WASHINGTON, D.C. — Small business owners decried the impact of the current tax code on their businesses and lauded the newly-released GOP tax reform plan’s potential to “unleash the American dream” Thursday.
Small business owners expressed optimism about the expected impact of the framework on their respective operations during a press conference hosted by tax reform groups on Capitol Hill.
The framework, released Wednesday, cuts taxes for individuals of all income levels, small businesses, and corporations, and eliminates itemized deductions for the wealthiest Americans.
Kristie Arslan, the owner of D.C.-based gourmet popcorn company Popped Republic, praised the GOP plan for the simplicity that she expects the reform to bring to the tax code. Arslan, who founded her business five years ago with her husband, said she has always feared the IRS.
“One of the things I always say is that since starting our business our biggest fear has been the IRS,” Arslan said during the press conference. “[The tax code is] so confusing for us. We are small, we don’t have the ability to have an in-house accounting team to keep an eye on what’s coming down the pike with taxes or help us make decisions on how we can position our business to be most effective with the tax rates.”
Rebecca Boenigk, President and CEO of Neutral Posture, America’s only female owned office furniture company, reiterated the importance of injecting simplicity into the tax code.
“I figured out pretty quickly that the government was running my business,” Boenigk said. “My tax return was 72 pages long, I have no idea what all of that says and what all of that means, but I’m the one who has to sign it.”
Both Arslan and Boenigk lamented the high individual pass through tax rate they pay under the current system, and said the additional available revenue gained under the new framework would allow them to reinvest and grow their businesses.
Roughly 95 percent of American businesses qualify as “pass through” businesses, the majority of which are small businesses like sole proprietorships, partnerships, and S-corporations. Those businesses pass their profits and losses directly to their individual owners. The owners are then taxed at the top individual rate of 39.6 percent, rather than the existing top corporate rate of 35 percent.
The new framework limits the top tax rate levied against any American business at 25 percent, including small businesses previously hampered by the pass through rate.
Arlsan noted that the additional revenue she would retain under the newly proposed plan would allow her to invest in another location, which would allow her to add six employees to her 11-person workforce.
The elimination of the individual pass through rate has received some pushback as critics have pointed out that certain large businesses, like NFL teams, currently pay the pass through rate, and the new plan would amount to a tax cut for the extremely wealthy team owners.
Tom Click, owner of Virginia-based aluminum manufacturing firm Patriot Aluminum, emphasized the impact of the elimination of eliminating the estate tax under the new framework. The estate tax, which can be as high as 40 percent, applies to assets greater than $5.49 million. The high threshold at which the estate tax is applied has led critics of the tax reform plan to suggest that the elimination of the tax amounts to a handout for the wealthiest Americans. But Click cast the reform as a much-needed assurance to nascent small businesses.
He explained that as a manufacturing business, his firm is in a uniquely risky position under the current system, as a large portion of his assets are tied up in materials. The illiquid nature of his business would force his wife and children to sell off shares of the business to raise the cash required to pay the estate tax in the event of his death.
“Manufacturing businesses aren’t like service businesses; there’s a fundamental misunderstanding of how manufacturing works,” Click told the Daily Caller News Foundation. “I have a new policy that’s going to cost more per month than I would pay an employee. Our insurance costs to defray the uncertainty, will be more than the salary of one and a half employees.”
Click characterized the estate tax as a “grab for money,” and said that it amounted to the government taking advantage of families during their most vulnerable time.
“It’s taking advantage of these families that are devastated,” Click said.
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