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NFIB Study: Small Business Owners Overwhelming Favor Comprehensive Tax Reform

NFIB's Research Foundation randomly sampled 12,500 NFIB members between mid-November and mid-December, 2012 and asked them about a range of issues concerning the current federal tax code. Here's how small business owners responded about how much taxes impact their ability to operate their businesses.


Chris Whitcomb, NFIB tax counsel

"This survey unambiguously shows that comprehensive tax reform is a priority for small-business owners, and that they are willing to give in order to get," said NFIB Tax Counsel Chris Whitcomb. "For example, we now know that there is willingness in the small-business population to cap or eliminate popular tax exclusions and deductions in exchange for lower tax rates."

He added, "As federal lawmakers tackle the complex subject of tax reform, this new data will give them needed clarity on the views of the small-business community. With leaders in the House already developing discussion drafts for reform, this type of insight into small-business owners’ challenges, needs and mindset will be invaluable."

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Small Business Tax Survey Executive Summary:
 

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  • 85% of NFIB members think Congress should fundamentally revise the federal tax code in 2013.
     
  • Arbitrary/inconsistent tax preferences, constant change, and complexity top the NFIB member list of complaints about the current federal tax code.
     
  • NFIB members have effectively surrendered to the code's complexity: 91% hire a professional tax-preparer to do their taxes; 55% do not think simplification will occur in any tax revision, even if explicitly intended.
     
  • 34% of NFIB members made expenditures in the last five years to protect their heirs from the estate tax; another 15% plan to make them. Since many fewer will ultimately require the protection, those expenditures represent a considerable misallocation of resources.
     
  • At least 82% of NFIB members purchased less than $500,000 in depreciable business assets, including real property, in 2012.
     
  • 36% of NFIB members say that they calculated the Alternative Minimum Tax (AMT) in their last tax year; 17% claim that they paid it.
     
  • NFIB members in the abstract strongly prefer a tax code with lower rates and fewer preferences. They are less inclined to hold those views when concrete proposals are in question.
     
  • Tax preferences that NFIB members generally support capping or eliminating in exchange for lower tax rates include: the mortgage interest deduction; the employer-­-provided health insurance exclusion; total deductions; tax exempt municipal bonds; and the production tax credit. Where applicable, one-third to one-fourth of respondents selected their answser based on a provision's cap size rather than the provision per se.
     
  • NFIB members favor retaining the deduction for state and local taxes paid, even in exchange for lower tax rates, and the preference for capital gains.
     
  • To reduce the federal budget deficit, 81% prefer a spending cut to tax increase ratio of at least 3 to 1, with the emphasis on cuts. A plurality (36%) wants to reduce the federal budget deficit through spending cuts only. Virtually no respondent favors more tax increases than spending cuts.
     
  • NFIB members oppose the VAT and the Carbon Tax as potential replacements or offsets for other taxes by a net 41% and 64%, respectively.
     
  • The success measure of fundamental tax restructuring for a majority of NFIB members is the bottom line. 71% agree that the most important outcome in tax restructuring is their taxes rising or falling; 20% disagree.

Tax Survey Infographics

Infographic of small business opinions on tax reform