NEWSRELEASE
For Release: November 15,
2002
Contact: John McDowell (202) 205-6941
SBA Number: 02-42 ADVO
john.mcdowell@sba.gov
Tinkering With Taxes Hinders Small Business Planning And Growth
Small Business Needs Certainty Beyond The Next Election
WASHINGTON, D.C. – Tinkering with the tax system and unexpected changes in tax rates make running a small business much more difficult and result in lower economic growth. These are the findings of a paper presented today to the National Tax Association’s 95th Annual Conference on Taxation held in Orlando, FL by Dr. Radwan Saade of the SBA’s Office of Advocacy.
The paper, "Rules Versus Discretion in Tax Policy," applies analysis used in macroeconomic policy to understand the role and effects of "rules" in tax policy. These rules include such things as mandated balanced budgets and legislative super majorities needed to change tax rates.
The paper notes that typical small business plans span five to 10 years. These plans require that the business owner make assumptions about the tax and regulatory environment, so that the plans make sense. Yet, this planning horizon is longer than the political election cycle. With adjustments to the tax code hinging on election outcomes, the result is less predictability. Less predictability means less economic stability, which means lower economic growth.
Rules implemented by some states, such as restraints on spending or revenues, offset the tax tinkering and result in greater stability and predictability for small business owners.
"This paper is part of the Office of Advocacy’s effort to more fully understand barriers to entrepreneurial growth," said Thomas M. Sullivan, Chief Counsel for Advocacy. "It’s a strong addition to Advocacy’s arsenal of research that policy makers can turn to when they need to understand their impact on small business, economic growth, and job creation," he said.
For more information and the complete text of the paper, visit the Office of Advocacy website at www.sba.gov/advo.
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Created by Congress in 1976, the Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. Appointed by the President and confirmed by the U.S. Senate, the Chief Counsel for Advocacy directs the office. The Chief Counsel advances the views, concerns, and interests of small business before Congress, the White House, federal agencies, federal courts, and state policy makers. Economic research, policy analyses, and small business outreach help identify issues of concern. Regional Advocates and an office in Washington, DC support the Chief Counsel’s efforts. For more information on the Office of Advocacy, visit http://www.sba.gov/advo, or call (202) 205-6533.