WASHINGTON – Two Maryland business owners pushed their tax reform proposals to help companies succeed and plan for the future at a House Committee on Small Business hearing Wednesday.
R. Samuel Griffith, president and CEO of National Jet Company in Cumberland, and Steve Bearden, president and CEO of Linemark Printing in Upper Marlboro, discussed how tax structures and yearly changes to the tax code influence the way each company operates.
Small businesses are affected more by the country’s tax code than larger companies because they pay 67 percent more to comply with the tax code, according to a study by the Small Business Administration’s Office of Advocacy.
Some of the tax reform proposals that the Small Business Administration is considering include making the Section 179 Equipment Deduction permanent; expanding cash accounting; changing filing dates for S corporations, partnerships and corporations; and changing requirements for partnerships and corporations.
National Jet is a subchapter S corporation, which means that the company’s income is listed on Griffith’s tax return. Because of this, Griffith said he pays a higher tax rate than if the incomes were separate. He also must pay the Alternate Minimum Tax, which prevents him from claiming popular tax credits like the Research and Development Tax Credit.
“So you give us credits for R&D and employing workers who have lost their unemployment benefits and then you take them away because of the AMT,” Griffith said in written testimony. “How does this make any sense?”
Many small manufacturers classify themselves as S corporations in order to pass a family-owned company to the next generation. Others use this classification to avoid double taxation of dividends that occur with C corporations, according to Griffith, who also represented the National Tooling and Machining Association.
“No one wants to pay double taxes on hard-earned income,” said Griffith, who is also a certified public accountant.
Changes to deductions and credits such as the Section 179 Equipment Deduction can influence how much a small business can invest in its infrastructure. Griffith wanted to purchase a machine last year that was well above the lowered limit for a Section 179 deduction. He ended up purchasing a less-expensive piece of equipment and not hiring two additional workers. A provision passed Dec. 30 that would have allowed Griffith to purchase the equipment he originally wanted, but it was enacted so late that he could not take advantage of it.
“It is very difficult to plan for the future given such uncertainty in our tax code,” Griffith said.
Making Section 179 deductions permanent would also help small printing companies grow and create new jobs, according to Bearden.
“In the environment of a rapidly changing communications marketplace, it is vital that small printers be able to continually modernize their product and service offerings,” said Bearden, who testified on behalf of Printing Industries of America.
Simplifying the tax code will allow small companies to increase investment and hire more people, according to Dave Camp, chairman of the House Committee on Ways and Means. “Every dollar they aren’t spending on taxes and tax compliance is a dollar they have to invest in equipment, start a new production line, hire a new employee or provide more in wages and benefits.”