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Tax Policy and Small Business

Before the U.S. House of Representatives Subcommittee on Select Revenue Measures, Committee on Ways and Means

Donald Marron

Published: March 03, 2011
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The text below is an excerpt from the complete document. Read the full written testimony in PDF format.

Abstract

Donald Marron's testimony before the U.S. House of Representatives Subcommittee on Select Revenue Measures, Committee on Ways and Means on tax policy and small business.


Chairman Tiberi, Ranking Member Neal, and Members of the Subcommittee, thank you for inviting me to appear today to discuss the tax system and small business.

America's tax system is needlessly complex, economically harmful, and often unfair. Because of a plethora of temporary tax cuts, it's increasingly unpredictable. And it fails at its most basic task, raising enough money to pay our government's bills. For these reasons, the time has come for fundamental tax reform.

Such reform could have far-reaching effects on every participant in the economy, including small businesses. To provide a foundation for thinking about these effects, my testimony discusses basic facts about the relationship between tax policy and small business. I make six main points:

  • Today's tax code generally favors small businesses over larger ones. Provisions such as Section 179 expensing, graduated corporate tax rates, and special, low capital gains taxes benefit businesses that are small in terms of investment, income, or assets.

  • Many small businesses also benefit from the opportunity to organize as pass-through entities. S corporations, limited liability companies, partnerships, and sole proprietorships all avoid the double taxation that applies to income earned by C corporations.

End of excerpt. The entire report is available in PDF format.