Tax Policy

Today, small-business growth is stifled by taxes that are too high and a system that is complex and burdensome. Without a permanent, predictable policy environment in which to make sound business decisions, optimum small-business growth cannot be achieved.

Actions must be taken during the first 100 days to address the inept tax policy currently in place, which in return will foster entrepreneurship and the growth of small business. Specifically, NSBA recommends the following actions:

Avoid burdening the small business community with ill-considered attempts to close the “tax gap.” A number of steps were recommended by the Bush Administration to close the tax gap, but many of these impose significant administrative, reporting, and tax collection burdens on small companies, in order to collect taxes from other bad actors—despite a real debate about the efficacy of these approaches. While it is tempting to “score” these steps as easy revenue raisers in a difficult fiscal environment, many of these recommendations may impose big IRS burdens on small businesses without a commensurate increase in federal tax revenues. Repeal the recently adopted reporting requirement on credit card receipts.

End the Self-Employment tax on health insurance. Small business owners are the only members of society whose employer-provided health insurance is subject to FICA taxes. Since the self-employed pay both halves of this tax (the so-called self-employment tax), it makes for a 15.3% tax on employer-provided health benefits that no one else must pay. Ending this tax not only would end a significant inequity, it would also greatly reduce the cost of health insurance for many self-employed Americans.

Permanently reform the estate tax by instituting a significant exemption indexed for inflation. The estate tax regime will revert to its 2001 state if no action is taken by this Congress. Small businesses need a permanent and predictable system that is not eroded by inflation.

Equalize top marginal tax rates for corporate and pass-through entities. Higher marginal tax rates for Pass-through entities will put successful small businesses at a competitive disadvantage to larger businesses. Any increase in individual marginal tax rates should exclude increasing the marginal tax rates on the trade or business income from pass-through entities. Small business should not pay higher taxes than larger businesses.