For years small business owners have sent a clear message to national elected officials: We need tax reform!
The complexity of the tax code and the burdens it places on small businesses are tremendous. According to the non-partisan Tax Foundation in Washington, D.C., the average person has to work until Apr. 12 this year to pay all local, state and federal taxes. That’s 102 days. Even a 15 percent reduction in this burden would free up significant resources for business owners.
Lately, several promising measures have moved forward that indicate that small business tax reform may be at hand. Let’s take a closer look at some of these measures.
Repeal of additional 1099 reporting requirements
The Patient Protection and Affordable Care Act, commonly referred to as the healthcare reform law, created onerous reporting provisions for small business owners—which I wrote about here. The measure would have made small business owners responsible for filing 1099 forms not just for independent contracts but also for businesses that met certain requirements. This would have multiplied the bureaucratic burden on small business owners. On Apr. 5, 2011 The Senate—following the House—voted to repeal this measure. The president signed it into law on April 14. This is an example of how small business owners and their representatives successfully overturned a burdensome law.
Want to read more tax tips? Check these out:
Proposed reform of income tax
The Republican Party, which currently holds the majority of seats in the House of Representatives, recently presented their proposal for the fiscal year 2012 budget. It proposes to address both the long-term and short-term fiscal problems of the country without placing the burden on business owners and entrepreneurs. “The Path to Prosperity: Restoring America’s Promise” is the report that outlines these proposals which were championed by House Budget Committee Chairman Paul Ryan of Wisconsin.
While the likelihood of these proposals reaching the President’s desk for signature is unlikely, at the very least they finally address the fundamental issues which hurt the U.S.’s financial standing. Key provisions include:
- Reduction in the top marginal income tax bracket for individuals and businesses to 25 percent from 35 percent.
- Elimination of all but two tax brackets: 10 percent on incomes up to $100,00 and 25 percent on incomes above that.
- Elimination of tax credits and tax deductions and other incentives that are skewed in favor of large corporations that can afford to hire lobbyists who in turn help draft legislation in their favor.
- Elimination of the Alternative Minimum Tax.
- Elimination of capital gains taxes, taxes on dividend income and taxes on interest and estate taxes.
- Replacement of the corporate income tax with a business consumption tax of 8.5 percent.
Go to the article: Small Business Tax Reform May Finally Be Here
