Manufacturers Blast Tax Increases For Veterans' Education

Fri. May 16, 2008


Medium and small business manufacturers would bear the brunt of a tax approved by the House to fund an increase in veterans' educational benefits, the National Association of Manufacturers said today. The House, as one portion of a three-part war funding supplemental spending package, approved a provision that would pay for a four-year college degree at any public university for veterans of the wars in Iraq and Afghanistan for at least three years. To pay for the increase -- $52 billion over 10 years -- the House Thursday voted to impose a 0.47 percent tax on individuals with a gross income of more than $500,000 and couples with income more than $1 million. NAM sent a letter Thursday to House lawmakers urging them to vote against the tax. Higher taxes on manufacturers means there will be less money for business expansion and job creation, including for returning veterans, according to NAM.

In an interview, Dena Battle, NAM's director of tax policy, said today the group was disappointed that it passed. "We are very hopeful that this will be stopped in the Senate," she added. Battle pointed out that small businesses, such as S-corporations or limited liability companies, pay taxes at the individual rate. "So any time Congress does something to increase tax rate or place surtax on individual incomes, then it hurts those businesses," she said. "One thing that is unique to many small businesses is that it is all of their business income that is treated on their personal tax return, so you could have a very high number, but most of that amount is reinvested into the business and not profit going to the individual," she added.

Democratic supporters of the plan have argued that increasing veterans' education funding has long-term economic benefit. House Speaker Pelosi and other Democratic leaders have argued that for every dollar spent on the GI bill enacted after World War II, seven were returned to the national economy. They have argued that benefits are owed to U.S. troops who have been asked by their country to risk their lives. "We owe it to them," said House Rules Chairwoman Louise Slaughter, the day before the supplemental was voted on the floor. "More than 40,000 of them are coming back with life-altering wounds. I don't see how we can do too much for them."

House Appropriations Chairman David Obey said this week that he wanted a broader tax because the American public has not been asked to sacrifice for the war while the nation's soldiers and their families have shouldered the load. But he said he has lost that battle, and that taxing those making over $500,000 was the next best idea. Democratic leaders were forced to offset the veterans' education benefits provision after the Blue Dog Coalition forced the issue by threatening to derail the supplemental.

by Humberto Sanchez

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