It should come as no surprise that there’s a third and fourth corollary to the old saw that there are only two certainties in life – as in death and taxes. Those additional “certainties” would be that individuals and businesses alike HATE paying taxes and that the current U.S. tax code has become so complicated that in many ways it’s affecting productivity.
Look at the results of the 2012 Small Business Taxation Survey recently conducted by the National Small Business Association (NSBA). In short: the complexity and inconsistency within the U.S. tax code pose a significant and increasing problem as an ever-growing patchwork of credits, deductions, tax hikes and sunset dates has created what the group calls a “roller coaster ride” environment without the slightest indication of what's around the next corner.
“Nearly half of all small-business owners spend 80 hours every year dealing with federal taxes, and two-thirds spend more than one full week,” noted Chris Holman, NSBA’s chairman, CEO of Michigan Business Network.com and president of The Greater Lansing Business Monthly.
The tax burden on small-business owners has grown to such an extent, NSBA argues, that 64% reporting they spend more than 40 hours per year dealing with federal taxes, up from 57% just one year ago. The financial burden also is growing with a slight increase in the number of small businesses spending in excess of $5,000 annually on the administration (i.e.: accountant fees or internal costs) of federal taxes alone.
Trucking companies, of course, have an extra burden to deal with – fuel taxes. That just adds to the administrative headache revolving around taxes these days.
Underscoring the complexity of the federal tax code, Holman said, is the fact that 85% of small-business owners must pay an external tax practitioner or accountant to handle their taxes, according to NSBA’s poll. Furthermore, when asked to rate the most significant challenge posed by the federal tax code to their business, the majority (56%) picked administrative burdens while 44% said financial burdens.
When it comes to public policy, the clear majority of small businesses polled (73%) support broad tax reform that will reduce both corporate and individual tax rates coupled with reduced deductions.
Small businesses in the group’s survey also expressed moderate to significant concern over the following expired, or soon to expire, tax provisions: a pending increase in the marginal income tax rates (74%); increases in the estate tax (58%); prohibiting self-employed from fully deducting the cost of their health insurance (53%); and expiration of the expanded Section 179 expensing and bonus depreciation (52%.)
[One concern among truck drivers during tax season is making sure they tap into all the deductions available to them. The video below provides some tips to think about.]
Given that the overwhelming majority of small businesses (83%, according to existing NSBA data) pay taxes on their business at the personal income level, or are so-called “pass-through” entities, addressing just one piece of the puzzle—such as corporate tax reform—will lead to even greater complexity and a massive tipping of the scales in favor of the nation’s largest companies at the expense of small businesses, noted Todd McCracken, NSBA’s president.
"The overwhelming majority of small-business owners support broad reform of the federal tax code—not tinkering with certain taxes here and there," he added. "Lawmakers must work toward broad reform, and they must do it now."
Fat chance of that happening any time soon – especially in an election year. Ah, but one can always hope of course.