Extending the Bush-era tax cuts for high-income individuals would do a lot to reduce uncertainty among small business owners, Congressman Tom Latham told a gathering of mostly retired business owners this morning in Urbandale.

Not extending the tax cuts would result in the loss of an additional 720,000 jobs and reduce economic growth by 1.3 percent, Latham said, citing figures from a recent study conducted for the National Federation for Independent Business by consulting firm Ernst & Young. 

“This is an absolute critical issue for us all to have the tax cuts extended,” Latham said to about 40 members of NFIB’s Iowa chapter who gathered at the Machine Shed Restaurant.  “The problem that I hear from business people everywhere is the uncertainty: “What’s going to happen after the first of the year?” he said.

Originally enacted in 2001 through the Economic Growth and Tax Relief Reconciliation Act of 2001, the so-called Bush-era tax cuts were designed to stimulate the economy during the recession, but have also increased the national debt by $1.35 trillion in the past 10 years. Due to expire in 2011, the tax cuts were extended by Congress for two more years in 2010.  

According to the Ernst & Young study, increasing individual tax rates would directly affect small business owners whose companies are organized as S corporations, partnerships, limited liability corporations and sole proprieterships, also known as “pass-through” businesses. NFIB research shows that around 75 percent of all businesses are organized in such a manner.  

 “We want an economy where we’re actually investing and hiring people, and to punish people for actually doing what we need to have done in this economy is exactly the wrong direction,” Latham said.

Congress passed a measure in February to extend the current tax cuts through the end of 2012. The House of Representatives next week will vote on both President Barack Obama’s proposal, which would extend the cuts only for individuals earning less than $200,000 and couples earning less than $250,000, as well as a Republican proposal that would extend all of the cuts.

Latham, a Republican who will compete for a redistricted House seat against incumbent Democrat Leonard Boswell in November, said his party’s strategy is to use the one-year extension to buy time to pursue a “fairer, flatter tax code” that would help to generate more economic growth.

David Van Ahn, owner of Heartland Investments & Insurance in Clive, said he supports extending the tax break. Hiring another employee would cost him $50,000 in payroll alone, not counting benefits, he said.

“Being a small business owner and having two employees, I’m still going to gross over $250,000,” Van Ahn said, adding that he doesn’t know if Obama’s proposal counts gross or net income. 

“I’m in the health-care industry; there is no stability in that industry at the moment, and I think the tax cuts need to be extended,” he said. ““This country is all about succeeding, and if you’ve made money and succeeded, more power to you.”