A great Christmas gift: Tax reform

Nobody has more at stake in the tax reform debate than America’s small business owners.

As chairman of the House Small Business Committee, I am fully committed to making sure their voices are heard in this debate.

There are over 28 million small businesses in America today which employ half of all working Americans, and are responsible for creating seven out of every ten new jobs. 

{mosads}These economic powerhouses pay 42 percent of the payroll of private sector employees in the United States and generate nearly half of private sector output.  Moreover, they constitute 98 percent of goods-exporting firms, establishing the United States as the world’s leader in international trade.

It’s remarkable these businesses can continue to create jobs and grow even as the federal government saddles them with a massive tax burden every year.

Adding insult to injury, small businesses have to contend with a climate of confusion and uncertainty as Congress scrambles to pass a package of “tax extenders” every year. 

Effective only for a few years or sometimes just a few months, these provisions leave small business owners guessing at their tax liabilities and fearing that this will be the year they are not renewed.

Just last week a panel of small business owners stressed to our Committee that this uncertainty over their tax liability makes it extremely difficult for them to plan for the coming year, hire new employees and grow their business.

“Washington’s inaction on comprehensive reform and Congress allowing the continued expiration of key tax provisions creates a globally uncompetitive environment for small businesses manufacturing in America,” said Todd Kriegel, a precision parts manufacturer from Van Wert, Ohio.

“Congress needs to end the annual extenders debacle and make permanent those provisions that belong in the underlying code,” added Rich Shavell, the president of Shavell & Company, P.A. in Boca Raton, FL. “Until these issues are addressed, small business is playing with one hand tied behind its back.”

Tom Nichols, an attorney and CPA from Wisconsin who advises the small business owners, probably said it best when he pointed out that many small businesses file as “S corporations” to protect themselves as best they can from the tax burdens. He told the Committee:   “I had a client who wanted to sell his business, but could ill afford to do so if the double-tax built-in gains regime was applicable. I recommended that he and the buyer reach agreement and have all the documents prepared, but wait until actual passage of the extenders legislation to sign and close the deal,” Nichols recounted.  “His response was that he was in poor health and may not be able to wait.”

We must extend and make permanent those temporary provisions in the tax code which are vital to the success of these small businesses and millions of others like them, including bonus depreciation, Section 179 expensing, and the Research and Experimentation tax credit. 

Our tax code is fundamentally broken and America’s small businesses are paying the price.

As Speaker Ryan (R-Wis.) noted in his speech last week, our neighbors to the north in Canada tax their small businesses at 15 percent but in some parts of the United States, the top tax rate on a successful small business is over 40 percent.

This is outrageous and it must not be allowed to continue. By making the small business extenders permanent, we will set the stage for broader, more comprehensive tax reform that will enable all individuals to prosper.

The best gift we can give our entrepreneurs this Christmas is meaningful tax reform that will provide them with clarity, certainty and peace of mind. 

Chabot has represented Ohio’s 1st Congressional District since 2011, and previously from 1995 to 2009. He is chairman of the Small Business Committee, and also sits on the Foreign Affairs and the Judiciary committees. You can follow him on Twitter @HouseSmallBiz


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