TMA Survey: Tax Hikes on Wealthy Unlikely to Sink Business

CHICAGO, May 2, 2011 /PRNewswire-USNewswire/ -- Raising taxes on the wealthy is one of the more contentious proposals in the political tussle over reining in the U.S. federal deficit. However, in a recent survey most turnaround professionals said dire forecasts about the effect of such tax hikes are overkill.

"While no one wants tax increases, they are going to be an integral part of any deficit-reduction program, which is necessary to achieve prolonged economic health," said Mark Indelicato, TMA president and a managing partner of Hahn & Hessen LLP in New York.

Eighty percent of respondents to the Turnaround Management Association survey said the measure, if approved, would have no more than a moderate effect on a business climate still emitting mixed signals since the financial crisis of 2008. Of those, 28 percent predicted no material impact in the form of corporate defaults and business closings.

"If raising taxes on the wealthy is part of a compromise plan that significantly reduces the deficit, there could be a positive effect on businesses because deficit reduction is more important to focus on from a business standpoint," said James Shein, clinical professor of management and strategy at Northwestern University's Kellogg School of Management. "Confidence is what makes businesses grow and take risks."

Only 10 percent of respondents forecasted the worst consequences if such tax hikes are approved, including significant increases in corporate defaults and business closings.  Of those predicting moderate to extreme effects, nearly all – 87 percent – said those effects would materialize up to 18 months after a final agreement between the Obama Administration and Congress is reached.

Most respondents (66 percent) said a material reduction in the federal deficit is highly unlikely through cutting expenses alone.  Nearly 20 percent thought otherwise, saying expense reduction alone can reduce the deficit. A few members said increasing tax rates would not necessarily result in increased tax revenues and that cutting expenses would hurt not only lower and middle classes, but also segments of the upper class.

"Clearly, turnaround professionals responding to this survey are much more concerned about deficit reduction as a whole," said Thomas Pabst, president of HYPERAMS, LLC, a Chicago-area asset disposition investment firm. "Hopefully, some level of bipartisanship in Washington will prevail and real deficit reduction becomes the overall goal."

Chicago-based Turnaround Management Association, www.turnaround.org, has more than 9,000 members in 47 chapters worldwide.

SOURCE Turnaround Management Association