While tax day is behind us, most small business owners have likely filed extensions to let them continue combing through the tax code looking for ways to keep their hard-earned dollars in their own coffers instead of in Uncle Sam’s. Fortunately, there have been some encouraging developments recently in Congress that could significantly impact small businesses.
The Senate passed a small-business friendly budget last month that indicates after months of political wrangling, lawmakers may finally be working on fiscal policies aimed at helping entrepreneurs. Coupled with the small business tax reform plan recently unveiled by Congressman Dave Camp (R-Mich.), we hope these developments are the sign of a new bipartisan consensus that small business success is the solution to our economic blues.
Entrepreneurs nationwide are slowly beginning to shake off the recession, and in many cases, think about expansion. These signs of growth underscore the need for budget bargains and deficit discussions to revolve around how we can improve conditions for small businesses.
House Ways and Means Chairman Dave Camp’s tax plan goes a long way to address the issue of small business expensing. Prior to the fiscal cliff deal that averted a major reduction in the amount of capital investments small firms can expense up front for one year, Small Business Majority’s scientific polling found more than eight in 10 entrepreneurs were anxious about the limit dropping to $25,000. While the one-year extension is good news, Camp’s proposal would permanently allow expensing of capital investments up to a quarter of a million dollars, 10 times what the limit is set to fall to in 2014. Not only that, the plan would also double the dollar amount small firms can expense for startup costs.
As talks around small business tax reform continue, it’s of course important to ensure steps are being taken to reduce our deficit. One way tax reform can help small businesses while reducing the deficit is to close wasteful loopholes disproportionately benefiting large corporations. In fact, a Government Accountability Office report appropriately released on tax day, April 15, found large corporations enjoyed more tax breaks in 2011 than they paid in corporate taxes. With the economy in the shape it’s in, it’s no wonder small businesses want large corporations to pay their fair share. Three-quarters of entrepreneurs agree these loopholes should be eliminated, and the same percentage says their small business is harmed when large corporations avoid taxes.
Fortunately, senators passed a budget promising corporate tax reform that can help level the playing field for small businesses while reducing our deficit. Just how big a dent would the budget put in deficit reduction? Nearly $1 trillion, by eliminating loopholes and wasteful spending in the tax code that benefit only the wealthiest corporations and individuals.
Support for plugging these loopholes has been popping up on both sides of the aisle: a bipartisan amendment introduced by Senators McCain, Levin and Whitehouse targeting corporate abuse of offshore tax havens also made its way into the final Senate budget resolution. The proposal aims to put an end to tax breaks for moving production overseas, among other things, which our polling found 90 percent of small businesses support.
All in all, we’re starting to see some real progress on the small business tax reform front. Lawmakers have a strong set of tax and budget plans before them. It’s up to them to continue building on the bipartisan efforts made thus far, and keep Main Street small businesses top-of-mind as they do it.