Congress should finish strong with small business tax cuts
With the changing of the seasons, the political winds in Washington have shifted. Congress has just a couple months before the holidays, and the American people are looking for results. Lawmakers have the opportunity to deliver well-deserved tax cuts for middle and low-income taxpayers; but also for small businesses, the backbone of our state and national economies.
Here in Ohio, small businesses are an especially big deal. A whopping 99.6 percent of our companies are small businesses, according to figures from the U.S. Small Business Administration. They employ over two million Ohioans, making up 46 percent of all employees in-state. In the latest Kauffman Foundation rankings, Columbus and Cleveland both placed in the top-30 metro areas nationwide for entrepreneurial growth rates.
In the U.S. House of Representatives, the Small Business Committee is chaired by Ohio’s very own Rep. Steve Chabot. He’s well aware that small businesses — and the economic growth they provide — are being held back by onerous taxes. “While there are many reasons potential entrepreneurs are apprehensive,” he recently said, “perhaps the biggest barrier to taking the leap is the broken tax code.”
Thanks to the unfair pass-through system that taxes many small business owners at their highest marginal individual rate, he noted: “Businesses with five or fewer employees face burdens as high as $4,500 per employee.” For pass through entities like Sub-chapter S corporations, sole proprietorships, etc., — which over 90 percent of small businesses are — federal taxes can reach a whopping 40 percent. Add state and local taxes, and small businesses can see half their income going out the door.
Worse yet, business owners often have to shell out even more to get help just to file their taxes — money that could be going to new hires, higher wages, and more facilities. One in three small businesses told the National Small Business Association that tax time takes two whole work weeks. Four in five said their top tax priorities are reduced rates and more deductions.
Fortunately, the Trump administration has set out powerful benchmarks for tax relief, including a 25 percent tax rate for small businesses and a simplified tax code. Congress ought to wrap up negotiations quickly and get on board with these common-sense policies.
The American people are ready to reward action. In an America First Policies poll, around 80 percent agreed that a federal tax bill is a must this year, focusing on tax cuts to jumpstart the economy while increasing take-home pay. Small business tax cuts are how you get that done, and voters know it. Surveys also show that Americans want Congress to focus on cutting taxes for small businesses right now. A majority told Morning Consult and POLITICO pollsters that small businesses are being stifled. Echoing Rep. Chabot’s analysis, more than 70 percent said individuals are being treated unfairly under the current tax code.
It’s time for Congress to take tax cuts national.