The Hill
November 14, 2017
By Ron Busby, Opinion Contributor
If the 2016 election was a referendum on the economy, you’d think lawmakers would put job creation and our nation’s long-term economic viability at the heart of their plans to overhaul the tax code for the first time in three decades. They’re not.
Instead, they are proposing an epic and fiscally irresponsible giveaway to large corporations, rather than focusing on harnessing the economic power of our nation’s actual job creators—small businesses.
A September report by the Small Business Administration’s Office of Advocacy unequivocally shows that small business, not big companies, led the way out of the Great Recession by creating most of America’s jobs. Since the recession, small businesses have created 8.3 million jobs—nearly two-thirds of all new private-sector jobs.
That’s why we’ve formed Businesses for Responsible Tax Reform, a coalition of small business owners and advocates, to ensure Congress hears from entrepreneurs about what they need and want from tax reform. I co-chair the coalition along with Frank Knapp Jr., president of the South Carolina Small Business Chamber of Commerce. Small businesses need tax reform that levels the playing field with big business so they can continue to create jobs. The proposals before Congress don’t even come close.
Consider:
- A huge corporate tax cut is at the heart of the GOP’s proposals. This is a benefit for big business that is being paid for by small entrepreneurs. For instance, corporations will still be able to deduct state and local taxes on their profits but the owners of small pass-through businesses will not. Moreover, under the House plan, 86 percent of small businesses get just a tiny fraction—if anything—of the tax cut promised to corporations. Large corporations see an across-the-board tax cut from 35 percent to 20 percent. To pay for these massive cuts, proposals would eliminate or cap deductions that middle class small business owners rely on, including for home office expenses, tax preparation, state and local taxes and mortgage interest.
- The proposals do nothing to level the playing field for small businesses. They significantly lower the corporate tax rate but fail to close many loopholes big businesses use to avoid paying taxes, such as their ability to shift profits overseas in search of lower tax rates. The proposals also do little to simplify the code, and actually make it more complex for the more than 90 percent of small businesses that organize their firms as pass-through entities. This means owners will continue to sink time and money into complying with a byzantine and bewildering tax code, further tilting the playing field in favor of large corporations that can afford armies of accountants to search out every loophole and advantage.
- The proposals needlessly balloon the deficit by more than $1.5 trillion. Why is this bad for small businesses? Because it will drive interest rates higher, discourage investment and become a drag on economic growth. During a time of relative economic strength, unbridled deficit spending—and the risks it poses to the economy—is unneeded and irresponsible.
In its rush to score political points, Congress is creating a slap-dash plan that will have a significant and long-lasting impact on our economy simply to meet an arbitrary deadline. There is no reason tax reform should vastly benefit corporations over small businesses, and in fact, doing so will considerably harm future job creation and economic vitality.
Congress must stand up and do what’s right for small businesses, the backbone of our economy. This means lawmakers need to go back to the drawing board and thoughtfully and deliberately develop a plan based on sound economic policies that actually help real small businesses.
Ron Busby is the president and CEO of the US Black Chamber of Commerce, and co-chair of the coalition Businesses for Responsible Tax Reform.