The world has been abuzz with joy, inspiration, and goodwill since the first Chilean miner emerged from underground. The Chilean embassy in Washington, D.C., marked the event with a good old-fashion celebraciòn and broadcast the rescue live on an outdoor big-screen TV. The celebration is not without good reason. As Daniel Henninger pointed out in Thursday’s WSJ:
“If those miners had been trapped a half-mile down like this 25 years ago anywhere on earth, they would be dead.”
Indeed, this accomplishment is a major triumph, not only for Chile but for the global economy and, as Henninger goes on to point out, free-market capitalism.
Companies, firms, and organizations from a host of countries contributed resources, technology, expertise, supplies and general support.
In a White House press release, President Obama lauded the rescue as “a tribute not only to the determination of the rescue workers and the Chilean government, but also the miners and the Chilean people who have inspired the world.”
While President Obama was undoubtedly sincere in his praise, what has not been mentioned by any account of the ordeal is the fact that the policies pursued by President Obama and congressional Democrats reward those who came to the rescue of the entrapped miners with a bevy of draconian tax increases in the coming months.
Let’s look at the two Pennsylvania companies that Henninger highlighted in his Wall Street Journal article: Center Rock, Inc., in Berlin, Pennsylvania, which provided the crucial drill bit and West Chester, Pennsylvania’s Schramm, Inc., which provided the drilling rig.
According to the company’s website, Schramm, founded in 1900, “is a closely held, privately owned Pennsylvania corporation that originally manufactured engine driven machinery and portable air compressors.” Center Rock, which currently has 74 employees, was founded in 1998 by a 26-year-old.
If these companies are S-Corporations or partnerships, as is most likely the case, the higher tax rates on individuals that become effective on January 1 will be the new rate at which these distinguished companies pay taxes.
Today, most small businesses’ profits are taxed at a 35 percent rate. In January this rate will rise to 39.6 percent, a 13 percent tax increase. This is not the only tax hike set to hit these companies. Thanks to the new Obamacare law rammed through earlier this year, these companies will also be forced to fork over more revenue to Uncle Sam if they do not provide health insurance to their employees.
If these companies happen to be constituted as corporations — which is not as likely but possible — they will still face the Obamacare tax increases, which include the employer mandate tax as well as two dozen other tax increases. Also keep in mind that U.S. corporations already face the highest corporate income tax rate in the developed world (tied with Japan) at nearly 40%. Quite the hero’s welcome from President Obama and congressional Democrats
While the White House and Democratic strategists have been having fun with class warfare and demonizing businesses these last few weeks, it is companies such as Center Rock and Schramm that will bear the brunt of the Obama-Pelosi-Reid tax hikes that take effect in less than 80 days. Fortunately for these small businesses and the private sector in general, November is just around the corner.
Patrick Gleason is Director of State Affairs at Americans for Tax Reform.