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13 Apr, 2012

U.S. Small Businesses Say Complexity of Tax Code Is As Bad As Taxes

WASHINGTON, April 12, 2012 /PRNewswire-USNewswire/ — The National Small Business Association (NSBA) today released the 2012 Small Business Taxation Survey which provides detailed insight on how America’s small-business community is being impacted by federal taxes.

Released just days before the April 17 income tax deadline, the survey’s key message is: Complexity and inconsistency within the tax code pose a significant and increasing problem. The ever-growing patchwork of credits, deductions, tax hikes and sunset dates is a roller coaster ride without the slightest indication of what’s around the next corner. This is unsustainable and unacceptable.

Editor’s Comment

The survey and the Top 10 Key Priority issues raised by the NSBA have great relevance to the Asia-Pacific, especially for the many SMEs in the travel & tourism industry.

The survey report can be used as a ready-made template for addressing a wide-range of problems. Download the following two reports by Travel Impact Newswire Executive Editor Imtiaz Muqbil on Strengthening SMEs in the Asia-Pacific by clicking here and here.

The survey showed that in 2012, 64 percent of small businesses reported they spend more than 40 hours per year dealing with federal taxes, up from 57 percent just one year ago. Forty-five percent report spending more than 80 hours per year—two full weeks—just on dealing with federal taxes.

Said NSBA Chair Chris Holman, CEO of Michigan Business Network.com and President of The Greater Lansing Business Monthly. “This is an unnecessary and massively unfair drain on an already-struggling small-business community.”

The current tax code is comprised of more than 10,000 pages of laws and regulations that serve as a disadvantage to small businesses, and are egregiously complex and constantly in flux, Mr Holman said.

Underscoring the complexity of the federal tax code is the fact that 85 percent of small-business owners must pay an external tax practitioner or accountant to handle their taxes. Furthermore, when asked to rate the most significant challenge posed by the federal tax code to their business, the majority (56 percent) picked administrative burdens while 44 percent said financial burdens.

In terms of specific small-business taxes, respondents were asked to rate them both in terms of financial and administrative burden, and payroll taxes, state and local taxes, property taxes, sales tax and income taxes rounded out the top five.

Small businesses expressed moderate to significant concern over the following expired, or soon to expire tax provisions: a pending increase in the marginal income tax rates (74 percent); increases in the estate tax (58 percent); prohibiting self-employed from fully deducting the cost of their health insurance (53 percent); and expiration of the expanded Section 179 expensing and bonus depreciation (52 percent.)

“The overwhelming majority of small-business owners support broad reform of the federal tax code—not tinkering with certain taxes here and there,” stated NSBA President Todd McCracken. “Lawmakers must work toward broad reform, and they must do it now.”

When it comes to public policy, the clear majority of small businesses (73 percent) support broad tax reform that will reduce both corporate and individual tax rates coupled with reduced deductions.

Given that the overwhelming majority of small businesses (83 percent, according to existing NSBA data) pay taxes on their business at the personal income level, or are so-called “pass-through” entities, addressing just one piece of the puzzle — such as corporate tax reform — will lead to even greater complexity and a massive tipping of the scales in favor of the nation’s largest companies at the expense of small businesses.

Touching again on the ever-changing maze of tax credits and laws, small businesses expressed the greatest concern over a pending increase in the marginal income tax rates; massive increases in the estate tax; prohibiting self-employed from fully deducting the cost of their health insurance; and expiration of the expanded Section 179 expensing and bonus depreciation.

We hope this survey provides timely and useful information on how taxes are impacting America’s small-business community.

Celebrating its 75th Anniversary in 2012, NSBA continues to advocate on behalf of America’s entrepreneurs. A staunchly nonpartisan organization, NSBA reaches more than 150,000 small businesses across the country and is proud to be the nation’s first small-business advocacy organization.

For more information, please visit www.nsba.biz.

Top 10 Priority Issues Facing U.S. Small Businesses

Every two years, NSBA members and leadership vote on the organization’s Top 10 Priority Issues. Listed below are the issues voted on during the 2011 Small Business Congress. These issues will be NSBA’s priorities during the 112th Session of Congress. Click on each headline for a link to further details:
  1. Hold a White House Conference on Small Business 
  2. Reform the Current Tax Regime
  3. Reign-in the Costs of Health Care
  4. Deficit Reduction and Entitlement Reform
  5. Improve Access to Capital
  6. Repeal the Expanded 1099 Reporting Requirement
  7. SBIR Reauthorization, Expansion, and Strengthening
  8. Strengthen the SBA Office of Advocacy
  9. Regulatory Reform and Paperwork Reduction
  10. Enhance Small-Business Contracting