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US Business Owner Frets Over Possible Tax Hike

  • Michael Bowman

President Barack Obama's announcement of a deal to temporarily extend tax cuts for all people at all income levels could, if enacted, defuse a confrontation between Democrats and Republicans on how much to tax the wealthy. At a time of slow economic growth and rising national debt, most Democratic legislators wanted to allow tax cuts for top earners to expire, while preserving them for everyone else. Republicans insisted no one's taxes should rise and appear to have won the argument - to the delight of business groups.

One WashingtonD.C.-area entrepreneur fears higher taxes would strangle his expansion plans.

Mike Anderson owns Mango Mike's Caribbean restaurant in Alexandria, Virginia. With $3 million in annual sales, Mango Mike's employs dozens of people. The restaurant earns enough so Anderson can expand his operations.

"We just got our big smoker here, which is still wrapped in plastic from shipping," said Anderson.

Anderson plans to open another restaurant next year in a different part of town.

"We are going to be the biggest restaurant in Del Ray, in this community, with 6000 square feet [560 square meters] of operation," he said.

But Anderson is worried. Even under optimal conditions, restaurants have slim profit margins that are eaten away by taxes and fees. He says he risks losing customers if he raises prices, so tax hikes are especially painful.

"Whatever tax increase comes along, we can't pass it to the consumer," explained Anderson. "So we either eat it [absorb it], take a pay cut, lay some people off, or stop investing in projects like this."

Anderson is the type of small businessman that Republicans have pointed to in opposing tax hikes on those who start ventures and, ultimately, create jobs. Senator John Thune of South Dakota:

"When you increase the cost of doing business, it makes it that much harder for small businesses to invest, to make that capital investment, to buy that piece of equipment, or to hire that additional person," said Senator Thune.

Democrats have said the goal is not to punish businesses. President Obama has wanted to end the current tax cuts for those earning more than $250,000 a year.

"Every economist knows a middle class family is more likely to spend a few thousand dollars on groceries, on clothes, on pharmaceuticals, than a person who already has millions to spend will with an extra $100,000," said Democratic Senator Sheldon Whitehouse of Rhode Island.

One of the world's richest men, the legendary investor Warren Buffett, has long argued the rich should pay more taxes.

"I see nothing wrong with those who have been blessed by this society to give a larger portion of their income to society than somebody who is working very, very hard just to make ends meet," said Buffett.

"I am not in Warren Buffett's league by any means," said Mike Anderson.

Though wealthier than the average American, Mike Anderson says he is just one of millions of struggling small businessmen.

"If we had a tax increase of any magnitude without a substantial increase in business, which is never guaranteed, I am not sure we'd make it through another year. It has been that tough. "

With a trillion-dollar federal deficit and runaway national debt, the United States has important fiscal choices to make. Most economists believe, sooner or later, a combination of higher taxes and sharp spending cuts will be required. Mike Anderson hopes any future tax hikes will not cripple small businesses like his.