Small business groups denounce Obama’s corporate tax reform proposal


U.S. President Barack Obama delivers a speech about the economy and jobs at an Amazon.com Fulfillment Center in Chattanooga, Tennessee. (Jessica McGowan/GETTY IMAGES)

Small business lobbyists want several changes to the nation’s tax code — just apparently not the ones the president is selling.

A number of small business groups quickly criticized a new “grand bargain” proposal outlined by President Obama on Tuesday, which would authorize new economic stimulus spending in exchange for lower tax rates for corporations. Obama described the plan as a balanced compromise that would boost the economy and create jobs for the middle class.

Over on Main Street, the description was starkly different.

“Once again, President Obama has made a major policy speech without offering anything of substance to the real engine of the U.S. economy – small business,” Dan Danner, the president of the National Federation of Independent Business, said in a statement. “A corporate-only approach to tax reform will ensure that small business shoulders a much greater tax burden than mega-corporations that have been gaming the system for years.”

Danner said that the vast majority of all small businesses are structured as pass-through entities, so their owners pay taxes at the individual rates. Consequently, those firms would not stand to gain from the president’s concession to lower the corporate rate from 35 percent to 28 percent.

Instead, by lowering the corporate rate and leaving the individual rate untouched, it would put small firms at an even greater disadvantage to large corporations, Danner said.

It’s not unlike the NFIB to take issue with the president’s plans, as the group tends to lean to the right politically. However, this time around, Obama’s proposal was not spared even by small business groups that have supported his economic agenda in the past.

The Main Street Alliance, for instance, release a statement calling the so-called bargain “wholly inadequate,” noting that its latest polling shows that small business owners prefer policies that combat offshore tax havens to proposals to lower the corporate rate.

“Small business owners need corporate tax reform to focus on requiring corporations to pay their fair share for economy-boosting investments that bolster consumer demand on Main Street, not lowering corporate tax rates,” said Reshonda Young, operations manager at Alpha Express in Waterloo, Iowa and member of the Main Street Alliance Executive Committee.

In reference to the location Obama chose to outline his proposal — an Amazon warehouse in Tennessee — she added that “the president’s speech may have put an Amazon smile on the faces of corporate CEOs, but it leaves small businesses still paying for the shipping,”

Steve Caldeira, president and chief executive of the International Franchise Association, was equally disappointed with the proposal, but for slightly different reasons. He said one of the franchise community’s top concerns with current tax laws is their complexity and that owners want “reform that simplifies a cumbersome, out-of-date and costly tax code for businesses of all sizes.”

This latest plan does little to address that complexity, he said. Instead, he argued that it “picks winners and losers between large and small businesses” by lowering the corporate code without lowering the individual rates, echoing some of the warnings from the NFIB.

“Only fixing the corporate side is not true tax reform,” he said.

House Small Business Committee Chairman Sam Graves (R-Mo.) agreed, noting that his committee has heard testimony from many small business owners and experts about the importance of trimming back the rates for both individuals and corporations.

He added that House and Senate lawmakers have already started crafting tax reform legislation and warned that this latest pitch by the administration could undermine that process.

“The president’s goal to consider only corporate tax reform leaves out small businesses, our nation’s most robust job creators,” he wrote in an email, “and it undermines Congress’ more comprehensive approach to tax reform that is already underway.”

What is your take on the president’s plan? Please share your take with us below.

Follow On Small Business and J.D. Harrison .

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he manages the Post's On Small Business blog.
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