NFIB

The Chinese proverb “Make your plans for the year in the spring, and your plans for the day early in the morning” rings of optimism and hope. But for a majority of American small-business owners, spring, with its inevitable April 15 tax deadline, is less a season for planning the future. Rather, it’s more of a time of dread.

For two decades, taxes and related issues have been top problems for small firms. According to the NFIB Research Foundation’s Small Business Problems and Priorities, taxes and the hassles affiliated with them claimed 13 of the 75 issues deemed problematic. Three of the top 10 rankings included federal taxes on business income, just ahead of property taxes and only three notches above state levies.

Given the fact that approximately 85 percent of the nation’s small-business owners file their tax returns as individuals, and that there are about 25 million American small firms in operation these days, it’s easy to figure out that there are a lot of downright discouraged entrepreneurs who are watching the spring calendar with all the enthusiasm of an Easter Bunny eyeing a hungry fox.

But the Internal Revenue Service, while not exactly heeding the Chinese proverb’s schedule, has been planning ahead. If small-business owners have any doubts, they should heed the words of IRS Commissioner Mark W. Everson, who, in November, touted the agency’s progress in enforcing tax compliance: “One area where we need to do better is small business—those with less than $10 million in assets. The audits dropped to 7,290 in 2004 from 13,680 last year. … We started to bring up the audits of large businesses this year. I expect to do the same for small businesses in 2005.”

There is, however, one area where small-business taxpayers and the commissioner agree: The nation’s tax rules are too complex. There is no greater burden placed on small firms by government than that of the current IRS tax code. Small-business owners potentially face more than 200 different IRS requirements, which forces eight out of 10 owners to rely on tax practitioners to prepare their returns. That’s not only an additional cost, but money that isn’t being reinvested into creating jobs and improving their businesses.

Perhaps it’s time for Congress to ponder another Chinese proverb—the one that says, “Insanity is doing the same thing in the same way and expecting a different outcome.”

Real, meaningful reform of our tax system can be accomplished by Capitol Hill lawmakers doing things differently to achieve outcomes that will help small firms to grow and prosper.

The first step to free small businesses from antiquated IRS regulations—rules that no one can comprehend—can be achieved this spring if Congress will make this commitment: simplify the tax code, make the 2001 personal income tax reductions permanent and repeal the Death Tax.

As ancient wisdom notes: “The journey of a thousand miles begins with the first step.”