The current tax code excessively punishes job creators and wealth builders. Most small business which are S-corporations see large business revenues pass through to personal tax filing, even though these revenues exist solely as “inventory” or book “adjustments.”
Small businesses that have a good year are taxed at rates most likely far above larger C-corporations, which have the capital and manpower to take advantage of loopholes and tax credits not available to smaller firms with small staffs.
The tax code is income based and punishes success in this country. A system which is more simplistic and moving toward consumption is more fair as taxes would be based upon the level of spending people choose to take part in.
It punishes small business owners who have a bad tax year with the alternative minimum tax or AMT, which is nothing more than a duplicate tax structure which ensures that when a small business does well, it pays taxes, and when a small business does not do well, the AMT ensures that it will also pay taxes.
Here are improvements the government can make in the tax code to boost manufacturing, job growth and prosperity in the nation:
●Simplify the system and move toward a consumption based tax system. This step sounds like just another level of taxation, but for it to work as the fair tax indicates, in detail, is to simply remove all other taxation in current existence and replace it overnight with a consumption based system.
The only adjustments needed to be made are to existing inventory which still carries the burden of past income tax structure. It will be transparent, broaden the base to include any persons consuming products for initial sale in the United States. This includes residents, non-residents and visitors to the U.S. This simple step would eliminate all taxation on small business and large corporations in order to be in the best position to compete in local and world markets.
With no personal or corporate income tax and only a consumption tax, the ability for small and large corporations to compete on a world level is greatly improved.
● Most importantly, to get our economy going in the right direct we need confidence in our economy and our ability to purchase the products we need. A consumption tax will eliminate all payroll withholding taxes, thus allowing more cash flow for individuals to decide how to spend their money.
This increased ability to free up cash flow for the average citizen will reap rewards as new customers will be available for both small and large businesses to acquire new growth and prosperity, not only in a local market but on a world-wide level.
Brian J. Stein is president of Intersource, Inc., S&S Refractories and Clearscape Management in Mars, Pa.