Now that the filing deadline has passed it is safe to put both taxes and the IRS out of sight and out of mind, right? Not according a report released by the House Small Business Committee (HSBC). The report, “Seven Ways to Stimulate the Economy by Updating the Internal Revenue Code”, came out of an April 10 HSBC hearing where experts and witnesses testified on the need to and benefits of modernizing the current U.S. tax code.
The impetus behind the report is to demonstrate how the current IRS code inequitably treats small businesses, compared to their corporate counterparts, and how that is driving down the economic stimulus that small business can provide to a faltering U.S. economy.
Chairwoman Nydia M. Velázquez stated, “Small businesses have always led us to economic recovery and growth, but the tax code is holding them back.” Velázquez went on to say, “With the nation facing the prospect of a recession, we should do everything possible to remove the barriers that stand in their way.”
The report lays out seven steps that can be taken to remove the barriers posed to small businesses across the nation. The recommended provisions include:
- Simplify the “Home Office” Deduction.
- Update the outdated equipment deduction limits and loosen the unreasonable record keeping requirements that are placed on small businesses.
- Adjust the listed property limits for automobile depreciation as the current law is based upon 1984 prices.
- Shorten the depreciation schedules particularly for computers, retail improvements, goodwill amortization, and HVACR equipment.
- Allow self-employed entrepreneurs to the deduct cost of health insurance premiums.
- Raise the small business limit for deduction of business meals and entertainment to 80% or 100%.
- Incentive for Investment in Small Firms Eliminated by Reduction of Long-Term Capital Gains Tax
NSBA members voted tax equity for small business one of the top ten priority issues for NSBA during the 110th Congress. NSBA’s support of small-business tax equity includes: elimination of the self-employment tax on health care, establishment of pension contribution parity, and an end to the owner exclusion from cafeteria plans.
While NSBA supports all of the provisions laid out in the HSBC report of particular interest is the proposed action on health insurance premiums. NSBA worked closely with Velázquez and HSBC staff to ensure that the health care provision would be included in the report. That current loophole in tax law results in millions of self-employed individuals paying an additional 15.3 percent in payroll taxes on the cost of their health insurance premiums.
The importance of tax equity for small business is best summarized by Velázquez’s statement that “Antiquated fiscal policy that is overly complex and fails to meet the needs of the small-business owner only hinders the ability of these crucial drivers of innovation and growth. Implementing the recommendations contained in this report would yield long-term benefits to our economy and restore American competitiveness around the globe.”
Click here, to read the complete HSBC report.
Click here, to view NSBA’s Tax Equity Issue Brief.