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US House Committee Discusses Small Business Tax Reform

Monday, July 17, 2017

Small business owners have given evidence before the Ways and Means Tax Policy Subcommittee that lower tax rates, a simpler tax code, and certainty are critical elements of any tax reform package.

The Tax Policy Subcommittee heard evidence from three small business owners on how tax reform proposals would affect their businesses. A statement on the Ways and Means Committee's website summarized their testimony saying that "tax reform will help them expand their operations, hire more workers, and invest in their local communities."

The witnesses said that a reduction in effective tax rates would allow them to reinvest savings back into the business. They also highlighted problems they had experienced with complexity in the tax system, referring to experiences of unexpected tax liabilities and high legal and accountancy fees. In addition, they said that permanent reform to the tax code was needed to provide certainty to their businesses.

However, Chye-Ching Huang, from the Center on Budget and Policy Priorities, a nonpartisan research and policy institute, argued that cutting the tax rate for pass-through business would "overwhelmingly benefit the wealthy and tax avoiders, not small businesses."

Referring to President Donald Trump's proposal to cut income tax to 15 percent for pass-though business, she said that: "In reality, it would mostly help wealthy filers – such as hedge fund managers, investment bankers, and real estate investors – as well as high-earners who engage in tax avoidance by converting their salaries to pass-through income."