Billionaire business publisher Steve Forbes is concerned about talk in Washington — and on the campaign trail — about raising income taxes and corporate taxes, and he reckons that doing so will wreck the U.S. economy.
In an interview with CNBC, Forbes said that with the U.S. economy is in slow-growth mode, increased taxes would be harmful for years.
"We know from experience that when you raise taxes during an economic downturn, you hurt the economy," said Forbes.
"Raising taxes — we tried that in the Great Depression. We tried that in the 1970s. We tried that in the 1990s. I don't know why we have to run this bad movie again."
Forbes noted that American businesses have the second-highest tax burden in the world right now, and that that should be alleviated to improve the country's overall, global economic competitiveness.
Proposed increases in the income taxes for individuals with incomes over $250,000 — whether through a lapse in the Bush administration's tax cuts, or an increase in other taxes — would damage job creation, Forbes said.
Most individuals who earn more than $250,000 are not employees, but are, rather, small business owners, who are taxed at the personal income tax rate, since their businesses are S Corporations, partnerships or limited liability companies, said Forbes.
"As President Lincoln pointed out, you don't level the playing field by hurting those who are investing and creating jobs," said Forbes, publisher of Forbes magazine.
Economic experts agree with Forbes that entrepreneurs are still vital to U.S. economic growth.
"More and more of the firms in the U.S. are service firms, and more of them are smaller, i.e., consulting firms, firms where people are the largest input into the production process," Cheryl Asher, an assistant professor of economics at Villanova University, tells Moneynews. "Small businesses do create more new jobs in the U.S. than large corporations."
If taxes go up during the next presidential administration, many small businesses may close.
"As a small business owner, I am taxed heavily enough," Peter Miralles, president of Atlanta Wealth Consultants, tells Moneynews, adding that if the headaches increased, he would just close shop and go work in corporate America.
"Without limits on taxation, we become no better than the feudal system in the Middle Ages in Europe."
During his CNBC interview, Forbes also said he is enthusiastic about the tax proposal advocated by Sen. John McCain.
"We have to grow our way to a balanced budget. The growth of the U.S. economy from 2003 through 2007 resulted in more jobs than the entire Chinese economy. The purpose of Washington is to increase the chance of Americans moving ahead."
"But, lately, Washington has been compared to a drunken sailor. That's an insult to drunken sailors — they spend their own money, not other people's money,” said Forbes.
Forbes said that investors are faced with the "starkest differences" between two presidential candidates since 1980.
"Obama wants to raise taxes, McCain wants to reduce them," said Forbes.
"Obama has come out for protectionism. McCain wants to reduce barriers. As the American people see these stark differences, they will say, 'Let's go with the guy who can put us back on track.'"
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