Tax reform is “the single most critical piece of legislation” that needs to happen in Washington.
That’s a personal plea I heard not from a lawmaker or a lobbyist or even the President, but from a small business owner in Pittsburgh. Her name is Wendy, and she runs a mechanical contracting company. I met her during a roundtable discussion I hosted as head of the U.S. Small Business Administration.
Wendy noted the current tax system is inherently unfair. As a small business, she’s paying a rate of 35 percent, and her effective tax rate is higher than that of multinational firms that can park their profits overseas. And that’s crippling her business. She calculates that if her tax rate were lower, she would double her growth projections over the next five years. And growing her business would mean she could hire more workers.
That’s why President Trump has made tax reform a top priority – it would both grow the economy and help our small businesses create jobs. And a simpler tax structure would enable small business owners to spend more time focused on running their businesses.
Last night the President was in Pennsylvania and laid out his plan to cut taxes and simplify the tax code. He noted it will help the middle class by putting more money in their pockets. And small businesses would see their tax rate drop to the lowest rate in 80 years.
The President’s tax proposal is based on four pillars:
Make it easy. The current tax code is 2, 600 pages, and there are another 70, 000 pages of forms, instructions, and other pieces of guidance associated with it. In a letter submitted to the House Subcommittee on Tax Policy, the chair of the Small Business Council of the U.S. Chamber of Commerce noted that the total cost of complying with the tax code is about $100 billion – with small businesses bearing almost two-thirds of that cost. Most small business owners don’t have accounting expertise of their own, so they’re paying CPAs and attorneys to help them. That’s money they could be investing in their own businesses.
Make it fair. Streamlining the tax code would mean small businesses are no longer at a competitive disadvantage to big companies that can afford accountants to find special tax breaks and loopholes to reduce what they owe to Uncle Sam.
Win again. Small businesses here face a marginal federal tax rate as high as 44.3 percent. Reducing the rate businesses pay would lead to more jobs, more competitive wages, and more money in the pockets of American workers. And American companies will be better able to compete in the global marketplace.
Bring it home. Our high tax rate gives companies an incentive to move elsewhere. A lower rate would encourage them to bring wealth back home, where they could invest in American workers and American communities.
Wendy is far from the only small business owner pleading for tax reform. I have visited offices, factories, retailers and restaurants from coast to coast, and I hear a common theme – they want their taxes to be lower and less complicated. And they want to know what they can expect. They tell me that when they can’t plan ahead for their taxes, they can’t make investments in their future. They are hesitant to hire new employees or invest in new equipment or expand their operations.
America’s 30 million small businesses are the engines of our economy. Common sense tax reform will accelerate their success and fuel our nation’s economic growth.