Time to reform the tax code to help millennials and women in business

Time to reform the tax code to help millennials and women in business
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Women are opening up businesses at a record pace. A study by American Express found that 39 percent of all businesses are owned by women. Since 1997, the number of firms owned by women has grown 114 percent. Recent polling also suggests that young people are considering starting their own businesses and feel strongly that entrepreneurship is essential for promoting jobs and innovation.

I am proud to be a part of this passionate group who puts everything on the line to do something we love. In my case, that was starting an online media platform. It’s incredibly rewarding and enjoyable work, but not without challenges. There is payroll to manage, a budget to balance, and overhead to pay. On top of that, there are regulations to keep track of and legal questions to consider. But all of this pales in comparison to one of the biggest challenges I face as a small business owner: tax compliance.

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In a nutshell, it’s incredibly complex and unfair. At four million words long, the tax code is undecipherable. According to a 2017 National Small Business Administration survey, 49 percent of small business owners who do their own taxes spend more than 40 hours preparing their federal taxes each year. Of course, most of us hire professionals to navigate a tax code that is 187 times longer than it was a century ago.

It’s no surprise then that the tax compliance industry is booming. The National Taxpayer Advocate, an independent organization within the IRS, found that tax compliance costs American taxpayers $195 billion a year. This is precious time and money that small business owners could be using to grow their businesses and create more jobs.

Then there’s the unfairness of it. For larger businesses that can afford to hire pricey lawyers, accountants and lobbyists, the tax code provides a treasure trove of subsidies, corporate handouts and tax breaks. The Congressional Budget Office estimated that this preferential tax treatment will exceed $1.5 trillion, this year alone.

It’s effectively a two-tiered system where the powerful and connected wield influence and get big breaks, while hardworking taxpayers and small business owners are just trying to keep their head above water. This unfairness may also explain why, despite interest among millennials of opening up their own business, they are also less likely to be self-employed than older individuals.

It shouldn’t be this way. Thankfully, there is considerable momentum in Congress to transform the tax code into one that is fairer, flatter and simpler. But it won’t be easy. Congress hasn’t overhauled the tax code in more than a generation because the same group of lobbyists and special interest groups currently benefiting from our convoluted tax code has powerfully opposed tax reform.

Many are lining up again. This time, they’ve joined forces with politicians who claim that the legislation the Senate just passed will only benefit the rich. But facts are stubborn things. History shows that each of the last three times we cut tax rates, it ushered in a period of increased growth, higher wages and more disposable income. In fact, opposing this tax reform is the best way to keep in place a system that’s rigged against the little guy for the benefit of the well connected.

I grew up poor. For a time, my family and I relied on public assistance to get by. Through personal experience, I learned that the best way to permanently lift people out of poverty is to expand economic opportunity so more people can find good-paying jobs to provide for their families. Businesses owned by women, along with small businesses, do this every time we grow our firms, hire new workers, or give our employees a raise.

Tax reform will enable more businesses to provide more opportunity. It will mean that more women will have a chance to own a business or join the workforce to drive our economy forward. Bitter partisanship should not preclude Washington from doing the right thing and fixing this unfairness. It’s time to do away with a convoluted and arcane tax system that rewards those who can hire the best lawyers and lobbyists.

Carrie Sheffield is executive director of Generation Opportunity.