Manufacturers send their thanks to Ways and Means Committee Chairman Dave Camp (R-MI) for holding a hearing yesterday on the Treatment of Closely-Held Businesses in the Context of Tax Reform. As we’ve been saying for years, more than 70% of manufacturers operate as “S” corporations or as other “flow-throughs” and pay income taxes at individual tax rates.
These entities are responsible for nearly 60 percent of total net business income and employ over half of the private sector workforce. In a nutshell: the treatment of S corps and other flow-throughs – and thus individual tax rates –should be a key part of any tax reform discussion.
However, that’s not always the case. As we noted last month, the President’s Framework for Business Tax Reform didn’t address flow-through entities because it didn’t address individual tax rates that apply to flow-throughs. Instead, the President continued to argue that individual tax rates should go back up to their pre-2001 levels for many of the very taxpayers who are business owners. What we need is comprehensive tax reform that includes permanent lower tax rates for the the small businesses that make up a significant part of the American economy and private sector employment.
We also appreciated the testimony of several witnesses who underscored the need for comprehensive tax reform that results in a simplified and streamlined pro-growth tax code to allow business owners to make decisions based not on the tax code but what’s best for their business. The NAM will continue to urge Congress to take action on this national priority.
Carolyn Holmes Lee is senior director of tax policy, National Association of Manufacturers.
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