Chairman Roskam Opening Statement at Tax Policy Subcommittee Hearing on How Tax Reform Will Help America’s Small Businesses Grow and Create New Jobs
WASHINGTON, D.C. – House Ways and Means Tax Policy Subcommittee Chairman Peter Roskam (R-IL) today delivered the following opening statement at a Subcommittee hearing entitled “How Tax Reform Will Help America’s Small Businesses Grow and Create New Jobs.”
CLICK HERE to watch today’s hearing.
Remarks as prepared for delivery:
“One of the things that makes Americans charming and delightful is that we are not a jealous people. When we see our neighbors succeed, we think ‘How nice for them.’ That’s because we know that with hard work that could be us, or that could be our children. Unfortunately, this basic premise of the American dream – that anyone with a good idea and hard work can start a successful business – is under attack, in part, from an antiquated and bloated tax code.
“In 1913 when the federal tax code was created, it was 400 pages long. Today, it is over 74,000 pages long. Need I say more?
“Imagine that you’re starting a small business that you’ve always dreamed of. First off, as a pass-through entity you should know that the IRS is planning to take 44.6% of your business’s income if you’re a success. That’s less money for you to grow your business, and it’s less money for you to hire workers with.
“Next, you’ll have to navigate through a mesmerizing array of depreciation schedules. That desk you work at, well you can depreciate that over 7 years, but the computer that only takes 5 years, although the sidewalk you needed to build for customers will take 15 years. Don’t worry though; the tree that shades the sidewalk is also on that same 15-year depreciation schedule. Unless you also sell the fruit from it, then it’s only 10 years.
“Then, after you have figured everything out and you start turning a profit, remember not to use all of deductions right away because you will need to calculate your regular tax liability then you get to do it again by calculating and your Alternative Minimum Tax (AMT). You’ll of course be paying whichever of those is higher.
“Finally, if you’ve found a way to overcome all of the obstacles that the tax code threw at you, you’re going to want to start estate planning right away. Because if you want to leave the business to your children when you pass, the government could be taking an additional 40% of your business assets upon your death.
“If that sounds ridiculous, that’s because it is. But here is the good news. The tax code is not a natural disaster. It is not an immovable object. It is a problem that we created and that we can change just as easily.
“In the Ways and Means Committee we are proposing a simplified tax code that works with, instead of against, small businesses.
“First off, we drop the tax rate from 44.6% to 25%. This means more money to hire employees, and this means more money to grow your business.
“Then we simplify the tax code in three main ways. We eliminate the nonsensical depreciation schedules and replace them with immediate expensing. So when you buy equipment for your business, you write it off, all of it, in that year. Then, we eliminate the AMT so that businesses can know exactly what they owe without having to worry about a second hidden tax code. Finally, we abolish the death tax so that families are never again forced to find a way to pay a 40% tax on their family business or worse yet, sell it off to pay the tax.
“Clearly tax reform is not a simple task and questions still remain. The Ways and Means Committee has been hard at work figuring out the fairest way to define business income so that companies are taxed fairly. Additionally, as many small businesses already take advantage of immediate expensing through section 179, the Committee is developing rules to allow small businesses to continue to deduct their interest payments on business related debt.
“With this in mind I am pleased to welcome our witnesses. I look forward to hearing your testimony and working with my colleagues on both sides of the aisle to determine how best to create a tax code that incentivizes small business and grows the American economy.”