Senate Republicans, along with business leaders, gathered for an event Tuesday to highlight why they think their tax reform plan will help small businesses.
Congressional Republicans in recent months have made tax reform a top priority. Their goal is to reduce business and individual rates while also simplifying the tax code to spur economic growth. House Republicans have already passed their version of the legislation with their Senate counterparts hoping to do the same later in the week.
Senate Small Business and Entrepreneurship Committee Chairman Jim Risch hosted the event alongside Small Business Administration Administrator Linda McMahon. Senate Majority Leader Mitch McConnell, other leading lawmakers, and heads of several national business associations also attended the event to make their case for why tax reform will help small businesses.
“I’m pleased to be joined today by a diverse group of senators, and most importantly representatives from multiple small business industry and trade groups, who between them, have many millions of members with small enterprises,” Risch said during the event. “I’m encouraged with the plan the Senate moved out of committee. The aim of this entire exercise is to reduce the burden on taxpayers, and create an environment that enables families and business, particularly small businesses, to thrive.”
The Senate version of the legislation reduces rates in most of the seven income tax brackets, while also reducing the corporate tax rate down to 20 percent from the current 35 percent. The bill also reduces or eliminates certain deductions and exemptions in order to simplify the tax code. The plan promises to help small businesses by including a 17.4 percent deduction for what are known as pass-through entities – a business structure that allows the owners to be directly taxed on their income instead of having a corporate rate applied.
“What you see behind you is representatives from the majority of American businesses, what we call pass-throughs, by and large,” McConnell said. “Not the big companies, these are the job generators that produce most of the jobs in America. And every small business group that I can think of is on board with this comprehensive tax reform that we hope to clear the Senate this week.”
Pass-through businesses are often small and family owned, but critics have expressed concern that the change could be abused by wealthy individuals who want to avoid paying the top personal income tax rate. Additionally, not every small business is a pass-through entity. The bill does include provisions designed to prevent abuse, but not everyone is convinced they are enough.
Congressional Democrats have argued that the plan would do little to help middle-class taxpayers while primarily benefiting the wealthy and large corporations. Critics have also expressed concern that some deductions being reduced will hurt the middle-class. The nonpartisan Congressional Budget Office found in an analysis Nov. 26 that the Senate version of the legislation could add $1,414 billion to the deficit over the next decade, which could slow economic growth down the line.
The Senate and House versions of the legislation also have key differences that will have to be resolved during the conference committee process. The Senate will first have to pass its version of the bill before that process can begin. President Donald Trump would then have the opportunity to sign the legislation into law once both congressional chambers have passed identical bills.
