Congressman Vern Buchanan, a Republican from Bradenton, Florida, introduced legislation Wednesday that would ensure small business owners reap the same benefits as large employers under any future corporate tax reform legislation.
Buchanan’s “Main Street Fairness Act” would allow small businesses that file taxes as “pass-through” income – including partnerships, sole proprietorships, LLCs and S corporations – to pay the same effective tax rate as large companies.
The current maximum tax rate for U.S. corporations is 35 percent, but small businesses can pay nearly 40 percent under the individual income tax code.
“Local mom and pop stores and medium-sized businesses should not be burdened with a higher tax rate than multinational corporations with billions of dollars in earnings,” said a statement from Buchanan, a senior member of the tax-writing House Ways and Means Committee. “America has the highest corporate tax rate in the developed world – and small businesses face even higher rates.”
Buchanan’s proposal would help businesses that employ more than 68 million people, according to his press release.
The legislation is co-sponsored by Rep. Charles Boustany, R-La., chairman of the Ways and Means Tax Policy subcommittee. “This act simplifies the code for small businesses and gives them the confidence they need to invest and provide more jobs for American families. I am proud to be an original sponsor of this legislation,” Boustany said in a statement.
The proposal is backed by a number of business and tax reform groups, including the Associated Builders and Contractors, the Florida Chamber of Commerce, Florida TaxWatch and Americans for Tax Reform, which blogged its support Wednesday.
In a statement, Carolyn Lee, senior director for tax policy at the National Association of Manufacturers, said the bill was “a viable plan for reducing taxes on pass-through businesses that can be part of a larger tax reform effort.” Pass-through businesses enable a business owner to avoid being double-taxed.
Buchanan, who has run several businesses and employed thousands of people in numerous states, said in his statement that the “goal of tax reform should be to boost the economy and create more American jobs.”
“Even President Obama has called for reducing our corporate tax rate,” Buchanan’s statement added, “but merely reducing the tax burden on corporations does nothing for more than 90 percent of American businesses.”
Prospects for Buchanan’s bill are likely slim because corporate tax reform has been discussed for years in Congress, but with little action. Despite a high base corporate tax rate, few U.S. corporations pay the full 35 percent rate due to numerous tax breaks and loopholes that lower their actual tax burden.