President Obama has again renewed his efforts for corporate tax reform, but small businesses have little to gain from the proposal. In addition, if the proposal to lower the corporate tax rate is accepted, large corporations will gain much while small businesses will be left untouched by the benefits.
Lowering the corporate tax rate, which is an important part of tax reform, from the present 35 percent to 28 percent as proposed by Obama will not help small businesses. Only a small number of small businesses make enough profits to reach the current corporate tax rate, so even if the corporate tax rate is reduced to 28 percent, the majority of small-business owners will not be eligible for its benefits.
The proposal also has many loopholes that may entice corporations to evade taxes by hiding income overseas. Various studies have shown that it is mostly large corporations that hide income in foreign tax havens.
The call for the simplification of the tax filing process is one small part of the proposal that stands to benefit small businesses. President Obama proposed simplifying the tax filing formalities for businesses, which will help them save time, effort and money during tax season. Obama has also increased the amount of equipment investments that businesses can deduct from their taxes.
It is not only high taxes that affect small businesses, but the earning and spending capacity of consumers. Tax incentives directed towards their survival and growth may better help them compete in the market.
Lowering the corporate tax rate will not affect small businesses as much as it is expected to. Corporate tax reform, therefore, must look to resolve the problems faced by small businesses, which are a major means of job creation. It is important for the health and consistent growth of the economy that the demands of small businesses are met. Factors other than lowering taxes must be included in corporate tax reform to assist the growth of all business, regardless of size.