11/03/17 Erik Paulsen Correspondence Corner : Small Business Becomes a Pawn in Tax Reform

PREFACE :
Erik Paulsen regularly issues a video Correspondence Corner in which he responds to constituent questions.
It is a great ploy — Congressman Paulsen determines what question is to be answered … thus, providing him an opportunity to portray himself as effectively responding to issues that he wishes to address as if they are the most critical issues that voters want addressed.
The MN Political Roundtable will be evaluating Congressman Paulsen’s responses and encouraging readers to offer their own assessments.

Yesterday’s topic: H.R.1 – Tax Cuts and Jobs Act and your 401k

Today’s topic: H.R.1 — Tax Cuts and Jobs Act for small business


Quick Question : Do you think of Steve’s Bike Shop when you hear Erik Paulsen say “small business” ?

U.S. House of Representatives, Committee on Ways and Means

Complaint
• “Lowering the tax rate for pass-through businesses creates a massive loophole that wealthy Americans will use to avoid paying their fair share of taxes.”

Response
• The Tax Cuts and Jobs Act includes specific safeguards to prevent tax avoidance and help ensure taxpayers of all income levels play by the rules under this new fairer, simpler tax system. Our legislation will ensure this much-needed tax relief goes to the local job creators it’s designed to help by distinguishing between the individual wage income of NBA All-Star Stephen Curry and the pass-through business income of Steve’s Bike Shop.

That’s from the talking points issued by Congressman Paulsen’s Ways and Means Committee in response to complaints over HR 1 Tax Cuts and Jobs Act.

Who is Steve and where is Steve’s Bike Shop is immaterial … that’s what they want you to think … the tax “reform” proposal isn’t designed to help big corporations or multi-millionaires, but instead the “Mom and Pop” local shop.

So when Congressman Paulsen got request from Mary Ann of Bloomington to do something about the high tax burden facing small business, he was eager to respond.

The #PaulsenSpin was going overboard … not since 1928, when Republican Presidential candidate Herbert Hoover made the campaign promise of a “chicken in every pot and two cars in every garage”, have we heard such optimism.
Yep, were spinning now … can’t you just see the electronic billboards now … “THANKS to Congressman Paulsen’s H.R.2559 – Bike to Work Act of 2017 and Tax Reform, there will be a Steve’s Bike Shop on every corner.”


Well … not so fast …

Big problems for small business: Owners of mom-and-pop shops worry the tax bill doesn’t fix a system they feel already favors big business.

The National Federation of Independent Business, which represents 325,000 small businesses in the U.S., wasted little time saying it can’t support the tax legislation “in its current form.”

“This bill leaves too many small businesses behind,” Juanita Duggan, the groups’ president and CEO, said in a statement.

Most small businesses are set up as “pass-throughs,” meaning their profits are passed through to the owners, shareholders and partners, who pay tax on them through their personal returns. The GOP tax bill slashes the pass-through tax rate to 25%.

However, small business owners fear this won’t help the vast majority of them because most already pay taxes at a 25% rate or less.

“This proposal would primarily help wealthy individuals rather than small businesses,” according to John Arensmeyer, CEO of the Small Business Majority, another advocacy group.

Hmmm … a shift in taxes could help big corporations versus small business … well, that might not be good news for Minnesota operators.
Heck, it was just in May

Minnesota Manufacturing : Feelin’ Fine

From 2010 through 2016, manufacturers in the state predicted a flat economy, but 2017 is proving to be a time of optimism.

55 percent of those surveyed expected an increase in revenue this year, up 11 percentage points from last year’s survey, and 44 percent expect an increase in profits, up seven percentage points. Overall, 94 percent of manufacturers indicated confidence in the future of their company.

This optimism comes in spite of the fact that a majority of manufacturers are still struggling to find talented employees for job openings. 68 percent of respondents cited difficulty in attracting the right people.

“Everyone is really competing for workers on a community basis, not just an industry basis,” said Robert Kill, CEO of Enterprise Minnesota.

Hmmmm … so you are a machinist, do you go to work for the large employer who can offer stable work and better pay / benefits, or the small business that may be impacted by fluctuations in the marketplace ?

Oh … and it gets worse … cause it isn’t one employee Steve’s Bike Shop that will be impacted but some pretty good size operations.

See the definition of “small business” really means anything that isn’t a big corporation … for example, to be a “small manufacturing business” you could have 499 employees … or be in the general construction industry (home builders) with sales under $13.5 million and still be classified as a “small”.

And it’s some of those “small businesses” that could be negatively impacted by other aspects of the GOP proposal … such as the cap the mortgage interest deduction which worries the real estate industry as well as carpenters, electricians, plumbers, HVAC technicians, etc.

The National Association of Home Builders warned the GOP tax plan “slams the middle class” by hurting home values.

Echoing the arguments made by the home builders, the National Association of Realtors complained that the plan “threatens home values and takes money straight from the pockets of homeowners.”

The concern for realtors is that a slowdown in housing could hurt their income or even employment prospects. It’s a major employer. There are about 2 million active real estate licensees in the U.S., according to the Association of Real Estate License Law Officials. The NAR alone represents 1.3 million realtors.

The #PaulsenSpin is that HR1 is all sunshine and lollipops … in realty, the prime benefits will go to the big corporations and wealthy … aka the #PaulsenDonors.

No doubt, the NFIB, the Associated General Contractors of Minnesota, and other donors to Paulsen campaigns will make their voices heard … the bill will be tweaked … and in the end, what will be passed is a $1.5 TRILLION reduction in tax collections.

There is a lot not to like in the Republican tax reform proposals … worse is that they have unabashedly ignored the debt they are asking future generations to pay.

Tags: , ,