Committee Explores Updating Tax Code as Means of Helping Entrepreneurs Spur the Economy
Congressional Panel’s Report Calls for Changes to Seven Areas of U.S.Tax Policy
Washington, D.C. (Vocus/PRWEB ) April 10, 2008 -- Times change and so should the tax code, but with tax day less than a week away millions of entrepreneurs are facing outdated IRS provisions that stifle their ability to boost the economy. Today, the House Committee on Small Business heard from a panel of business owners and tax experts at a hearing focused on modernizing sections of the code while making it more small business friendly. As part of the forum, the Committee also issued a report titled 'Seven Ways to Stimulate the Economy by Updating the Internal Revenue Code,' which provides specific recommendations on fixing provisions that impact small firms.
Chairwoman Nydia Velazquez (D-NY) hears testimony from witnesses at today's hearing on Tax Modernization.
“Small businesses have always led us to economic recovery and growth, but the tax code is holding them back. With the nation facing the prospect of a recession, we should do everything possible to remove the barriers that stand in their way,” said Chairwoman Nydia M. Velázquez.
Many of the tax code’s provisions have not been updated since 1986 and fail to reflect modern realities. Witnesses noted that 20 years ago, items such as cell phones and computers were rare luxuries. Today they are business necessities. Their testimony also underscored the fact that the average lifespan of technology goods is now two to three years. Businesses that don’t make the necessary investments to replace these tools become uncompetitive and frequently go under. Despite that, the tax code only allows for the deduction of such purchases every five years.
“The market conditions facing entrepreneurs have changed considerably, and the tax code must evolve to meet those realities,” said Chairwoman Velázquez. “When small businesses lose time and money because of outmoded rules, they can’t bring new products and services to market. It also means innovation and competition are undercut—exactly the opposite of what today’s economy needs.”
The hearing also delved into the challenges posed by unnecessarily complex provisions. For instance, while more that half of entrepreneurs now work at home, the tax code stipulates extensive requirements to file for a home office deduction. As a result, most small firms forgo their right to do so. Moreover, the law treats small firms unequally from their larger counterparts and forces self-employed entrepreneurs to pay taxes on health insurance premiums twice—as employees and as business owners. Recommendations on correcting these and other problems—without delay—are the core of the Committee’s report.
“A comprehensive overhaul of the tax code may not be viable in the short term, but we can certainly update targeted provisions,” said Chairwoman Velazquez. “By modernizing specific parts of our tax law, and greatly simplifying others, we can give small firms the real opportunity they need to succeed. That is all they are asking, and they deserve no less.”
Jeffrey Hoops, a partner at Ernst & Young who testified on behalf of the American Institute of Certified Public Accountants agrees. His comments underscore the recommendations in the Committee’s report: “everyone is always looking for the big idea. My years of experience tell me that there isn’t one, and that we would make a lot more progress by focusing on fixing the many things that could be fixed simply in the current tax code. We could make it more efficient and easier to comply for small businesses.”
Click here to read the full report issued by the Committee.
Click here to view list of witnesses and testimony.
Click here to view video highlights of the hearing.
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