The proposal for corporate tax reform by President Barack Obama did not include a solution to the problems and demands of small businesses. Small businesses, like large corporations, support corporate tax reform, but are unhappy with President Obama’s proposal because it suggests a reduction in the corporate tax rate.
Even though a reduction in corporate tax rate seems beneficial for all businesses, some small business owners will not benefit from it, as many file individual tax returns. The individual income tax code was not considered by President Obama when preparing his proposal. A study states that as many as 69 percent of U.S. entrepreneurs begin their businesses from their home and out of those, 59 percent continue to work from home.
Many small businesses will not benefit from the decrease of the corporate tax rate, which presently stands at 35 percent. Large corporations find legal ways to avoid paying taxes in the U.S. Many use tax havens to hide their income overseas. Small businesses, on the other hand, do not operate at an international level or have large profits, and therefore, their survival and growth depends more on helpful government policies.
Business Roundtable, an association of business leaders, responded to President Obama’s proposal saying that “some of the changes the President has proposed to the U.S. international rules would further disadvantage American companies competing abroad. The Roundtable believes that corporate tax reform must include a competitive, hybrid international tax system, where a company’s sales in foreign markets are taxed at the same rate as other companies in that local market—their closest competitors. Without that important fix, America’s unusual and outdated international tax system will continue to put U.S. companies and workers at a significant disadvantage when selling goods and services in international markets.”
Small businesses are as important as large corporations in spurring economic growth, with almost 60 percent of employment coming from small businesses. When reforming the current tax code, small businesses must be given the same consideration and benefits as international corporations.