The following is a statement from Small Business Majority Founder & CEO John Arensmeyer on why tax legislation released today by the U.S. House of Representatives will increase the deficit without helping small firms.
The tax legislation released today by Republican leadership in the U.S. House of Representatives may be advertised as a windfall for small businesses, but in reality would be little more than a $1.5 trillion expenditure that would not pay off for Main Street.
Given this terrible return on investment, it is evident lawmakers don’t understand that we need to take a bottom-up approach in order to help all small businesses, and create a level playing field so small business owners can compete.
Indeed, slashing the pass-through rate to 25 percent will help very few small business owners because nearly 9 in 10 businesses that pass through their income already pay at the 25 percent rate or less. Instead, this proposal would primarily help wealthy individuals rather than small businesses.
While cutting the corporate rate to 20 percent would undoubtedly help some small businesses, entrepreneurs oppose lowering that rate without getting rid of corporate tax loopholes because doing so would greatly increase the deficit while continuing to put small businesses at a disadvantage. In fact, Small Business Majority’s recentscientific opinion polling found seven in 10 small business owners believe their business is harmed when big corporations use loopholes to avoid taxes.
Currently, 85 percent of small business owners feel the tax code unfairly benefits large corporations over small businesses, and that corporations and wealthy Americans should be required to pay their fair share of taxes. What’s more, the repatriation provision fails to address the substantial tax advantage given to big businesses because it would not do away with the loophole that allows multi-national corporations to defer paying taxes on foreign profits.
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Small Business Majority’s polling found 75 percent of small business owners believe large corporations should not be able to choose to declare some or all of their income in a foreign country in order to lower their taxes. Additionally, the proposed phase out of the estate tax would help virtually no small businesses—despite what you may have heard.
For 2017, the tax doesn’t even kick in unless the estate in question is valued at $11 million for a married couple, which is well beyond the valuation of most small businesses. Today’s tax proposals are being billed by many as “small business tax cuts,” but as the research shows, they won't actually help the vast majority of small firms.
Much can be done to help small firms through tax policy changes, which is why it is so disappointing that this proposal offers virtually nothing to benefit the overwhelming majority of America’s job creators. Unless lawmakers make significant changes to their proposed legislation, this rare opportunity for tax reform will become a wasted one.
About John Arensmeyer
John Arensmeyer has built Small Business Majority into a nationally recognized small business organization and advocate for critical public policy issues facing America’s entrepreneurs—particularly healthcare, access to capital, taxes, retirement/asset building, and numerous workforce issues.