As a small business owner who also works extensively with start-ups and other small businesses, I am a big advocate for real tax reform. Big corporations are able to game our current system, taking advantage of loopholes that allow some to pay little or no tax at all. That hurts small businesses on Main Street, who find it harder and harder to compete on such an uneven playing field. Further, millionaires and billionaires use special-interest loopholes to avoid paying their fair share, while middle-class taxpayers are often left in the dust.
Small businesses make up 99 percent of businesses, employing nearly half of all private-sector workers in the United States and creating the majority of new jobs. Small business is the heart of the American economy, and any tax bill should put small businesses and their customers first.
That’s why I’m so concerned about the Republican tax plan. The Senate Republican tax bill creates even more loopholes for wealthy corporations at the expense of everyone else. It will encourage big businesses to move American jobs and profits offshore, hurting small businesses who can’t take advantage of these complicated new loopholes. It will increase taxes on half of all American families, including two in three middle-income households. That means less money in families’ pockets, and less money to spend at small businesses in turn. It also increases the deficit by an appalling $1.4 trillion — meaning deep cuts to programs small businesses rely on, like infrastructure investment, education, job training, and more.
Even Republicans’ so-called small business tax cuts don’t actually help small businesses. Their tax bill provides the vast majority of breaks to only the richest firms owned by millionaire businessmen like Donald Trump. Many small businesses won’t get another dime.
Here’s the list of businesses these bills hurt:
1 Home contractors and energy efficiency industries. Tax deductions and credits that encourage home retrofits, including energy efficient appliances, solar panels and electric vehicles, could be eliminated.
2 Family farmers. The Republican tax bill forces automatic cuts to critical agriculture programs, which could wipe out the farm safety net, and eliminates deductions that farm co-ops rely on.
3 Technology services and manufacturing support. The tax loopholesthat encourage offshoring and outsourcing will be expanded and made permanent, risking more jobs and profits lost overseas.
4 Disability, education and health care service businesses. Tax deductions that encourage businesses to become more accessible for people with disabilities, allow Americans to deduct significant health care expenses, and provide for tuition grants for graduate students will be gone under the House bill.
5 Research and Development. The House bill proposes taxing academic fellowships and scholarships.
6 Artists. While hedge fund managers get to keep most of their tax breaks, artists would no longer be able to deduct their work expenses.
7 California, New Jersey, New York and Massachusetts markets. Both tax plans make deep cuts to the mortgage interest deduction, disincentivizing home-buying in large cities and states.
8. Middle-class business owners. While the corporate tax cuts become permanent, all of the bill’s provisions for individual taxpayers expireafter 10 years. Genuinely small businesses, including small family practices in law or medicine, could be further squeezed out of the market place.
The reality is that the GOP tax plan is designed to help large corporations and high net worth families. While it completely eliminates critical deductions and exemptions middle class business owners rely on, the Trump family could save $1.1 billion in estate taxes alone. Repealing this tax could blow up to a $150 billion hole in the budget to benefit 0.2% of taxpayers. Everyone else seems to be left holding the bag.
Andrew Lachman owns a Los Angeles-based law firm serving small businesses and technology start-ups.