Small business owners prefer a Tax Code with low rates and fewer deductions, according to a new survey by the National Federation of Independent Business, but their bottom line is whether their taxes rise or fall.
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The survey also indicated that small businesses believe federal spending should be curbed in order to bring the federal budget into balance.
Eighty-five percent of the small business owners who responded to the survey overwhelmingly agreed that the Tax Code is too complex and should be overhauled.
“This survey clearly shows that small-business owners believe the Tax Code is too complicated, too politically motivated and inconsistent,” NFIB tax counsel Chris Whitcomb said in a statement. “It is no wonder that more than half of small businesses believe that simplifying the tax code should be a top priority. As federal lawmakers tackle the complex subject of comprehensive tax revision, this new data will give them needed clarity on the views of the small-business community. With leaders in the House already developing discussion drafts for restructuring, this type of insight into small-business owners’ challenges, needs and mindset will be invaluable.”
Over 90 percent of the small business owners who were surveyed indicated they have given up trying to comply with the Tax Code and instead pay professional tax preparers to prepare their filings. More than half (52 percent) of the small business owners polled believe that simplifying the Tax Code should be a top priority out of all potential revision options.
Survey respondents noted that the biggest challenges they face in terms of complying with the Tax Code are that tax preferences are inconsistent, and continuous changes affect their ability to plan ahead, increasing their cost of compliance. Over 60 percent of NFIB members are very small operations with fewer than 10 employees, and this presents a disproportionate cost and compliance burden compared to larger companies.
While small business owners agreed the tax laws should be simpler, a 55 percent majority said they do not believe that any changes to the Tax Code will result in less complexity. This finding reflects a sustained pessimism and lack of confidence in the federal government among U.S. small businesses, and a clear disconnect between what is promised on the campaign trail and the ability of Washington politicians to live up to their commitments after they are elected.
“By an overwhelming margin, small business owners indicated that they prefer lower individual tax rates and a simpler Tax Code,” said study author and NFIB senior research fellow William Dennis in a statement. “They see economic possibility in growing their businesses, not in growing government revenue through tax increases. In fact, their sentiment that spending cuts must take priority is overwhelming, with 81 percent preferring spending cuts to tax increases by at least three dollars in cuts for every dollar in revenues. Virtually no respondent in the survey favored increasing taxes over cutting spending.”
A 71 percent majority of small business owners agreed that any revisions to the Tax Code should ultimately result in lowering their overall tax burden. Seventy-eight percent of the small business owners surveyed indicated they would prefer a tax system with fewer tax preferences. In some cases, they said they were willing to accept closing or modifying tax preferences in exchange for lower rates. This is consistent with past sentiments among business owners about the need for a fair playing field.
Virtually none of the small business owners surveyed believed tax rates should serve as the only means of reducing the national budget deficit. The small business owners who were polled overwhelmingly indicated (81 percent) they would prefer by a ratio of 3 to 1 that spending cuts should take priority over tax increases to reduce the deficit by a ratio of at least 3 to 1.
NFIB members believe the federal government should also have to balance its books just like everyone else. A majority of the small business owners surveyed said they believe tax reform that eliminates tax preferences and reduces personal income tax rates is the best way to achieve more robust economic growth.
Small business owners have little support or faith in new tax schemes that have been proposed in recent years for the U.S., such as a national sales tax, such as a Value Added Tax or VAT, or a carbon tax. Even if such taxes were used to reduce tax rates or replace other taxes, NFIB members remain staunchly opposed. Sixty-seven percent of the small business owners who said they are familiar with a carbon tax indicated they oppose it. A national sales tax doesn’t fare much better, with a solid majority (58 percent) of small business owners who are familiar with the idea opposed to it.