Small businesses are a great driving force of the American economy. With the sector creating two thirds of jobs in the U.S., many experts believe that freeing up money to help them invest more in their business is critical.
Look at almost any survey and the number one concern of small businesses will almost certainly be taxes. Taxes have long been a concern of businesses large and small, but now more than ever with the economy still in recovery it seems even more important.
Recent tax reform proposals by the Trump administration promise to lighten the burden for individuals as well as businesses. The reforms to individual tax rates would affect small business owners who are often taxed on their income at individual tax rates. When it comes to individual taxes, the president has proposed reducing the number of tax brackets from seven to three, with tax rates of 12 percent, 25 percent and 35 percent. Currently the rates range from 10 percent to 39.6 percent.
For businesses the proposal would reduce the business tax rate from 35 percent to 20 percent, which is hoped to have the effect of making American companies more competitive with other companies around the world. Sole proprietorships and partnerships would also get a 25 percent tax which would be lower than the individual tax rates many currently pay.
Another area that is expected to have a significant impact is that of making it easier to file tax returns. At present, taxes are so complicated that a small business owner can spend weeks with tax preparation.
The new tax proposal seems to be the right thing at the right time but many are still skeptical. According to a recent survey, the number of business owners who expect changes in tax policy to have a positive effect on their business in the next 12 months fell form 42 percent to 31 percent.
Will these proposed tax reform steps accomplish all that the president is saying they will? We may soon see.