House Small Business Committee Hearing on Tax ReformApril 10, 2013
On Wednesday, the House Committee on Small Business held a hearing titled: Small Business Tax Reform: Growth Through Simplicity. Ways and Means Committee Chairman Dave Camp (R-Mich.) served as a key witness and testified before the committee on his Discussion Draft: Provisions to Reform the Taxation of Small Businesses and Pass-through Entities released March 12, 2013. He focused on the following small-business provisions: S-Corporation reform, Section 179 expensing, the cash-method of accounting, unified deductions for start-ups, and general simplification.
The purpose of the hearing was to receive testimony from Chairman Camp as well as small-business owners representing a variety of industries, on several proposals to reform and simplify the tax code. Over time, our tax code has become more complex and truly temporary. Taxpayers, and particularly small-business owners, are spending more of their time and resources to comply with and adjust to onerous tax laws, instead of investing those resources and assets back in their business.
Tax reform is NSBA’s number one priority, driven by the fact that, according to NSBA data, more small businesses cite complexity and administrative burdens (55 percent) as the biggest problem with the tax code than those that cite the financial burden (45 percent). Furthermore, more than one-in-three small businesses spend more than 80 hours per year–two full work-weeks–on federal taxes alone. This is wildly unfair and economically unsustainable.
Last month, Camp released a discussion draft aimed at creating a simpler and fairer tax system for small businesses. His draft is part of a broader, comprehensive tax reform package that would significantly lower rates for individuals, small businesses and corporations. The discussion draft is the latest in a series of drafts put forth by the Ways and Means Committee as a result of hearings, stakeholder meetings and working group discussions over the past year. Among a host of proposals, the draft includes:
- Permanence for Section 179 expensing at threshold of $250,000, which is set to drop to just $25,000 in 2014;
- Simplification and an increase in the threshold for small-businesses utilizing cash accounting from $5 million to $10 million for all businesses;
- An increase and expansion in the deductibility of start-up expenses from $5,000 up to $10,000 and inclusion of operational costs;
- A reordering and simplification of the due dates of tax returns for partners and S corporations; and
- Two separate options designed to achieve greater uniformity between S corporations and partnerships.
While NSBA continues to push for a broad reform, and has been a leading proponent of the Fair Tax, Chairman Camp’s draft raises important issues on small-business taxation and is a step in the right direction. Moving forward, NSBA encourages any formal proposals to embrace the key tenets of NSBA’s Tax Reform Checklist: promote fairness, transparency and eases complexity.