« iepriekšējāTurpināt »
During the past twenty years, many proposals have been advanced for
tax changes to provide relief for small business.
Some of these proposals
have been incorporated into the law.
This study of the impact of taxation
on small business has concluded that while the prior proposals have been of
great help, they have been piecemeal efforts.
As such they have been unable
to correct the overall debilitating effect of the present tax system on
A new and fresh approach is necessary.
The study concluded that:
o The unique tax problems of small business require solution
without disturbing the present broader tax system for other
segments of the economy;
o The solution to the tax problems of small business therefore
require a definition of small business as a separate, identifiable
The study revealed that the resolution of the major tax problems facing
small business would also resolve the fundamental economic problem facing it.
This is the problem of developing economically viable small businesses making
them an attractive investment alternative for private savings. The small
business tax reform program recommended would enable small business viability
o Stimulating internal growth of small enterprises as a result
of permitting greater retention of earnings for use in the
enterprise or similar small enterprises;
o Producing the necessary capital, without using additional
government funds, to provide federal management assistance
and educational opportunities.
Many proposals of the past are incorporated into the recommended
Some prior proposals have been rejected.
program goes further, however, by establishing a separate small business
tax entity which is defined in terms of its economic characteristics and
takes into account the realities faced by the small businessperson.
this framework, other recommendations specifically address the unique tax
problems of this economic sector.
Thus, it is possible, without creating
havoc with the present revenue system, to provide comprehensive small business
tax reform, and at the same time to substantially simplify the tax law
specifically pertaining to the sector.
No previous tax reform proposal has successfully achieved four
objectives which would result from implementation of the recommended program.
Specifically, the proposed program would:
o Increase the attractiveness of the small business sector as
an investment alternative by permitting deferral of tax on
most types of income resulting from private savings committed
to the sector;
o Facilitate capital formation for small businesses by integrating
the corporate and individual taxes;
o Establish a complete data base for analysis of the impact
of taxation on small business, and for other non-tax analysis
o Achieve an overall balanced impact on the public revenue.
Deferral of Tax
Integrated into this reform program is a mechanism
for attracting private capital into the small business sector.
investment could take the form of the establishment of new small businesses.
It could also take the form of passive investment in small business investment
Using several variations of a technique well known in the tax
law, the interlocking recommendations provide complete tax deferral for
most types of income from small business investments if the income remains
invested in the small business sector.
Tax is triggered when the income
is permanently withdrawn from the sector.
Such withdrawal can take many
forms including payment of salaries, interest, dividends or sales of small
Integration of the Corporate and Individual Taxes
have indicated that the double taxation of corporate income tends to
discourage capital formation.
This is particularly troublesome because
it aggravates other problems faced by small business in the attempt to
attract long term and equity capital.
The recommended tax reform program
would achieve tax integration for virtually all small businesses.
would be accomplished by the creation of the separate tax entity for the
small business enterprise, and the amendment of Subchapters to make it
The need for a data base for analysis of small business
problems is well recognized.
The creation of the separate Small Business
Enterprise tax entity results in a complete data base.
It would be easy to
summarize the information from the special tax returns filed by such
enterprises for use by the Treasury (to evaluate the impact of taxation