Main Street Businesses Credit Tax Reform for Economic Boom
This week the House Ways and Means Tax Policy Subcommittee held the second hearing in our tax reform hearing series. This hearing, titled “Tax Reform and Small Businesses: Growing Our Economy and Creating Jobs,” focused on tax reform’s impact on America’s small businesses.
Tax Policy Subcommittee Chairman Vern Buchanan (R-FL) started the hearing by saying:
“Last year we passed the Tax Cuts and Jobs Act to reform our tax code into one built for growth. We lowered tax rates across the board, for individuals, small businesses, and corporations. We introduced full and immediate expensing for most capital expenditures by firms of all sizes. And we enacted provisions specific for small businesses, such as expanded availability for cash accounting, and flexibility for choosing between pass-through and corporate taxation. These reforms benefit all businesses, big and small, and create an economic climate that spurs economic growth.
“We are seeing results already. Back in 2016, CBO projected that GDP growth in 2018 would slow from 2.3 percent in the first quarter down to 2.1 percent in the fourth quarter. Now, after growing 2.9 percent in the first quarter of 2018, GDP growth is projected to accelerate to 3.3 percent in the fourth quarter.”
Rep. Peter Roskam (R-IL) spoke about the record level of business optimism and consumer confidence in America and asked:
“What is it you’re seeing, not in surveys, not in polls … what are you seeing in real life?”
John Horne, Owner and President, Anna Maria Oyster Bars, responded:
“I’m seeing more [guests], I’m seeing them more often, so that tells me that they feel better. They’re not staying home, they’re not going to Publix and fixing dinner at home. They’re going out, they feel comfortable going out … they’re buying things again … We put money into our business, we’re spending more … and other people are as well … People are spending more money and it permeates throughout our community.”
Rep. Jim Renacci (R-OH) added:
“As I travel the state of Ohio I keep hearing positive things. According the National Federation of Independent Business the number of small business owners who think now is the right time to expand is at an all-time high. Is your experience – in the small business community – is there high optimism now compared to prior years?”
Michael Baach, President and Chief Executive Officer, Philpott Solutions Group, responded:
“Tremendous optimism … we deal on the supply side with very small companies, they express optimism, our customers are really along the supply train … we end up selling to five different layers of the supply chain. All of which we have communication with, and all of which are highly positive and have great expectations for what the future will bring.”
Rep. Renacci followed up by asking how Philpott Solutions’ capital investment has changed since tax reform. Mr. Baach responded:
“We just invested five million dollars. It had been probably 20 years combined [since] we invested that much because things were going the other way … this five million dollars is only the beginning.”
Rep. Tom Rice (R-SC) asked Mr. Larry Gray, who owns Alfermann Gray & Co. CPAs, if the small businesses he works for have projected what their tax bill will be next year. Mr. Gray responded that his clients’ tax bills are going to go down as a result of tax reform.
Rep. Erik Paulsen (R-MN) spoke about the long-term benefits to American businesses thanks to international tax provisions in the Tax Cuts and Jobs Act:
“The Joint Committee on Taxation macroeconomic analysis specifically credits the international tax changes that we have made with increasing foreign direct investment here in the United States … it’s only been four and a half months and we’ve got all these encouraging results, but the international provisions in particular are where we’ll see long lasting reinvestment decisions by companies to actually return to the United States.”
Chairman Buchanan went on to note that thanks to a booming economy there is more demand for workers.
“I can’t tell you how many job sites there are … that can’t find workers.”
Mr. Gray responded:
“If you just drive through the towns you will see more construction. I’ve got clients in construction that cannot get qualified, skilled employees.”
Mr. Baach added:
“I see positive at every level that we touch both on the supply and customer side, and it’s going to be great for a while.”
To close the hearing, Chairman Buchanan said:
“There’s a mindset now … that Washington is with us now. In terms of reducing some of the regulations … also in terms of tax reform … If you look at [small businesses] they’re going to have a substantial [tax] reduction … you’re going to be able to keep more of what you earn so you can redeploy that to buy equipment or expand your business.”
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