The results of a recent CNBC/SurveyMonkey Small Business Survey indicated that over 25 percent of the more than 2,000 respondents consider tax reform to be the most important issue facing them in the coming period.
The Trump administration is proposing parity for both small businesses and corporations in its plans to overhaul the tax code, which would bring the current top rate of 39.6 percent for individuals and 35 percent for businesses down to an even 15 percent.
House Speaker Paul Ryan also recently spoke in favor of overhauling the tax code, pointing out the uneven playing field for small businesses that file as pass-through entities, in comparison to their corporate counterparts.
“Here in America, 8 out of 10 businesses file their taxes as individuals,” Ryan said. “In fact, most of our jobs come from these … small businesses. Real tax reform … means creating a new lower tax, specifically for small businesses, so they too can compete on a fair, level playing field.”
It appears that while many small business owners agree with these statements, they also believe that the complexity of complying with the federal tax code is another challenge in addition to high tax rates. Jeremy Wanamaker, CEO of the 30-person IT services provider Waypoint Solutions Group, explains that he strategizes with his CPA in order to maintain competitiveness.
“We want to be as aggressive as we can while staying within the boundaries of the law,” Wanamaker said. “The tax code is too complicated. I think that small businesses are not able to reinvest money easily. The way we are taxed on our profits makes it difficult to reinvest. If we have a profitable year, we pay taxes on all of our profits, whether we use that money to take home or put it back into the business.”
Wanamaker believes that the Trump administration’s proposal for parity between large and small businesses would be a “very effective way” to encourage small businesses to hire and grow.
“If the tax rate on pass-through income was reduced, I could then take that money and reinvest it back into the business,” Wanamaker explained. “That means hiring more people, buying equipment and doing something that impacts the economy as a whole.”