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US Congress Receives Bill To Cut Small Business Taxes

by Mike Godfrey,, Washington

07 June 2016

Randy Hultgren (R – Illinois) has introduced legislation into the House of Representatives to provide federal tax relief and reduce administrative burdens for pass-through entities in the United States.

The profits of pass-through entities (such as sole proprietorships, partnerships, and S corporations, which account for over 90 percent of all US businesses and more than 50 percent of private sector jobs) are passed directly to their owners and are taxed on their individual tax returns.

It has been shown that, as those owners pay up to 39.6 percent under the federal individual income tax code, on top of additional taxes on earnings and investments, they can pay more than 50 percent of their income in taxes in some states.

Key provisions of Hultgren's bill – the Bring Small Businesses Back Tax Reform Act – include a new 10 percent tax rate on a pass-through business's first USD150,000 in income, and a 20 percent tax rate on its income from USD150,000 up to USD1m; the immediate expensing of all investment in equipment by pass-through businesses; and simplified cash accounting for tax purposes for all businesses with gross receipts under USD25m.

"Small and mid-market business owners tell me that among many obstacles they face to expanding their operations and hiring more workers, high taxes remain central," said Hultgren. "Governments tax their capital like it is personal income, and it isn't working. As small businesses go, so goes the American economy. … My bill will give these employers room to grow by giving them back time and resources."

Hultgren's bill has received support from Jobs Creators Network (JCN), which conducted a recent national poll showing that only one in five small business owners plans to hire more employees over the next year, with two-thirds citing their tax burden as a main obstacle to growing their business.

JCN launched its Bring Small Businesses Back campaign earlier this year to determine solutions to help such businesses. "The Bring Small Businesses Back Tax Reform Act is a major step to lifting the tax burden that is preventing small businesses from thriving and creating jobs," said Alfredo Ortiz, JCN's President and CEO. "To truly get the economy working again, we must allow the engine of the country's economy to operate without being weighed down by over taxation."

TAGS: individuals | tax | small business | business | proprietors | accounting | legislation | tax rates | United States | tax reform | individual income tax | Tax

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