As we speak, the Senate is sorting out the details of tax relief, with a vote expected soon. The House has already passed the pro-growth Tax Cuts and Jobs Act, leaving it up to our senators to reward millions of small businesses nationwide.
And reward small business they must. America is home to nearly 30 million small businesses, which employ nearly 60 million workers—half of the U.S. workforce. In fact, just about 99 percent of American companies are small businesses, which are responsible for two-thirds of America’s net new jobs. The writing is on the wall: When small business succeeds, the U.S. economy succeeds.
But these job creators are being crushed by high tax rates and a complex filing process. Our tax system has not been substantially updated since the 1980s, when President Ronald Reagan signed the iconic Tax Reform Act. Under the current tax code, the overwhelming majority of small businesses (95 percent) are taxed at the highest individual marginal tax rate. The federal rate hovers around 40 percent, while state and local taxes can reach 50 percent. That’s right: Job creators are often left with only half of their business income to finance business expansion and new hires.
Take it from a small business owner. I started my company, Guy Chemical, in 1995. Headquartered in Somerset, Pennsylvania — about an hour outside Pittsburgh — we specialize in manufacturing silicone products and packaging for the consumer and industrial markets. In business for over 20 years now, I’m proud to say that we currently have about 130 employees.
But our path to prosperity was paved with trials and tribulations. I lost money for almost three years. I did not draw a salary from my business for five years. When I finally began drawing a salary, it was $36,000 a year. It goes without saying, but $36,000 doesn’t get you very far in Somerset or Pittsburgh — let alone Washington, D.C. Struggling to stay afloat, I knew that I had to expand our accounts receivable and grow Guy Chemical into a real player in Pennsylvania’s manufacturing space.
How did I do it? To finance our growth, I mortgaged my house seven times. I took out four loans in 2008 alone.
Unfortunately, government polices never helped. I’ve had to take out bank loans on numerous occasions just to pay my taxes. Because Guy Chemical has become successful, I’m currently in the 39.6 percent tax bracket. After all of our allowed deductions, I’m still paying 36 percent of business income in federal taxes. When you combine federal, state, and local taxes, my total tax burden is nearly 50 percent. For every dollar Guy Chemical makes, I send 50 cents of it to Uncle Sam.
Our current tax code hurts small business employees the most. If I could keep more than 50 percent of my business income, I would use it to hire more employees and raise wages for my current workers. Cutting taxes isn’t about lining my own pockets; it’s about growing my business and helping my employees line theirs.
For months, President Trump proposed a tax rate of 15 percent for small businesses, urging legislators to help small businesses first and foremost. Our senators must heed his words now, passing a tax plan that rewards job creators and the millions of Americans they serve. Sens. Ron Johnson (R-WI) and Steve Daines (R-MT) are now encouraging even deeper tax cuts for small businesses to level the playing field.
They’re right. The less small business owners pay, the more their employees take home — and the stronger our economy becomes.
Guy Berkebile is the founder and president of the Guy Chemical Company in Somerset, Pennsylvania.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.