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STATEMENT
Congresswoman Nydia Velazquez, Ranking Member

Committee on Small Business

“The Tax Outlook for Small Businesses: What’s on the Horizon?”

Wednesday, April 18, 2012

Thank you, Chairman Graves.

In recent months, our economy has shown steady signs of recovery.   In the last quarter of 2011, Gross Domestic Product grew at an annual rate of 3 percent. Consumer spending is on the rebound – increasing by the most in seven months in February despite stagnant wages and rising gas prices. Most importantly, the U.S. economy is adding jobs – 245,000 a month between December and February.  

While this news is promising, the recovery remains fragile, making it vital that our tax policy promotes small business job growth – and does not hinder it.  Now, more than ever, small firms need stability and incentives to grow. But after filing taxes yesterday, the challenges created by the current tax code and the uncertainties that lie ahead are on the minds of every small business owner.

Tax law has been used to encourage business investment through the use of deductions, credits, and favorable tax rates. Yet, as this committee is well aware, it has become riddled with unnecessary complexities, which have created additional burdens on small firms.

With many expiration dates looming and ACA tax provisions going into effect in the coming years, these complications are compounded for millions of firms.  In that vein, it is my hope that today’s hearing will offer insights on both current and future tax obstacles, while also generating potential solutions. 

In doing so, we will seek ways to ensure effective tax efforts are maintained, and ineffective ones are either allowed to expire or modified to encourage growth and competition.  Failure to take any action, however, could create greater uncertainty in the marketplace, and dampen the recovery for small businesses. 

At a time when the economy is starting to exhibit sustained job creation, small firms cannot have new obstacles to expansion. Tax policies can disadvantage small businesses as they seek to compete both domestically and abroad.  Small firms now spend up to 67 percent more on tax compliance than their corporate competitors and face constant changes to the tax code, creating further confusion and hindering job creation.

A fairer and simpler tax code can encourage entrepreneurship, promote investment, and yield hiring. After all, as we look at policies to promote growth, tax reform should be a top priority. Given that the last major reform of the code took place in 1986, it is clear changes are long overdue and that we cannot go forward without input from small business owners and entrepreneurs. Yet, comprehensive tax reform poses its own challenges.

However, many discussions have focused on a corporate-only approach, which disregards the importance of individual tax rates. Devoting reform efforts on a complete overhaul of the code supports our nation’s job creators by allowing them to continue hiring and expanding without worrying about tax increases. Comprehensive reform will have immediate benefits for small businesses while also serving our nation’s economic objective of promoting pro-growth policies.

With that, I look forward to today’s testimony and thank the witnesses for their participation.   

I yield back.