What Small Business Owners Should Know About Tax Reform
There are many complex policy issues that have a major impact on the small business community. Each week, we’re going to help break one of those issues down so small business owners can stay in the know and remain aware of their stake in these national issues. This week’s Issue Q&A is on tax reform.
Q: How will corporate tax reform help small businesses?
A: The current corporate tax code contains tax loopholes that favor large corporations, while placing smaller companies at a disadvantage. According to our scientific polling, four in five small business owners support reforming the corporate tax code and closing corporate tax loopholes, or inversions, which allow big businesses to relocate their base overseas for tax reasons. These inversions harm small businesses and closing them would create a much more level playing field.
Q: What steps can be taken to reform the tax code and level the playing field for small businesses?
A: The nation needs a tax code that creates opportunities for small businesses and encourages startups and entrepreneurs. There are many other steps that can be taken to achieve this goal:
- Ensuring parity between online and brick-and-mortar businesses with a reasonable Internet sales tax solution will bring about a fairer tax code.
- Simplifying and expanding the small business healthcare tax credit so more small companies can provide coverage for their employees will bolster small businesses to compete with larger businesses for top-tier talent.
- Cracking down on the ability of large corporations to reduce their tax burden by simply moving their headquarters outside the country will ensure a more level playing field.
Q: Is there any current legislation under consideration that would help reform the tax code and benefit small business?
A: Yes! The Marketplace Fairness Act could settle the issue of parity between online and brick-and-mortar stores for good. The act would require online retailers to collect sales tax from customers in states where the retailer has no physical presence and remit them to each customer’s state. With a small business exemption for online sellers making less than $1 million annually, this act would level the playing field for brick-and-mortar stores while delivering additional revenue to state and local governments.
The Small Business Tax Relief Act, passed by the House in June 2014, would improve a crucial part of the tax code for small firms and give small businesses more financial confidence, promoting increased investment. The act would allow small businesses to deduct the cost of purchasing new equipment up-front, enabling business owners to maximize investments for their company, expand and create jobs.
Finally, the Small Business Jobs and Credit Act, passed in 2010, should be extended permanently to allow self-employed individuals to deduct the cost of healthcare from their income. These entrepreneurs currently pay 15.3% more in taxes because they are self-employed. To achieve true tax equity, the self-employed must be able to exclude health insurance premiums from self-employment tax.