The Small Business & Entrepreneurship Council (SBE Council) and other business groups offered Senate Finance Committee Chair Orrin Hatch (R-UT) feedback on how to revamp the tax code to help small businesses.
In a letter to Hatch, the business groups made three key recommendations to help small businesses. First, they implored lawmakers to reduce tax rates for all businesses. At 35 percent, the U.S. corporate tax rate is among the highest in the world. The plans offered by both President Donald Trump, Speaker Paul Ryan (R-WI), and House Ways and Means Chairman Kevin Brady (R-TX) lay a foundation for productive tax reform, they wrote. Cutting the corporate tax rate will help businesses of all sizes, as more than 86 percent of corporations today have fewer than 20 employees.
Second, they said lawmakers must understand that businesses are affected heavily by individual income tax rates. Roughly 95 percent of U.S. businesses are non-C corporations that pay the personal, rather than the corporate, income tax. For these business owners, the tax code’s highest personal income tax rate, at 39.6 percent, is an obstacle to growth.
Third, they call for reform that allows for the full and immediate expensing of capital expenses. Allowing businesses to immediately deduct the full cost of their capital investments, rather than over the course of several years, could lead to higher levels of investment, job creation, and growth, they said.
“There is a clear need for tax reform that is bold and balanced, resulting in a tax code geared towards growing our economy, not restricting it,” SBE Council President and CEO Karen Kerrigan said. “We believe the best plan on comprehensive tax reform must include a territorial system, with significantly lower rates, full expensing and simplicity as key goals. Comprehensive tax reform must be bold and balanced, and work for all Americans. It would be a tremendous mistake to not capitalize on this historic opportunity to make transformative changes to the nation’s tax code to help grow the American economy and small businesses, which will lead to the creation of high-quality jobs for millions of Americans.”