House Passage of Tax Bill is a Missed Opportunity to Help Small Businesses
Statement from Small Business Majority Founder & CEO John Arensmeyer on why the U.S. House of Representatives’ vote in favor of a tax reform bill will not help most small businesses
We’re disappointed that the U.S. House of Representatives today voted to pass legislation that blows a $1.5 trillion hole in the deficit while leaving small businesses behind. If lawmakers are going to add such a hefty amount to the deficit anyway, they should at least use a substantial portion of that money to help the small firms that employ nearly half of all private-sector workers. That Congress failed to do much for America’s 28 million small businesses, however, makes this latest tax reform effort a wasted opportunity.
This hastily drawn tax plan gives a whopping 55 percent of the pass-through reduction benefit to the top 2.6 percent of firms, meaning the likes of hedge fund managers and wealthy lawyers would be the primary beneficiaries. Indeed, the financial benefits to a pass-through entity making $500,000 are 20 times the benefits to a business making $75,000. What’s more, a priority of this legislation has been to slash corporate tax rates from 35 percent to 21 percent even though only five percent of small businesses pay corporate taxes.
Unfortunately, lawmakers have not recognized that entrepreneurs overwhelmingly support closing loopholes that strongly favor large multinational firms, such as the loophole that allows multinational corporations to defer paying taxes on foreign profits. In fact, Small Business Majority’s recent scientific opinion polling found seven in 10 small business owners believe their business is harmed when big corporations use loopholes to avoid taxes – specifically, 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. What’s more, 85 percent of entrepreneurs 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.
In 2018, we hope Congress will consider changes to the tax code that actually benefit most of America’s small firms instead of leaving them holding the bag. A step in the right direction would be allowing pass-through entities and C-Corp small businesses to deduct their first $25,000 of profit, thus benefiting the vast majority of small firms from the bottom up. Additionally, offshore tax deferral should be addressed in part because it could offset this $1.5 trillion tax cut. These changes would go a long way toward evening the playing field for small businesses and ensuring their future success. Sadly, Congress did neither this year.
About Small Business Majority
Small Business Majority was founded and is run by small business owners to ensure America’s entrepreneurs are a key part of a thriving and inclusive economy. We actively engage our network of more than 55,000 small business owners in support of public policy solutions and deliver information and resources to entrepreneurs that promote small business growth. Our extensive scientific polling, focus groups and economic research help us educate and inform policymakers, the media and other stakeholders about key issues impacting small businesses and freelancers. Learn more about us on our website and follow us on Twitter, Facebook and Instagram.