Optimistic that 2017 could be the year that comprehensive tax reform gets enacted, U.S. Rep. Vern Buchanan (R-FL) is advocating for pro-growth tax policies like his bill that would ensure more equitable tax treatment between small businesses and large corporations.
“We want to do everything we can to encourage tax reform to help startups and entrepreneurs and small and medium-sized businesses so that they have the same advantages as big corporations,” Buchanan said in a recent interview with The Ripon Advance.
“They don’t have access to the equity markets that the big public companies do. So we want to make sure that they can keep more of their dollars to help grow their businesses,” said Buchanan, a member of the House Ways and Means Committee.
Buchanan’s bill, the Main Street Fairness Act, H.R. 116, targets alleviating the tax burden on businesses that file taxes as pass-through income, such as sole proprietorships, partnerships, LLCs and S corporations.
The majority of small businesses are pass-through entities that file taxes through the individual income tax code instead of the corporate income tax code. The current maximum tax rate for U.S. corporations is 35 percent, but small businesses can pay 39.6 percent under the individual income tax code, on top of additional taxes on earnings and investments.
The Tax Foundation also notes that on the federal level, pass-through businesses are subject to a top marginal tax rate of 44.6 percent, meaning that in many states, those businesses can see marginal tax rates that exceed 47 percent.
The legislation would make sure small businesses never have to pay a higher tax rate than large corporations by removing income earned by pass-through businesses from the individual tax code and treating that income like business income earned by corporations.
“I think the general feeling about tax reform is that they don’t want Exxon, for example, having lower rates than small businesses,” Buchanan said.
Small businesses underpin the nation’s economy, providing 55 percent of all jobs and 66 percent of all net new private-sector jobs since the 1970s, according to the U.S. Small Business Administration.
Buchanan’s bill also was included as part of the House Ways and Means Committee’s tax reform blueprint.
Buchanan introduced the Main Street Fairness Act during the 114th Congress and reintroduced the bill in January for the new session of Congress. Support for the measure got a boost when U.S. Sens. Susan Collins (R-ME) and Bill Nelson (D-FL) introduced companion legislation in the Senate in March, S. 707.
“Small businesses employ more than half of all workers and have generated approximately two-thirds of our country’s net new jobs since the 1970s,” Collins said when the bill was introduced. “Unfortunately, our nation’s small businesses face a higher tax burden that affects their ability to compete with large firms in the marketplace. Our legislation will help keep small businesses strong by ensuring that they do not pay a higher tax rate than large companies.”
The measure is favored by a range of business and tax reform organizations. In a letter to Buchanan supporting the bill, the National Small Business Association said the “legislation is a step closer to enabling businesses to invest in new equipment, hire more workers and dedicate more money to savings and investment, which in turn will help strengthen our economy.”
With decades of experience in the business sector prior to serving in Congress, Buchanan has a long track record of fighting to make tax policies fairer and for lowering rates for small businesses. The congressman also draws his views on business tax reform from his years serving as chairman of both the Florida Chamber of Commerce and the Sarasota Chamber of Commerce.
Buchanan said he would continue putting his energy into helping to pass critical reforms to the nation’s complicated tax code, which hasn’t been overhauled since 1986. This could be the year that tax reform makes it to the finish line, he added.
“I was originally hoping by August, and there still is that possibility, but definitely by the end of the year,” he said.