Manufacturing & The Economy
House Ways and Means Committee Chairman Dave Camp (R-MI) has released a discussion draft aimed at creating a simpler tax code for small businesses. According to the National Federation of Independent Business, tax compliance costs are 65% higher for small businesses than for big businesses, costing small business owners $18 billion to $19 billion per year. In addition, nearly nine out of ten small businesses rely on outside tax preparers. About half of the private sector workforce is employed by a small business, a total of nearly 60 million Americans, whose tax rates can be as high as 44.6%.
As part of a broader, comprehensive tax reform package that significantly lowers rates for individuals, small businesses and corporations, the discussion draft reforms and simplifies a number of tax rules affecting small businesses and their workers. To help strengthen the economy by helping small businesses expand operations, hire new workers and increase wages and benefits, the discussion draft contains several core components that simplify tax compliance for small businesses and provide certainty with respect to the ability of small businesses to recover certain costs immediately. These include widely supported reforms such as permanent section 179 expensing and expansion of the “cash accounting” method, amongst other provisions.
The discussion draft includes two separate options designed to achieve greater uniformity between S corporations and partnerships. The Committee is soliciting comments from stakeholders on both options – one that revises current rules and a second that replaces current tax rules with a new unified pass-through regime.