By Robert Cresanti | Breaking through the noise of Washington politics can be difficult. In a town with a bottomless pit of opinions, we all want our voices heard and, better yet, understood. There is no better way to break through than to unite the nation’s small business community and their lawmakers on an issue that historically, believe it or not, has had bipartisan support – tax reform.
Over the decades, Democrats and Republicans have come together to support some of the most substantial changes to the tax code. In the 1986 overhaul, President Ronald Reagan (R), House Speaker Tip O’Neil (D-Mass.), and Sen. Bill Bradley (D-N.J.) worked together to bring tax relief to millions of Americans. Even throughout some of the more recent achievements, including last year’s permanent expensing limits for business, both parties rallied their support in the name of business – not Democratic or Republican businesses – just business. Yes, it’s possible.
During the 65th anniversary celebration of the Small Business Administration (SBA) at the White House last week, it was encouraging to hear President Trump, Ivanka Trump and SBA Administrator Linda McMahon all speak to how important small business success is to our economy. There was surely a collective comfort from dozens of small business leaders in the room as the administration reassured them that tax relief was on its way.
At the International Franchise Association (IFA), the world’s largest organization of franchise owners, we share the administration’s enthusiasm for comprehensive tax reform – for both corporations and individuals. IFA represents over 730,000 establishments and supports 8 million employees across a diversity of business categories. Franchising creates jobs in every community – often underserved – and fosters commitment to buying “local.” Franchising gives entrepreneurs with limited capital a way to start or expand their business more rapidly. Comprehensive tax reform, naturally, will help our small businesses thrive.
In a recent survey, IFA members overwhelmingly ranked lowering tax rates for small businesses as the highest priority change Congress should work toward. Among our members, 58 percent of franchisees and 39 percent of franchisors file as pass-through entities and nearly 80 percent of franchise owners file their business income on their individual tax returns. As a result, many are taxed at the highest rates. For tax reform to be successful, it must include real tax relief for these small business owners and their employees.
Recent polling shows that nearly two-thirds of Americans agree that if effective tax rates for large corporations are reduced, effective tax rates for small businesses should also be reduced. So, as we look ahead to the president’s reform package, we hope to see the current code modernized in a way that is simpler, flatter and fairer for all Americans, including small business owners that file as individuals.
We also believe that simplifying the outdated tax code is crucial. Tax complexity is a constant drain on the financial resources of every small business. In fact, small businesses annually spend between 1.7-1.8 billion hours on tax compliance and up to $16 billion on compliance costs. These are staggering numbers that beg for reducing the size and scope of the current tax code.
Additionally, the lingering estate tax continues to saddle businesses with having to plan for the unforeseen passing of an owner. Because many franchise businesses are family-owned, this tax becomes a moral threat and an unfortunate reality check when an owner dies. Aside from the emotional toll, the planning costs associated with the estate tax can be a drain on the business and take away important funds that otherwise could be spent on investment.
These principles of reform will continue to move us forward on a path toward growth and opportunity. Tax reform can be done – and, perhaps, surprisingly for some, done in a bipartisan manner. This issue simply is not about party, it’s about doing what is right for the economic success of business owners on every Main Street.
Fortunately, even in today’s hyper partisan environment, we actually see some glimmers of hope. Senate Minority Leader Charles Schumer (D-N.Y.), along with 45 members of his caucus, recently stated that a bipartisan tax reform effort could grow jobs, boost wages and update the tax system for American businesses – exactly what we need. Republican members in the House and Senate echoed with similar words of wisdom – that we must fix the broken tax code to grow the economy and help the middle class.
As other issues get bogged down in partisan politics, the moment for bipartisan, comprehensive tax reform policy may be here. On behalf of the hundreds of thousands of franchise small business owners and the eight million franchise employees who populate every district across America, we can’t afford to miss this opportunity.
Robert Cresanti is President and CEO of the International Franchise Association in Washington, D.C.