President Trump and Republican leaders released, “Unified Framework for Fixing Our Broken Tax Code,” their proposal to overhaul the current United States tax code. In a statement, we applauded the framework suggesting it will be good for small businesses “and help foster growth in their businesses, save for the future, be more competitive and most of all, put them on a more equal footing with their corporate counterparts both at home and abroad.” But now the hard work begins as the tax writers put the details of the plan together.
Overall, small businesses would benefit from a tax plan that lowers the individual rate and focuses on bringing parity to the way our tax system treats self-employed and sole proprietors who contribute greatly to our country’s overall economy. As millions of small businesses, including the over 27 million and growing self-employed and micro-businesses nationwide, scramble to figure out what this means for them, below are some key takeaways and how it could impact the small business community.
A Reduction in the Individual Rate
Any reduction in the corporate tax rate should mirror reductions in the individual rate since the majority of the self-employed and sole proprietors file their returns. Under this proposal, small business owners who file as individuals will see a drop in their tax rate to 25 percent, while the corporate rate also drops to 20 percent. This is great news for millions of filers who will keep more of their money in their pockets to re-invest right back into their own small business operations.
The proposed policy idea of creating a 25 percent pass through rate for sole-proprietors is an interesting idea, and the tax proposal’s acknowledgement of the important role the self-employed play in our economy is well intended. We have in the past advocated for other forms of parity and will continue to advocate for the tax code to reflect an equitable treatment with our corporate counterparts.
Doubling of the Standard Deduction
Taking the standard tax deduction saves individuals time and money by clicking on this quick option instead of the burdensome process of pulling together itemized deductions. Under this proposed plan, individuals and married couples see more of their money in their pockets and can expense critical items with this increased standard deduction of up to $12,000 for individuals, and $24,000 for married couples.
Allowing Businesses to Expense Capital and Equipment Investments
From printers to computers and critical tools, now small businesses can reinvest the cost of these important resources and equipment right back into their small business. Small business owners should not be hamstrung from growing and expanding because we don’t have the capital to do so; therefore, this flexibility allows us to purchase the much-needed equipment and use it to help foster growth in our businesses.
Other Useful Provisions
There are many other provisions from important deductions that offer savings via tax credits and benefits supporting the small business community. While our initial reaction is supportive, we look forward to seeing the details and protecting the small business community – the self-employed and micro-businesses.
It is also our hope that our leaders work in a bipartisan way to get this done – and ensure the small business community remains strong and at the heart of the middle-class.
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