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Center for American Progress

“Reforming the Tax Code to Assist Small Businesses”





Read the Full Testimony (pdf)

Thank you Mr. Chairman, I would like to thank you and Ranking Member Velazquez for inviting me to testify before this committee.

My name is John Irons. I am a Ph.D. economist by training, and I am currently the director of tax and budget policy at the Center for American Progress, a nonprofit think-tank here in Washington, Dc=

As an economist, I am continuously amazed at the resiliency of the U.S. economy, and at the creativity of our nation’s small business owners. While the title of this hearing is "Reforming the Tax Code to Assist Small Businesses," I feel that it is important to recognize up front that the small business community does quite well on its own, and the goal of tax policy in many ways should be to get out of the way of private activity, while still raising adequate revenue for vital domestic and international priorities.

When talking about the overall tax code, analysts often think about following three basic principles of simplicity, fairness, and economic growth.

The Center for American Progress has developed a broad reform package based upon these principles. A copy of that proposal is included in my written testimony.

The American Progress tax proposal calls for a variety of changes to the tax code, and includes the elimination of the employee side of the Social Security payroll tax and an elimination of the AMT.

However, we do not simply cut these revenue streams without making other adjustments. Rather, we shift the tax share onto a restructured income tax that is more progressive than our current tax structure. And we tax all sources of income for very high earners according to the same, progressive rate schedule. In total, we are able to increase revenues by about $500 billion over 10 years compared with current policy. And we are able to reduce taxes for about 70 percent of the population. Those at the high end of the income distribution-those that have benefited the most from recent tax cuts-would likely see an increase in their tax share.

A reduction in the employee side of the payroll tax would mean an immediate reduction in the taxes for a large swath of low- and moderate-income small business people.

The principles that guide overall tax reform should also be followed when looking at taxation of small businesses, and my submitted written comments are organized along those three themes as well.

But first let me first frame some of my comments by considering the general makeup of small businesses in the U.S.

Read the Full Testimony (pdf)




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