Tax Reform Especially Crucial for Small Businesses
We have one of the highest federal tax rates for corporations in the developed world at 35 percent. Mexico’s corporate tax rate is 30 percent. The United Kingdom’s is 19 percent. Canada’s is 15 percent.
That’s bad enough, but here’s the kicker: Most U.S. small businesses are unincorporated, and three-quarters are organized as pass-throughs.
That means they pay taxes at the individual rate, which can be even higher. Today, the highest federal tax rate for individuals is above 40 percent. When you add in state taxes, a lot of small businesses end up sending close to half of their income to the government.
That’s why small business owners support the Tax Cuts and Jobs Act, which is slated to receive a vote in the Senate before the end of the year. The National Federation of Independent Business (NFIB), which is West Virginia’s leading small business organization, is urging Senators Joe Manchin and Shelley Moore Capito to support the measure.
The Senate bill would provide relief by creating a 17.4-percent deduction on pass-through income up to $500,000.
That deduction would result in a significant reduction in taxes for small businesses regardless of their tax bracket. And it would be available to all small businesses, including service providers such as car mechanics and carpenters. This matters, because high taxes are taking a toll on small businesses.
Every couple of years we ask members of the National Federation of Independent Businesses to evaluate 75 issues facing small businesses. On last year’s survey, half of the top 10 issues were related to taxes.
Our members say taxes are too high, and they say that the tax code is too complicated. Small businesses waste too much time and money trying to comply with the ever-changing rules and regulations.
Small business owners are encouraged that the president and congressional leaders acknowledge the need to cut taxes for small businesses. Small business accounts for 99.9 percent of all employers in this country, and it employs about half our nation’s private sector workforce.
Over the next several weeks, NFIB will be working to ensure that tax reform becomes law. That way, small businesses can continue to lead America’s next great era of prosperity.
Gil White is state director of the National Federation of Independent Business. White, who lives in Wheeling, served 14 years in the West Virginia Legislature.