News from U.S. Senator Olympia J. Snowe
Chair, Senate Committee on Small Business and Entrepreneurship
For Immediate Release: April 17, 2006
Contact: Chris Chichester, 202-228-5843
SNOWE: SMALL BUSINESSES BURDENED
BY TEDIOUS TAX CODE
WASHINGTON, D.C. – Senator Olympia J. Snowe (R-ME), Chair
of the Senate Committee on Small Business and Entrepreneurship,
today said Tax Day is a reminder that the tax code must be
simplified and called on Congress to pass her legislation
that will provide small business owners with greater freedom
and flexibility in meeting their tax obligations.
“With the tax filing deadline once again upon us, I believe
the time is now for the Congress to reform our federal tax
code that is overly complicated, time-consuming and tedious
for all Americans and most especially for our nation’s small
businesses. Despite the fact that small businesses are the
real job-creators for our nation’s economy, the current tax
system places an entirely unreasonable burden on them as they
seek to satisfy their tax obligations,” said Senator Snowe.
“As the chair of the Senate Committee on Small Business and
Entrepreneurship, I believe the Congress must pass legislation
that I have introduced to allow small business owners to satisfy
their tax obligations in a less-expensive, more-efficient
manner to give them the freedom and resources they need to
devote to their business and to create jobs.”
This year Senator Snowe introduced the Small Business Tax
Flexibility Act, legislation (S. 2462) that allows start-up
small business owners to meet their tax obligations by using
a taxable year that is most suitable to their business cycle
if they earn less than $5 million during the tax year. Until
1986, businesses could elect the taxable year-end that made
the most economic sense for the business. In 1986, Congress
passed legislation requiring partnerships and S corporations,
many of which are small businesses, to adopt a December 31
year-end.
Senator Snowe noted the Small Business Administration’s Office
of Advocacy has reported that small businesses spend an astounding
8 billion hours each year complying with government reports.
They also spend more than 80 percent of this time on completing
tax forms. What’s even more troubling is that companies that
employ fewer than 20 employees spend nearly $1,304 per employee
in tax compliance costs; an amount that is nearly 67 percent
more than larger firms.
“These statistics are disturbing for several reasons. First,
the fact that small businesses are being required to spend
so much money on compliance costs means they have fewer earnings
to reinvest into their business. This, in turn, means that
they have less money to spend on new equipment or on worker
training, which unfortunately has an adverse effect on their
overall production and the economy as a whole,” said Senator
Snowe.”
Senator Snowe’s tax simplification agenda also includes
legislation (S. 543) she introduced that will further simplify
the tax code by permitting small business owners to use the
cash method of accounting for reporting their income if they
generally earn fewer than $10 million during the tax year.
Currently, only those taxpayers that earn less than $5 million
per year are able to use the cash method. By increasing this
threshold to $10 million, more small businesses will be relieved
of the burdensome record keeping requirements that they currently
must undertake in reporting their income under a different
accounting method.
In addition, Senator Snowe and Sen. Trent Lott (R-MS) also
introduced legislation (S. 2287) that doubles the dollar amount
of new investments a small business can expense and makes
that change a permanent part of Federal tax law.
"We must provide small businesses with critical incentives
like expensing so they continue to invest in new technology,
expand their operations, and most important, create jobs.
Small businesses drive our nation's economic growth, and my
bill strengthens their ability to lead the way," said
Snowe. "I'm responding to small business owners in my
home state of Maine and across the nation who have demonstrated
that this investment incentive works and have asked Congress
to expand it and make it permanent."
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