Ralph R. Reiland: Tax reform & small businesses
Over milkshakes and root beer floats at a Wally's Burger Express in Austin, U.S. Sen. John Cornyn, R-Texas, held a roundtable discussion on tax reform with three small-business owners several weeks after Congress passed the Republican tax overhaul bill.
The businessmen were Bob Mayfield of Austin's Dairy Queen and Wally's Burger Express, Josh Agrelius of Re-Bath of Austin and Bobby Jenkins of ABC Home and Commercial Services.
“We're grateful that finally there is somebody looking out for our interest,” said Mayfield at the meeting. He said Cornyn wanted to know how the tax reform measure “was going to affect our businesses,” so he told Cornyn his business would expand by two restaurants because of the Tax Cuts and Jobs Act.
He also appreciated the tax-reform bill doubling the estate-tax exemption.
“There is not one small business in the country that is not worried about death taxes,” he said. “You work your entire life and build a business or buy real estate so you don't have a lot of cash on hand to pay death taxes when you die. What I am so grateful for is the doubled exemption. It'll make it so much easier to pass your business on to your children.”
Under prior law, the federal estate-tax “exclusion amount” for 2018 would have been $5.6 million per person. Now it's $11.2 million. The larger amount will make the estate tax a non-issue in more business ownership transfers.
In her Dec. 17 Washington Examiner commentary, “Tax bill would help ordinary Americans and small business owners like me,” Mary Schiavoni expressed approval of the tax reforms. The New York Times editorial board disapproves, saying the bill will “take money from the middle class and give it to the wealthiest people in the world.”
“As a small business owner, all I can say is, what tax reform bill are they looking at?” Schiavoni wrote. “I can personally attest to the significant relief it will offer to small business owners and ordinary American workers like myself.”
She also wrote: “As a pediatric speech pathologist, I developed a series of treatment tools for children and adults, known as ‘Chewy Tubes.' And my line of developmental baby teethers, made in the USA, helps parents around the globe to get little mouths off to a healthy start. I started my company on my back porch. The pending tax reform bill could take it to Main Street.”
Schiavoni linked the tax bill to resultant increases in investment, incomes and hiring: “Curiously enough, one headline provision included in the bill has barely been reported on. This bill creates a new 20 percent small business deduction. In other words, for a business with $200,000 a year in annual earnings, $40,000 would be completely tax free. This provision helps smaller businesses to better compete against big business and international competitors, who currently face lower tax burdens than most small businesses. I currently employ five people. This tax cut would allow me to provide bonuses for current employees, hire more employees, expand my workspace and purchase inventory.”
Ralph R. Reiland is associate professor of economics emeritus at Robert Morris University and a local restaurateur (email@example.com).