Small Biz Sector Tires Of Complex Tax System

Martin Romjue
Posted on April 17, 2013

NATIONAL TRAVESTY ALERT: Despite an upswing in the economy — well, as long as you don’t count trillion-dollar deficits and all the people giving up on work or collecting disability because of bad backs and/or bad moods — small businesses are still burdened with an archaic, complicated, greedy tax system that siphons too many of their profits. And those are profits that could be creating more jobs.

The National Federation of Independent Business (NFIB) Research Foundation recently surveyed its membership on federal tax and spending issues. According to the study, 85% of small-business owners agree that the tax code is too complex and should be overhauled. 78% of small businesses prefer a tax system with lower rates and fewer tax preferences. And a whopping 91% have to hire tax preparers to get their tax filings right with the IRS.

Given that the vast bulk of the limousine industry consists of small, privately held businesses, this disfigured, Elephant Man of a tax structure in the U.S. should spur a leading call to action and reform by industry associations and their leaders.

It is intolerable in the 21st Century to have such rigid and retro tax system. Distorted tax policies benefit unions, big corporations, super-rich net worthies, and the un-taxed freeloaders who have been getting more and more freebies since Jan. 20, 2009. [Not my fault, hope it’s not yours. We could have had an economically moderate war hero in office. But you can always repent].

And lest we forget, small- to medium-size businesses create and sustain most of the jobs in this country — the over-taxed private sector workers who fund the spoiled, obese public sector.

The NFIB, which next to the U.S. Chamber of Commerce is a small business best friend, offers the following insights from its study. Small business owners should adopt these as talking points to be communicated when opportunity strikes, such as when encountering whiners who complain about “fairness” and blame successful business owners and entrepreneurs for the nation’s ills.

Tax Day 2013: The Tax Burden Continues to Plague Small Businesses

  • According to the April 2013 Small Business Economic Trends report, 23% of small-business owners cited taxes as the single most important problem.
  • In a survey of NFIB members ranking 75 issues of concern for small businesses, tax issues occupy five of the top 10 problems on the list.
  • NFIB research shows more than 77% of small businesses are organized as S-Corps., LLCs, LLPs, or Sole Proprietorships, also known as “pass-through” businesses, which pay taxes as individuals.
  • More than 54% of the private sector workforce is employed by pass-through business.
  • “Corporate only” tax reform would increase income taxes paid by individual owners of pass-through businesses, on average, by 8% or $27 billion annually.
  • Small-business owners overwhelmingly agree (71%) that any ultimate revisions to the tax code should result in lowering their tax burden. 
  • Raising individual rates directly affects small-business owner’s ability to re-invest in their firm, hire or retain employees, and manage cash flow.
  • 85% of NFIB members think the tax code should be fundamentally revised.  
  • NFIB members have effectively surrendered to the code's complexity: 91% hire a professional tax-preparer to do their taxes.
  • Although small-business owners agree the tax laws should be simpler, 55% do not believe that any changes to the tax code will result in less complexity.
  • Small businesses spend on average $74 per hour to comply with the federal tax code — the most expensive paperwork burden imposed on small businesses by the federal government.
  • Research by the Small Business Administration (SBA) Office of Advocacy estimates it costs small businesses 67% more to comply with the tax code than it costs their larger counterparts.
  • Small businesses spend nearly two billion hours on tax compliance with a total estimated cost of between $18 billion and $19 billion annually.
  • The U.S. tax code should be simplified to reduce compliance and accounting costs for small businesses.

— Martin Romjue, LCT editor

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