The Small Business & Entrepreneurship Council (SBE Council) released the following statement in response to the Obama administration's corporate tax reform proposal:
"The idea of reducing tax breaks and credits in order to broaden the base and lower corporate income tax rates is sound. Unfortunately, President Obama's plan also proposes to increase overall taxes on corporations and investors, while still favoring certain industries over others. The last thing this economy needs is higher taxes on business, investment and the energy sector," said SBE Council chief economist Raymond J. Keating.
The plan reduces the corporate tax rate to make it more globally competitive, but does not reduce individual tax rates, a move that would help America's small business owners and the self-employed. However, the President did call for expanding small business expensing levels to $1 million, and making that permanent.
"The expensing proposal is a positive step. At the same time, though, substantive tax reform would offer expensing as an option for all businesses in terms of their capital expenditures," added Keating.
The proposal also calls for repeal of the last-in, first-out (LIFO) accounting method, which would hit many small businesses. In addition, taxing carried interest as ordinary income would undermine investment and hurt U.S. competitiveness.
"At the very least, tax reform should strive to be revenue neutral. Ideally, we need substantially lower tax rates and overall tax relief to help get this economy back on a path of robust economic growth. And both corporate income and personal income tax rates must be reduced, so that all businesses, including small firms, can benefit and drive innovation, economic growth and job creation forward," concluded Keating.