Many of the specific changes have not been revealed, but in a series of recent joint opinion pieces, they wrote that helping small businesses would be one the “fundamental principles” guiding both of their efforts.
“Small businesses are the heart of most communities,” Camp and Baucus wrote in the Orange County Register. “We will work to ensure that any tax reform plan does as much to help a small family business create jobs and compete as it does for a large company.”
Small-business owners have for decades complained that current tax code requires them to spend too much time and money on compliance, placing them at a disadvantage to large corporations that have entire departments devoted to accounting. A recent poll by the U.S. Chamber of Commerce showed that 83 percent of small employers support a broad overhaul, and half said the top priority should be simplifying the rules.
Baucus and Camp have said that is precisely their aim. Camp, for example, has urged lawmakers to expand the use of a popular bookkeeping method known as “cash accounting,” which does not require companies to pay tax on income they have not yet received and generally presents fewer reporting hurdles. He also wants to establish one, simplified deduction for some of the organizational costs associated with starting a company.
“I had a man come in who had one retail store, and his tax preparation fee was $9,000,” Camp said at a recent event in Washington, adding that there has been broad support in Congress for scrubbing out some of the clutter in the current tax code.
On the other side of Capitol, Baucus is taking what he calls a “clean slate” approach to eliminating credits and deductions. His staff has asked lawmakers to submit proposals for tax breaks they think should be included in a completely new code, rather than trying to go though and weed out existing provisions.
Meaghan Smith, a spokesperson for the Senate Finance Committee, declined to comment on which loopholes and exemptions might be on the chopping block, but she said the chairman is taking a close look at the more than 30 definitions of “small business” that currently exist for various tax provisions.
“Some of these measures were well-intended, and people were trying to help small businesses, but the result has been a lot more confusion,” Smith said in an interview. “Getting rid of some of that underbrush would be helpful.”
Complexity is not the only source of tax frustration for small-business owners, though. Many have been critical of the current rate structure, which leaves some small firms paying a much higher rate than large companies.