13 July 2017 Ways & Means working to address small business tax concerns, Roskam says House Ways and Means Tax Policy Subcommittee Chairman Peter Roskam (R-IL) said during a July 13, 2017 hearing that members are working to address the concerns of small businesses regarding the deductibility of net interest expense. "Message received: We are actively working on that and I think we are going to get to a good place on that," Roskam said in closing the hearing on how tax reform can help small businesses. He earlier said the Committee is "developing rules to allow small businesses to continue to deduct their interest payments on business related debt." The House Republican Blueprint on tax reform proposed eliminating the deductibility of net interest expense. Roskam said members are also mindful of "some of the concerns in terms of anti-abuse rules on the pass-through treatment," so that it cannot be manipulated. He acknowledged that the hearing didn't really include discussion of another important issue, the erosion of the US tax base. With witnesses from the apparel and furniture industries, however, the impact of foreign competition was the focus of some comments. — Teresa Meares, President, DGG Uniform and Work Apparel In testimony, Meares spoke about complexity in the tax code, the need for access to capital, and the importance of expensing capital investments and a lower tax rate. VanderWal also discussed the importance of lower rates, accelerated depreciation and the deductibility of interest expense for the agriculture industry, and additionally mentioned the benefit of Section 1031 like-kind exchanges. Boenigk said the US tax system has "essentially created a foreign import subsidy at the expense of American-based businesses," which should be eliminated. Huang argued that a tax rate cut for pass-through businesses, proposed by President Trump and House Republicans, would overwhelmingly benefit the wealthy and tax avoiders, not small businesses. "It would mostly help wealthy filers — such as hedge fund managers, investment bankers, and real estate investors — as well as high-earners who engage in tax avoidance by converting their salaries to pass-through income," she said. "Few typical Main Street small businesses would see a benefit." Huang also said domestic small businesses would not benefit from the proposed move toward a territorial tax system, and may actually be hurt by it. Concerns about preserving the deductibility of interest expense for agriculture were previously expressed by Rep. Kristi Noem (R-SD) during an Agriculture Committee hearing earlier this year. During the hearing, Noem emphasized that agricultural producers typically borrow money to buy land, machinery, seeds, chemicals, and fertilizer, and hope to grow crops in the face of factors outside of their control, including weather and pests. On the Democratic side, Rep. Suzan DelBene (D-WA) similarly said farming is a capital-intensive and unpredictable undertaking and that affordable financing is essential. With regard to the interest deduction, VanderWal said much of what is done in the agriculture sector involves borrowing, at least initially. DelBene also asked about the importance of like-kind exchanges in the context of agricultural investments. VanderWal said the use of such exchanges for land transactions enables farmers to continue farming in the face of urban sprawl. Asked by Rep. Dave Reichert (R-WA) about the biggest challenges to her business, Meares said it is the ability to afford to hire additional employees and equipment for them to use, with which expensing can help. "Cash is king and when you're growing a business, you don't have it," she said. Under questioning from Rep. George Holding (R-NC) about disparate treatment for US and foreign businesses, Boenigk said more and more furniture is coming from Asia, which tends to have lower wages and fewer environmental regulations. "Those products come into our country and there's no taxes or tariffs on them at all, so they can bring in a product that is much lower cost," she said. Rep. Tom Rice (R-SC) also expressed the desire to make US businesses and farmers more competitive relative to other countries, and suggested there is a price differential that results from other countries having border adjustment. Meares said many in the clothing industry try to champion products that are made in the USA, but they almost always come at a higher price than foreign-made goods.
Document ID: 2017-1126 | |||||
