Easing Small Business Tax Burden Would Spur Jobs

"As a small business owner myself, I understand how difficult it can be to start and run your own business," said Subcommittee Chairman Kurt Schrader (D-OR). "Unlike big companies, small businesses don't have an army of tax attorneys and accountants to navigate a tax code that has grown so complex that it is a stumbling block for local merchants."

A 2005 study estimated individuals and businesses spent an estimated 6 billion hours and $265 billion dollars complying with their tax obligations, with compliance costs predicted to grow to $482.7 billion by 2015. As more Americans turn to entrepreneurship to start a new career or to boost their incomes, the 3.7 million word tax code is especially daunting for small businesses and home-based enterprises that operate on thin profit margins.

"The current home office deduction requirements are so confusing that many home-based entrepreneurs opt not to take advantage of it because they fear being audited if they make a mistake," Schrader said. "Small business owners need a simple way to take advantage of these incentives that can help start-ups and established businesses alike."

Schrader partnered with Republican Congressman John McHugh (R-NY) to introduce H.R. 1509, the Home Office Deduction Simplification Act, bipartisan legislation offering small business owners the ability to claim a standard deduction for home office expenses instead of utilizing the current, more complex formula. The simple home office deduction would benefit millions of home-based business owners, who are estimated to comprise 53% of all small businesses.

"Small businesses make up 98% of the companies in Oregon, just as they do in many communities across the country, and they are critical to our economic recovery," Schrader said. "By making it a little easier for small business owners to spend more of their time creating jobs, we can help them turn this economy around."

Witnesses told lawmakers that many tax laws are badly out of date. They cited cell phones as a prime example of an indispensable business tool that is still subject to antiquated tax treatment written decades ago when cell phones were a luxury item. Entrepreneurs also noted that the alternative minimum tax (AMT), which now ensnares 75% of all middle class small business owners earning less than $100,000 per year, as another item woefully out of date. They urged Congress to limit the AMT's reach and simplify the complex capital gains tax process to help small businesses reduce filing errors.

"In order to promote enterprise and reward hard work, our tax laws should be simple, straightforward and fair," Schrader said. "At a time when we need our entrepreneurs' ingenuity to lift us out of our economic slump, tax policies should help small businesses meet their obligations, not burden them with unnecessary layers of complexity."

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