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A Fairer Tax Code
By Marc Tracy
As things stand right now, small business owners are at a disadvantage in terms of filing their annual tax returns, as this excellent post at the OPEN Forum (which is published by our sponsor, American Express OPEN) makes clear. Part of the problem, of course, is the sheer complexity of filing taxes, which actually weights against small businesses, which after all tend to lack the resources to hire professionals to do their returns. And the rest of the problem is the intricate dynamics of the modes of taxation themselves, which contain, in effect if not intent, an unmistakeable anti-small business bias.
The article recommends four changes that would go some way towards leveling the playing field:
-Simplify, simplify. Rep. Kurt Schrader (D-Ore.) estimates that small businesses end up dishing out over $1300 per employee just to do their returns--that's double the rate at which big corporations spend. A simpler system, written in plain English, could go a long way towards lowering that.
-Standard home office deduction now! We've written about this before. As it stands now, taking a home office deduction is at best a large hassle, and at worse a red flag likely to attract an audit (shudder). Making a standard deduction for this undeniable and legitimate business expense would change all that.
-Independent contractor versus employee. Having independent contractors is far cheaper for the employer, but as it stands now, it's an extremely complicated matter. Making it less so would be a boon to small businesses--and, potentially, to the people they become more willing to hire.
-The health care deduction for sole proprietors. The self-employed can do it. Employees at large corporations can do it. Why can't sole proprietors of independent corporations do it?
Incidentally, we'd add a fifth: reform the self-employment tax. As matters stand right now, the self-employed pay over double what wage-paid employees pay in payroll tax: they are paying both sides of the Social Security tax (where employees pay only half, and their employers take care of the other), plus a Medicare tax, for a total tax of over 15%, completely independent of the income tax (except that what you pay in self-employment is deductible). We understand the logic behind this--the employee and employer each pays half; the self-employed payor is both employee and employer--but the fact that it makes some degree of internal sense doesn't change the fact that it's grossly unfair.
Comments (0)May 13, 2009 5:48 PM
