Opinion: Time for Small Businesses to Benefit from Tax Reform

Opinion: Time for Small Businesses to Benefit from Tax Reform

Morning Consult
May 14, 2019

BY FRANK KNAPP JR.

It happens every year. The weeklong, business-boosting spotlight on small business during National Small Business Week fades to business as usual. The high-profile campaign to promote shopping local with small businesses is replaced by other national concerns about growth and investment, filling jobs, providing healthcare and tax reform.
That’s right. Tax reform is back.

Corporations had their taxes permanently slashed by 40 percent under the Trump Tax Cuts of 2017. This resulted in a swath of American businesses benefiting. The big ones.

JP Morgan, for example, benefited to the tune of $3.7 billion on its tax bill—and proudly reported record profits this year. And Harley-Davidson shaved about 10 percentage points off the taxes it pays on its estimated $800 million-$1 billion in profit.

Meanwhile, small businesses owners—your local dry cleaners, hairdressers, retailers, childcare providers, handypeople and so on—found themselves grappling with lost deductions, higher accounting fees and increased levels of uncertainty. While some did have their taxes reduced slightly by a temporary tax deduction, the promise of a simpler and fairer tax structure for small business went largely unfulfilled for most of the nation’s entrepreneurs.

Not the outcome small business expected. Not the future they were hoping for.

I know this because they are my constituents. I am the co-chair, along with small-business CPA Anne Zimmerman, of Businesses for Responsible Tax Reform. BRTR is a coalition of national business leaders calling for tax reform that truly benefits America’s small business owners. We are dedicated to ensuring that tax reform is fiscally responsible, creates a level playing field for all businesses, grows the economy and works for our nation’s 30 million small business owners.

That is what brought us to Washington, D.C., this week to talk to policymakers about ways to revamp or improve the tax law to make it fairer and more beneficial to small business owners. Because despite the new tax law, despite decades of lip service about “helping small business,” small business owners feel that little has changed. Our organization has been in existence for two years and we still hear the same concerns: the tax code doesn’t help them grow, doesn’t help them hire, doesn’t help them invest.

This is not merely anecdotal, although there are plenty of anecdotes I could cite. Last month, during the heat of Tax Season, our organization conducted a Morning Consult poll in which only 19 percent of small business-owner respondents said the 2017 tax law helped their profitability. On hiring, only 15 percent said they were able to hire new employees and only 20 percent were able to give raises. They also felt stung by the inequities of the law, and would like to see action on the issue. Sixty-five percent said corporations do not pay their fair share in taxes—the same number who said they would support rolling back the 40 percent corporate tax cut to fund policies that help small businesses.

An April Bank of America survey came to a similar conclusion, stating that “overall, it appears the tax law didn’t help small businesses as much as the GOP predicted.” In that study, just 28 percent of respondents said the policy has been positive for their companies, down from the 45 percent who predicted a year ago it would be positive for them. And 21 percent said it was negative, up from 15 percent last year.

America’s small businesses are the lifeblood of our economy and the linchpins of our communities. Their 30 million businesses employ 60 million people—half of all private-sector jobs. The health of our nation depends on their success.

If Congress believes that the tax code should be used to help businesses be more successful in order to spur the economy, that philosophy should apply to all businesses, not just the big ones. So tax reform should be back on the national agenda. But this time it should be aimed at promoting entrepreneurship and small business success.

Small business owners already have ideas on how to do that. We know because we asked. Among them: equalizing the tax savings rate between small and large businesses; making the first $25,000 in profit for a small business tax-free; simplifying the tax code; giving small businesses relief on payroll taxes; doubling the startup tax deduction; and creating a tax credit for a small business owner hiring their first employee.

One week a year for spotlighting small business is nice. But tax reform targeted to small businesses will help us 52 weeks a year, every year. That would be great.

Frank Knapp Jr. is the co-chair of Businesses for Responsible Tax Reform and president/CEO of the South Carolina Small Business Chamber of Commerce.

https://morningconsult.com/opinions/time-for-small-businesses-to-benefit-from-tax-reform/