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High Tax Costs Plus Complexity Hinder Pa. Small Business Growth
NFIB testifies at House Finance Committee hearing
(HARRISBURG) March 31, 2015 – Pennsylvania’s leading small-business group, the National Federation of Independent Business (NFIB), testified before Pennsylvania’s House Finance Committee about the complexity and cost of state taxes and the impact that has on small businesses in the Commonwealth. NFIB represents 15,000 small and independent businesses in the state and roughly 350,000 nationwide. NFIB members represent virtually every sector in Pennsylvania’s economy.
"The cost of tax preparation and compliance for a small business can cost as much as $74 per hour," said NFIB/PA Legislative Director, Neal Lesher. "Many larger companies employ the staff necessary to navigate through tax laws, a luxury that most small businesses do not have. For every dollar in state sales tax that a small-business owner collects and remits — it also costs 13 cents in bookkeeping and compliance."
The Vice Chairman of NFIB/PA’s Leadership Council, Warren Hudak, who owns a business consulting firm, explained that three bills currently before the legislature would help simplify the state tax code and bring in closer in line with the federal code.
"Tax policy should be competitive with other states, conform to Federal standards when possible, and remove barriers to growth and investment," said Hudak. "The Small Business Tax Fairness package would remove unfair tax obstacles facing small businesses, and allow them to compete and grow."
HB 700 – Like-kind exchanges. This legislation, introduced by Rep. Stephen Bloom, would allow for tax-deferral when property is exchanged for similar property. This rule is currently allowed under Federal tax law and in all 49 other states.
HB 701 – Net operating loss. This legislation, introduced by Rep. Seth Grove, would allow small businesses to take a net loss from other sources of income. For example: If an owner sells some personal items to help the business make payroll, the owner could take the business loss against the tax bill created by selling personal items.
HB 702 – Increased expense deductions. Section 179 of the IRS tax code allows businesses to deduct the full price of qualifying equipment purchased during the tax year. For the last four years, the deduction limit has been $500,000. Under Pennsylvania law, while the allowable deduction for C-corporations is tied to the federal limit, most small businesses file under the Personal Income Tax and are limited to $25,000. This legislation, introduced by Rep. George Dunbar, would increase the limit under the PIT to $100,000 per taxable year and increase the phase-out of this deduction from the current $200,000 to the federal amount of $2,000,000.
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NFIB is the nation’s leading small business association, with offices in Washington, D.C. and all 50 state capitals. Founded in 1943 as a nonprofit, nonpartisan organization, NFIB gives small and independent business owners a voice in shaping the public policy issues that affect their business. NFIB’s powerful network of grassroots activists sends their views directly to state and federal lawmakers through our unique member-only ballot, thus playing a critical role in supporting America’s free enterprise system. NFIB’s mission is to promote and protect the right of our members to own, operate and grow their businesses. More information is available online at www.NFIB.com/newsroom