Misinformation is currently circulating in the media about how the Senate’s recently passed tax reform will affect ordinary Americans and small businesses.
Entrepreneurship author Rhonda Abrams recently wrote in a USA Today article that the tax reform bill is contributing to “a terrible, horrible, no good, very bad month for small businesses.” The New York Times editorial board says the bill will “take money from the middle class and give it to the wealthiest people in the world.”
As a small business owner, all I can say is, what tax reform bill are they looking at? I can personally attest to the significant relief it will offer to small business owners and ordinary American workers like myself.
As a pediatric speech pathologist, I developed a series of treatment tools for children and adults, known as “Chewy Tubes.” And my line of developmental baby teethers, made in the USA, helps parents around the globe to get little mouths off to a healthy start.
I started my company on my back porch. The pending tax reform bill could take it to Main Street.
Curiously enough, one headline provision included in the bill has barely been reported on. This bill creates a new 20 percent small business deduction. In other words, for a business with $200,000 a year in annual earnings, $40,000 would be completely tax free. This provision helps smaller businesses to better compete against big business and international competitors, who currently face lower tax burdens than most small businesses.
I currently employ five people. This tax cut would allow me to provide bonuses for current employees, hire more employees, expand my workspace, and purchase inventory.
To prevent this provision from being a tool of wealthy small businesses, like investment and accounting firms, it is only available to those making less than $315,000 a year. The overhelming majority of small businesses earn below this threshold, meaning the overwhelming majority would benefit. For small business owners who are responsible for nearly two-thirds of new job growth in this country, that‘s a big win.
The bill’s provisions to allow for immediate expensing of capital investment and full interest expensing would spur expansion and capital improvements, including a larger workspace for Chewy Tubes, because they would make such investments affordable. Additionally, we would see a long-overdue end to complicated and time-consuming depreciation schedules.
The tax reform bill also has other provisions that will benefit both ordinary Americans and the vast majority of small businesses that pay tax at individual rates.
The standard deduction is doubled, meaning that all families in the country pay no tax at all on their first $24,000 of earnings. This provision alone means roughly one-quarter of American families will face no income tax liability at all, according to Census Bureau data.
The bill also lowers tax rates across the board. The bill replaces the 15 percent income tax bracket with an initial 12 percent tax bracket for income up to $77,400. Similarly, it eliminates the 25 and 28 percent tax rates in favor of expanded lower rates.
Finally, the bill doubles the child tax credit to $2,000 per child, helping families pay for the increasing costs of raising children.
Taken together, these provisions will save ordinary families thousands of dollars a year. This money will stay in local communities where it is needed, helping spur local economic growth, main beneficiaries of which are typically middle-class individuals.
This tax bill brings long-overdue relief to hardworking taxpayers and small business owners like me. That's why I'm grateful for my elected representatives here in Maine, including Rep. Bruce Poliquin and Sen. Susan Collins, both Republicans, for supporting it. They have done the right thing by looking beyond the typical media coverage for the real facts of this tax reform.
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