House Tax Hearing Focuses on Small Business Burdens

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Congress continued to hold hearings about tax reform last week.  In last week's Tax Alert, we summarized Treasury Secretary Mnunchin's appearances before House and Senate committees on Monday and Tuesday.  On Wednesday the Senate Small Business Committee held a hearing examining prospects for tax reform with emphasis on the burdens and costs of tax compliance faced by small businesses.

 

The witnesses were Mark Mazur, former Treasury assistant secretary for tax policy, and Annette Nellen, representing the American Institute of Certified Public Accountants.  In an opening statement, committee ranking member Jeanne Shaheen (D-NH) called the current Internal Revenue Code "too long and complex," noting that "small businesses spend 2.5 billion hours complying with IRS rules."

 

Nellen testified that the time and money companies are expending on tax compliance would be better spent fostering business and job growth.  She said that an ideal tax system "must be administrable, support economic growth, have minimal compliance costs, and allow taxpayers to understand their tax obligations."  Echoing Secretary Mnunchin's recent testimony, she also recommended enacting permanent reforms that business could rely on for future planning, rather than tax cuts with "sunset" provisions that add to the confusion and complexity small businesses face.

 

Mazur testified that because small businesses are subject to the same compliance requirements as their larger competitors, the per-unit cost facing them is much greater.  He recommended reforms such as expanding the use of the cash method of accounting for small businesses.  Mazur said sound tax policy requires efficiency, equity and simplicity but noted that these goals can conflict with each other and some trade-offs may be needed.

 

In tax reform news breaking this week, House Speaker Paul Ryan delivered a major speech on Tuesday in which he declared that "we are going to get this done in 2017" and that tax reform and tax cuts "need to be permanent."  On Thursday, Senate Republicans released their long-awaited draft bill to repeal and replace the Affordable Care Act (also known as Obamacare).  We will bring you more on these late developments in our next update next week.

 

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