“Entrepreneurs and their small enterprises are responsible for almost all the economic growth in the United States” – President Ronald Reagan
President Reagan’s words reflect my own long-held belief as a former small businessman that small businesses are the backbone of our nation. In fact, small businesses provide a majority of the jobs in this country, generally about 60 to 80 percent. Small businesses are where ideas and innovations are not only brought to life but are nurtured into American success stories and economic opportunities. And as Vice Chairman of the House Small Business Committee, I remain concerned that in order to preserve the economic building blocks produced by small businesses we must ensure that burdensome regulations and job-killing taxes do not become walls to prosperity.
As taxpayers, we all know the tax code is confusing. In fact, it’s so confusing that individuals and small businesses combined spend more than six billion hours and more than $100 billion every year trying to understand and comply with the tax code. With that in mind, the House Ways and Means Committee earlier this year announced it was going to take on the task of overhauling the tax code to make it simpler and fairer for hard-working Americans.
While I fully support a reformed tax code, it was critical for me to bring to the committee’s attention how a particular reform could affect a variety of small businesses in a very specific, possibly negative way. Last month, U.S. Rep. Mike Quigley and I sent a bipartisan letter, which was signed by nearly 70 other Members of Congress and sent it to the committee urging its members to consider the negative effects of proposed reforms may have on the accounting flexibility of small businesses and farmers across America.
The proposed Tax Reform Act of 2013 would expand the use of cash accounting from businesses with gross receipts that do not exceed $5 million to those with gross receipts that do not exceed $10 million; a reform I strongly support. However, it would also limit the use of cash accounting for certain pass-through entities, farmers, and personal service corporations that have historically paid their taxes using the simple and appropriate cash accounting method. I worry that placing additional accounting burdens on the pass-through entities that account for more than 90 percent of all businesses in the United States and on the American farms that feed this nation and numerous other families abroad would hinder their ability to hire more employees, grow and raise more agricultural products, remain competitive with their foreign counterparts, and help this nation thrive.
The fact is America is long overdue for a simpler and fairer tax code. However, cash accounting is critical for small businesses, which I would argue the committee highlights with the expansion of cash accounting for C corporations and which is why I support continued accounting flexibility for pass-through entities and personal service corporations.
With my history in small business and my current responsibilities on the Small Business Committee, I am deeply committed to preserving the health of America’s small businesses and minimizing the obstacles before them.