 20 percent of our earnings from taxation. I agree with the respondents of a recent small business survey conducted by Bank of America that this tax code provision is a “game changer.”

With these added funds, I am able to upgrade my equipment, invest in new product lines and hire more contractors. According to a list compiled by Americans for Tax Reform, I am one of just hundreds of businesses across the country to reinvest its tax code savings into its employees. No wonder small business and consumer sentiment are pivoting around all-time highs as both groups have more cash on hand because of these tax cuts.

Surprisingly, there is a movement to repeal these tax cuts. Democratic leaders, including House Minority Leader Nancy Pelosi and her counterpart in the Senate, Minority Leader Charles Schumer, have called for them to be eliminated. Their reasoning is that these are “tax cuts for the rich.” In reality, the 20 percent tax deduction for small businesses phases out at $315,000 for joint filers, so it is off limits to the wealthy.

Other tax cut provisions as well, including the doubling of the child tax credit and making it refundable to $1,400, are also solely available to ordinary earners. This means that millions of parents are going to get a check, in addition to their regular tax refund, from the IRS to help pay for childcare costs. The economic growth that tax cuts produce also has a bigger effect on regular people, who enjoy higher living standards as a result.

Repealing these tax cuts would extract billions of dollars from local economies and put this money into the hands of federal bureaucrats, who — even if well-intentioned — do not know how to spend our money better than Missourians.

Missouri residents who care about the vitality of local small businesses and economic growth should cast their vote on Election Day this fall accordingly.

Debbie McFarland is the owner of McFarland Interiors, based in St. Charles, Mo.