Repealing estate tax won’t level the playing field for small businesses

Everyone knows the statistics – small business owners create two-thirds of new jobs each year and employ more than half of the private sector workforce. And as small business owners, we can tell you firsthand that small companies provide room for innovation that larger companies don’t. These contributions to the American economy are invaluable, so it only makes sense that our tax policies should help – not hurt – our small businesses. Unfortunately, lawmakers too often focus on the wrong types of policies – like the estate tax, which marked its 100th anniversary last week. Lately we’ve been hearing a lot of noise from lawmakers and pundits about how the estate tax hurts small businesses, but the reality is that the estate tax has a negligible impact on the small business community. The real issue we should be talking about is the inequity in our tax laws that allow big businesses to shift the tax burden onto small firms.

Despite what some politicians claim, the estate tax only impacts the wealthiest Americans and businesses. The tax doesn’t apply unless the estate in question is valued at more than $5.4 million – which most small business owners can tell you is far beyond the value of their business assets. In total, a mere 0.2 percent of all estates fall subject to the estate tax, and only 120 small businesses out of the nation’s 28 million small firms paid the estate tax in 2013.

{mosads}It’s important to note the tax also plays an important role in providing tax parity. Estate taxes will generate about $246 billion over 2016-2025 under current law, and because of the $5.4 million limit, this tax only impacts the very wealthy. If we abolish the estate tax, we’ll have to recoup that money from lower income individuals who are the most likely to quickly spend their money locally at small businesses like ours – whereas the extremely wealthy are more likely to save as they get wealthier.

What’s more, arguments about the estate tax and its impact on small businesses distract from the real issue at hand: loopholes in our tax code that allow big businesses to skip out on what they owe. Most small businesses owners don’t have a single in-house accountant, let alone an entire team of accountants and lawyers focused on taxes. But large corporations do, which means they can dedicate significant resources to utilizing tax loopholes. As a result, 26 profitable Fortune 500 companies were able to pay no income tax from 2008 to 2012. And each year, corporations dodge an estimated $90 billion by using “tax havens” to move their profits abroad and pay lower tax rates. 

When big businesses shirk their tax duties, they leave small businesses like ours paying the bill for items on which all of our communities depend – like schools and hospitals. In fact, offshore tax havens cost the average small business $3,244 per year.

The impact of tax loopholes is a huge concern for us, and we’re not alone. Small Business Majority’s polling found that an overwhelming 90 percent of small business owners believe big corporations use loopholes to avoid taxes that small businesses have to pay, and 75 percent believe their small business is harmed when big corporations use loopholes to avoid taxes.

In the wake of the estate tax’s 100th birthday, we’re hearing a lot about how this tax hurts small businesses – but don’t believe the pundits. The real issue is that small businesses are helping to foot the bill for big businesses, and local communities are feeling the cost. We need to focus on the real tax issues facing small businesses, which means instituting fairness in our tax system and getting rid of corporate tax loopholes.