With health care reform on hold for now, Congress needs a win. Tax cuts pave the road to victory.
According to recent polls, 75 percent of Americans want tax reform this year. Voters find tax cuts so important that they only rank “create jobs” and “destroy ISIS” higher among their top priorities. Even most Democrats (61 percent) want to see tax cuts happen by the end of 2017, as almost half of them claim their taxes are “too high.”
The mandate is in place for Congress to join with President Trump and reduce the tax burden on working Americans. Small businesses need tax relief the most. According to hundreds of small businesses around the country, taxes are the top issue they face, ahead of even health care costs.
I can certainly vouch for that. As a small business owner in Missouri, federal taxes take a serious cut out of my business, leaving me less money to hire additional staff and raise wages.
This comes with real-world consequences. In the United States, there are 29 million small businesses, which employ roughly half of the U.S. workforce. Millions more – from family members to the customers they serve – depend on the success of small business.
Yet one in five small businesses spend at least $10,000 annually on tax administration costs. More than 60 percent of small business owners hire external help to file taxes. These are resources not being invested in business expansion and job creation, holding the U.S. economy back from reaching its full potential.
Tax relief can unleash the economic growth we desperately need. As a motel owner, I know firsthand. The more paid out in taxes leaves less money to cover my business costs.
In my home state of Missouri, Gov. Eric Greitens recently signed into law one of the largest tax cuts in state history. Individuals and small businesses will see their rates drop significantly. While most Missourians will have their state income tax reduced from 6 percent to 5.9 percent, small businesses that file through the individual income tax structure will see their rates drop to 5.5 percent, saving them more money to expand operations and hire new employees.
President Trump is pursuing a similar solution. The White House has proposed cutting the top federal rate for small business owners from 39.6 percent to 25 percent, alleviating much of their current burden. The Trump administration has also called for a simpler tax code, with four brackets instead of seven. This would save small businesses valuable time on tax compliance.
A recent Job Creators Network poll found that most small business owners would use a tax cut to either raise wages, open an additional location, buy new equipment, or hire more workers. I certainly would.
The time to act is now. Faced with a menacing tax code, fewer and fewer Americans are opening startup businesses. The share of private firms less than one year old has dropped from more than 12 percent in the 1980s to only about 8 percent since 2010. In 2014, the startup rate was the second-lowest on record, even as the U.S. economy slowly rebounded from the Great Recession.
Without tax relief, the future looks no brighter for America’s small businesses – and the people who rely on them. Congress has a job to do.
– Mike Patel is Principal/COO at Marquee Hospitality, a business management consultant agency in Kansas City.