Velázquez Pushes for Tax Reform that Benefits Main Street
Washington, July 24, 2019
Washington, D.C.— Today, the House Small Business Committee, under Rep. Nydia M. Velázquez (D-NY) gathered experts and entrepreneurs to examine the impact of the Tax Cuts and Jobs Act (TCJA) on small businesses. The TCJA emphasized tax cuts for large corporations while making the tax code more complicated for many small business owners.
“What we are seeing nearly a year after the tax law was passed is that Main Street sees little to celebrate,” said Chairwoman Velázquez. “That’s why it’s no surprise that nearly 50 percent of small firms said that the new tax law had no impact on the growth or profitability of their business. And when small businesses are shortchanged, so too is the rest of our economy.”
In 2017, a Republican-led Congress passed the TCJA, the most extensive tax overhaul of the 21st century. Despite the wide-ranging implications of the bill, the legislation was crafted mainly behind closed doors and was never the subject of a public hearing. The new law implemented a litany of changes to the tax code. The tax bill cut the corporate tax rate to 21 percent, redesigned international tax rules, and instituted a new complicated deduction for pass-through income. According to estimates by the Joint Committee on Taxation, these cuts will reduce tax revenue by $1.5 trillion over a 10 year period. Since its passage, the non-partisan Congressional Budget Office has suggested that the tax cut would add $2.3 trillion to the federal deficit during the period from 2018 to 2025.
In addition to cutting the corporate tax rate, the bill included provisions meant to benefit small firms like the Section 179 expensing allowance and the Section 199A deduction for small business income. Section 179 has been criticized for its temporary nature while 199A has been described as confusing and costly by many small businesses that have tried to take advantage of the provision.
The Congressional Research Service (CRS) also found that the Republican tax law had a limited first-year effect on the economy and wages. CRS concluded that the revised tax code came to mostly benefit high income individuals because of the cuts to the corporate tax rate and the individual tax rate for higher income brackets.
A representative from CRS was present to testify on the effect of the bill on small businesses.
“Provisions that raise taxes include eliminating graduated corporate tax rates, eliminating carryback of losses, ending the production activities deduction, limiting the meals and entertainment deduction, and disallowing the employee transportation and parking deduction,” said Jane Gravelle, Senior Specialist in Economic Policy at CRS.
The panel of witnesses also included small business owners who spoke about their experience with the Republican tax cuts.
“This legislation is not simpler for most small businesses,” said Grafton Willey, IV, a CPA and Small Business owner from Portsmouth, RI. “It has also not been simpler for the tax professionals preparing the tax returns. When I first read the Tax Reform Legislation, I took the 400 plus pages of paper in my hand and told the staff that they should not worry about their jobs. This is not simplification.”
“The problem that I have with the Tax Cuts and Jobs Act is that it did nothing to address pre-existing burdens in the tax code that make it harder for small businesses like mine to hire additional employees,” said Muneer Baig Founder & CEO of SYSUSA, Inc. in Manassas, VA. “Under the current tax code, I get penalized for growing. Every time I want to add a new employee my tax burden increases, and on top of that I have to pay my accountant more money after I take on a new hire.”
“What was touted as a clearer, more simplified tax system, has simply left too many small businesses behind,” said Chairwoman Velazquez. “Simply put, small businesses and working families were not a priority when this bill was passed—they were an afterthought. We need to do better for Main Street.”