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Tax Reform Debate: Cause for Concern with Removal of Tax Expenditures
Advocacy report estimates the utilization of the largest federal tax expenditure provisions by small and large businesses in 2013.
WASHINGTON – The SBA Office of Advocacy study entitled, Measuring the Benefits of Federal Tax Expenditures Used by Small Business, analyzes the use of the largest federal tax expenditures by small business while projecting small business use of the top tax expenditures in 2013.
“Our nation’s policymakers need sound economic data to help develop the best fiscal policy for our country. Our report details the dynamics behind tax expenditures and the small business economy, but more importantly, the study suggests the hurried removal of certain tax expenditures to raise revenue could lead to unintended economic consequences for small business,” said Dr. Winslow Sargeant, Chief Counsel for Advocacy.
Today, many view tax expenditures as a loophole or tax break for big business. For example, the largest tax expenditure for large firms, deferral of active income of controlled foreign corporations, provides no benefit to small business. However, many of the important tax expenditures for small business were extended or expanded following the downturn and were intended to promote investment by small business. This study projects the largest federal tax expenditure provisions will total around $161 billion and small business use will make up approximately 25 percent or $40 billion of this total. For example, the study projects 10 percent of the largest tax expenditures for small business will be for domestic production activities totaling $3.9 billion in deductions for small business.
The full report is available on the Office of Advocacy website at http://www.sba.gov/advocacy/7540/756313.
Background: In the 1960s, Stanley Surray introduced the original concept of tax expenditures to encourage or increase participation in certain parts of the economy such as home ownership. The research relies primarily on Quantria Strategies, LLC’s individual income tax simulation model to calculate the utilization and value of major tax expenditure programs. The largest tax expenditure provisions referenced in the report are defined as those tax expenditures where the sum exceeds $500 million in the most recent year.
The Office of Advocacy of the U.S. Small Business Administration (SBA) is an independent voice for small business within the federal government. The presidentially appointed and Senate confirmed Chief Counsel for Advocacy advances the views, concerns and interests of small business before Congress, the White House, federal agencies, federal courts and policymakers. Regional advocates and an office in Washington, D.C., support the Chief Counsel’s efforts. For more information, visit www.sba.gov/advocacy, call (202) 205-6533 or get updates on Twitter (@AdvocacySBA) or Facebook at www.facebook.com/AdvocacySBA.