Executive Order Bonanza has Implications for Business

By Ann Sullivan, WIPP Chief Advocate

President Trump will complete only his third full week on Friday and has already left a lasting mark on how small businesses and government itself work with 20 Executive Orders. Through a series of presidential actions, Mr. Trump has touched on topics ranging from Immigration to healthcare. It’s time we took a deeper dive into what’s come down the pipeline and how it affects the small business community. Read the blog here.

The domestic policy action that was signed in the presence of a number of small businesses, is the “Two-for-One” Executive Order.

Here’s the rundown. The Executive Order has two parts – one aimed at Fiscal Year 2017 and one for Fiscal Year 2018:

  • FY17: “1 in and 2 out.” If a federal agency proposes a new regulation, it must recommend two regulations to the Office of Management and Budget (OMB) to be terminated. OMB, not the agency will have the final word on which regulations are eliminated.
  • FY18 and subsequent fiscal years: Agencies are ordered to offset costs of new regulations and the OMB is ordered to create a budget that limits how much a new regulation can rise.

On its face, this Executive Order spells relief for lenders and small businesses but there are a raft of unknowns still to be resolved. One question is when this directive will be implemented. For example, the administration’s OMB Director-designate Congressman Mick Mulvaney is undergoing a tough confirmation process and the timeline for his confirmation by the full Senate is still unclear.

Executive Orders generally provide broad guidelines rather than detailed plans on its execution. Questions to be answered are: What actually constitutes a “regulation?” Is it simply a single rule or a whole host of interwoven regulations that, together, provide guidance for an agency on an individual program or policy? What constitutes a “cost?” Will the benefit in a cost-benefit analysis be considered or will the analysis include only the cost? OMB is stocked with experts so we anticipate much more clarity on this as soon as the OMB director is confirmed.

Now, on to more straightforward presidential actions regarding President Trump’s infrastructure plans. One such action expedites environmental review and approval for high priority infrastructure projects and gives any Cabinet member or governor the unilateral ability to designate a project as “high priority” thus shortening the approval process, laid out in the NEPA law. He’s also issued a “Build the Wall” action which orders the Department of Homeland Security to begin building a wall along the U.S. and Mexico border using existing funds. It also authorizes the hiring of 5,000 new border agents. Congress will have to appropriate additional funds for completion because the current budget does not have funding for this project.

Additionally, there were two more Executive Orders issued almost immediately upon President Trump’s inauguration. One of the first actions signed by President Trump was an Executive Order that begins the process of repealing Obamacare. While it does not directly repeal the law, it directs federal agencies to give states, insurance companies and consumers maximum flexibility in complying with Obamacare until such a time as it is repealed. Full repeal and/or replace is going to take an act of Congress which has been openly wrangling with itself on whether to repeal, repeal and replace, or to “repair” the existing law. Regardless, this presidential action starts the ball rolling with respect to repeal of Obamacare while Congress considers its course of action.

The other significant action taken by the president instituted a federal agency-wide hiring freeze on all existing and open positions with exceptions for national security, military, and public safety.  The president intends this as a stopgap and allows agencies to reallocate to prevent public safety and national security from being adversely affected. The kicker, however, is that the memorandum explicitly prevents the hiring of outside contractors to prevent the circumvention of the spirit of the order. Given the number of waivers and exceptions allowed, it’s not altogether clear how this will work in practice, but it certainly lays down a marker that the president is serious about reining in the growth of the federal government.

Finally, on Feb. 3, the president signed two Executive Orders aimed at decreasing regulations for the financial industry; the first calling for a review and the scaling back of existing financial laws, including Dodd-Frank, and the second halting the implementation of the Department of Labor’s (DOL) fiduciary rule, which was set to go into effect this April.

Dodd-Frank, enacted after the 2008 meltdown, was responsible for creating more stringent rules regarding bank capitalization, increasing compliance and reporting standards for banks, introducing stricter mortgage requirements, creating the Financial Stability Oversight Council and the Consumer Financial Protection Bureau, and curbing excessive risk-taking and the existence of too-big-to-fail institutions on Wall Street. Mr. Trump’s action on Dodd-Frank requires regulators to produce a study on financial rules within 120 days—appearing as more of a demand for a review than a complete dismantling of the law.

The fiduciary rule was intended to prevent consumers from receiving conflicted advice when it comes to retirement savings. The president’s order calls for the DOL to examine the rule to determine whether it may lead to the unintended consequence of making it more difficult for advisors to provide financial advice to their clients. However, embraced by much of the financial industry, this order is expected to move quickly compared to the order on Dodd-Frank.

These Executive Actions have the potential to clear the way for even greater gains by women-owned small business moving forward. As we reach for new heights in 2017, WIPP will be fully engaged with the Congress and administration to ensure that burdensome regulations harming the growth of women-owned small business are eliminated and we continue to be the robust engine powering the small business economy.

Reimagining Health Care

By Ann Sullivan, WIPP Chief Advocate

Affordability, predictability, and flexibility were three themes reiterated at the Feb. 7 hearing held by the House Committee on Small Business entitled “Reimagining the Health Care Marketplace for America’s Small Business.” It was held for the purpose of taking a look at the current marketplace and its recent difficulties, and to explore options to improve access, affordability, and consistency.

While no clear legislative path has yet been paved, many facts, figures, and ideas were floated around regarding how to ensure that small business is not an afterthought in the revamping of the healthcare system. Solutions presented and discussed at the hearing included tax credits for small business, across state line coverage, and Health Savings Accounts and Health Reimbursement Arrangements.

Here is more about the items discussed.

  • Tax credits for the self-employed: As the Tax Code currently stands, self-employed individuals are restricted from deducting their health insurance premiums. Small, self-employed business owners end up paying more for health insurance because their premiums are not treated the same for taxes as other businesses.

Leveling the playing field by giving these small businesses tax credits would improve affordability for small business owners, as well as expand the pool of coverage, according to Keith Hall of the National Association of the Self-Employed (NASE).

  • Across state line coverage: The number of insurers participating in the marketplace varies widely from state to state, as do the number of coverage plans. The lack of competition among insurers in the current exchanges decreases pressure to keep costs down.

Mr. Hall of the NASE believes that allowing for the sale of health insurance across state lines will boost competition, driving costs down. In order for this to happen, Congress will have to enact a health plan that will modify the existing law that inhibits the sale of health insurance across state lines.

  • Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs): A provision of a law signed into Congress last session allows small employers with fewer than 50 full-time employees that do not offer a group health plan to fund employee HRAs to pay for qualified out-of-pocket medical expenses and for non-group plan health insurance premiums, including plans purchased on the public health care exchanges.

Allowing small businesses to offer a bare bones plan and HSAs would allow individuals to decide the best choice for themselves and their families, according to Tom Secor of Durable Corporation, who testified on behalf of the National Small Business Association (NSBA).

This hearing was the first of a continuing series that will take place on the discussion of healthcare repeal and replacement. To read full written testimony from each witness here.

Does the Tax Code discriminate against women?

By Caroline Bruckner, Managing Director of the Kogod Tax Policy Center

indexWomen-owned businesses are one of the fastest growing segments of our economy. Between 1997 and 2013, the number of women-owned businesses increased by 59% – 1.5 times the rate of U.S. businesses overall, according to a 2013 Women-Owned Business Report prepared by American Express. What’s more, over the past 16 years, employment by companies owned by female entrepreneurs is up by 10% and their revenues grew by 63%. Both increases exceed those of all but the largest, publicly traded firms. Today, more than 8.6 million U.S. businesses are owned by women. They generate more than $1.3 trillion in revenues and employ nearly 7.8 million people.

Those are impressive figures, especially considering that women business owners face many challenges men do not, such as having a much harder time accessing capital than their male counterparts. Only 4% of all commercial loan dollars go to women, in fact. But what other hurdles must they overcome? What about the U.S. tax code? Is the tax code—first codified more than 100 years ago, before women even won the right to vote—written in a way that inherently discriminates against women entrepreneurs?

The Kogod Tax Policy Center, with WIPP’s help, intends to find out.

Kogod will perform groundbreaking research in the coming months into whether small business tax incentives discriminate against women business owners—a question that has received scant attention from policymakers and academia.

Given the current political and budget environment, we think that researching and answering this question is vital to informing Congress about the policy implications of existing small business tax incentives as policymakers look to move forward with tax reform.

The tax code is ripe with provisions designed to specifically target various taxpayer populations like small businesses, veterans, and low-income workers. However, little academic or policy study has been dedicated to the tax challenges women business owners face and whether small business tax incentives favor men.

But how could the tax code discriminate against women? It can’t see the difference between male and female any more than it can play the piano or skip rope. Well, let’s look at some details of the tax code’s inception:

  • The income tax code was written in 1913.
  • Women didn’t get the right to vote until 1920.
  • Women weren’t able to fully access credit until 1974.

Women business owners weren’t even a footnote as our nation’s tax code was being written and developed. Simply because the tax code is supposedly gender neutral does not mean it impacts people equally.

We plan to analyze the federal budget implications of annual small business tax expenditures in relation to how many women-owned firms claim them.

We recently announced our project at WIPP’s Annual Leadership Meeting in Washington, D.C. As part of the study, Kogod will partner with WIPP to survey women business owners to determine how they view the tax code and its impact on their business, so watch your inbox and make sure to participate so we can use your experience and voice in our study!

Given the enormous role women entrepreneurs play in our economy, answering these questions will determine whether they are playing on a level field and could lead to positive policy changes that help the economy overall by boosting women’s entrepreneurial output even more.

The time has come to review the tax code and determine whether the specific tax provisions are serving women entrepreneurs so they can fully unleash their economic potential.

 

If you have questions about our research, want to help support the Kogod Tax Policy Center with a gift or would like to participate in the survey, contact Caroline Bruckner at cbruck@american.edu.

Filing Frenzy: Tax Deadline Strikes Today

tax-day

By: Jake Clabaugh, WIPP Government Relations

Tax Day is upon us and woman business owners have been working overtime. Not on growing their firms, planning investments or making important hiring decisions, but on tax compliance. At least, that’s according the House Small Business Committee, which took a look at the burdensome tax.

Forgetting tax liability – the amount a business owes – the Committee focused on how difficult it is for small businesses to satisfactorily comply with dense tax rules. According to the Small Business Administration (SBA), small businesses spend 5.5 billion hours preparing and filing taxes – time that should be spent growing the business. The costs and complexity of calculating tax provisions makes it difficult for smaller businesses to take advantage of incentives designed to reward investment. As a result, larger businesses that can incur the costs of calculation reap the rewards.

As we’ve heard from WIPP members across the country, tax certainty is a top priority. Clarity on what provisions and incentives will be enacted would provide businesses with the ability to plan ahead, rather than adjust to a changing environment. For the last few years, Congress has passed legislation solely for “tax extenders” – deductions and credits that were set to expire at the end of the previous year, but were extended to cover the current tax year. While many of these credits could provide some relief for small businesses, firms spent the entire year without knowing if these provisions would be available. Hardly an efficient way to have to run your business.

A simpler tax code would reduce compliance time and allow owners to focus on their business – not the latest tax rules. Also, small businesses should be able to take advantage of the same incentives that larger businesses can. WIPP will continue to focus our advocacy on the two guiding principles of simplicity and fairness for women-owned businesses.

Could comprehensive reform – not seen since the 1980’s – be on the horizon? House Ways and Means Committee Chair Kevin Brady (R-TX) announced last week that his Committee is planning to release a tax-reform “blueprint” this summer. Additionally, Members of the House and Senate have stirred over international tax reform in the wake of recent corporate mergers. While the conversations are ongoing, comprehensive tax reform in an election year, with an ardently divided Congress seems, at least in our view, unlikely.

For updates on tax policy and other finance issues, please visit WIPP’s Economy and Tax section and WIPP’s Economic Blueprint.

 

 

Stop New Taxes on Internet Access

internetThe Internet has revolutionized the way we communicate, learn, innovate and for business owners, it has been a game changer in their ability to manage and grow their businesses.  The Internet’s success and rapid growth is due in large part to a current law, the Internet Tax Freedom Act (ITFA), which has kept Internet access free from state and local taxes and fees since 1998.

We believe that Congress should act now and permanently extend the moratorium on taxing Internet access. ITFA is critical to keeping Internet access affordable for business owners and consumers, enhancing Internet adoption rates and growing the digital economy.

Finally, after much delay, it looks like the vote on a permanent version of ITFA could be as early as tomorrow! We need your help to urge your Senators support the Customs Bill and keep the Internet Tax Freedom Act in the bill. 

Urge your Senator to Support the Internet Tax Freedom Act!

With communications taxes on telephone services already on average at 17%, we don’t need the potential for another tax of close to 20% added to our Internet bills. In a time when our economy is still recovering, any money saved from the monthly bills of women-owned small businesses is much welcomed.

Tell your Senator to permanently extend ITFA today and keep Internet access free from new taxes.

Small Business Policy Index 2016

Small Business & Entrepreneurship (SBE) Council released the 20th edition of its annual Small Business Policy Index, “Small Business Policy Index 2016: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth.”

The Index ranks all 50 states according to various major government-imposed or government-related costs that have direct or indirect impact on entrepreneurship and business, as well as on start-ups and small growth eager companies.

The Index investigates in total 50 measures, from which:

  • 25 are tax related,
  • 18 relate to rules and regulations,
  • 5 focus on government spending and debt issues, and
  • 2 remaining measures deal with the effectiveness of important government undertakings.

The outcome is accessible through an interactive map displaying states’ ranking in color, with a summary per state provided after selecting a state.

Screen Shot 2016-02-08 at 1.15.31 PM

The most policy-friendly states to entrepreneurs under the “Small Business Policy Index 2016” are: 1) Nevada, 2) Texas, 3) South Dakota, 4) Wyoming, 5) Florida, 6) Washington, 7) Alabama, 8) Arizona, 9) Ohio, 10) Indiana, 11) Colorado, 12) Michigan, 13) Utah, 14) North Dakota, and 15) Virginia.

On the other side of the ranking we can find: 40) Maryland, 41) Maine, 42) Iowa, 43) Oregon, 44) Connecticut, 45) Vermont, 46) Hawaii, 47) Minnesota, 48) New York, 49) New Jersey, and 50) California.

The authors highlight several findings from the report, which are especially interesting to note:

  • Average real annual economic growth of the top 25 states’ was by 29.2 % faster than the average rate for the bottom 25 states.
  • Also, the top 25 states’ average state population growth of 4.9 percent from 2010 to 2015 was double compared to only 2.5 percent for the bottom 25 states.
  • The top 25 states also witnessed positive net domestic migration of a 2.00 million at the expense of the bottom 25 states, which lost 2.03 million people.

The SBE Council President and CEO Karen Kerrigan provides her explanation of the founded facts: “Policy matters for entrepreneurship and small business growth. Quite simply, when elected officials impose weighty tax and regulatory burdens, the increased costs and uncertainties mean reduced risk taking and less economic opportunity. The message from our ‘Small Business Policy Index’ to state officials is clear: If you are serious about helping small business, then reduce barriers to entrepreneurship and government costs imposed on small business.”

To access the Small Business Policy Index 2016 full report please click here.

House Committee Talks Taxes For Small Businesses

BY: Jake Clabaugh, WIPP Government Relations

tax

If, like most small business owners, you have concerns about year-end tax planning, Congress may have a Holiday present for your business’ bottom line.

 

An agreement to reauthorize tax rules, known as “extenders,” could come before Congress adjourns for their Holiday recess. Extenders are temporary tax rules and require Congress to authorize their renewal. Extension of these provisions, although temporary, could save your business from significant tax liability.

 

For small businesses, these changes can have a tremendous impact. The House Small Business Committee held a hearing, “Employers of Choice: How the Tax Extender Debate Will Affect Small Business” on December 3 to discuss how the year-to-year renewal process impacts small firms. The hearing allowed members of the small business community to explain the importance of these tax rules and how uncertainty can negatively affect investments by small businesses.

 

Did your small business invest in any equipment this year? Then one tax extender that is important for your business is often referred to by its place in the tax code, Section 179, or simply as “Small Business Expensing.” This rule allows businesses to deduct the full cost of equipment purchased during the tax year, subject to certain conditions, instead of writing off portions of the purchased equipment over several years. If this provision is not extended, small businesses that made significant investments in equipment could face higher tax liability.

 

Last year, Congress agreed to reauthorize certain tax extenders for the 2014 tax year. For the 2015 tax year, negotiators in the House and Senate are still determining what tax rules to extend and for how long. A similar bargain is expected this year, but it is still unclear what provisions will be included.

 

For more information, please see WIPP’s advocacy efforts on the Economy and Tax.

Congress Temporarily Extends Internet Access Tax Ban – GUEST POST

by Rob Schrum, myWireless.org

myWireless logoJust as time was running out, Congress passed a continuing resolution, which – among a handful of other provisions – will extend the ban on Internet access taxes through December 11th. As you may recall, the ban on Internet access taxes was due to expire on October 1st.
Earlier this year, the U.S. House of Representatives made a move to permanently extend the ban on Internet access taxes by passing the Permanent Internet Tax Freedom Act (H.R. 235). Unfortunately the Senate has yet to take up the companion legislation, known as the ‘Internet Tax Freedom Forever Act’ (S.431).
The ban on Internet access taxes was originally put in place in 1998 and incrementally extended by Congress over the years to encourage the continued expansion of Internet use. Last year, CTIA – The Wireless Association found that the decision to keep Internet access tax free led to more than $34.4 billion in savings for Americans – and that doesn’t even account for the benefits the Internet provides on how we communicate, learn and conduct business.
If the Internet access tax ban expires, the high state and local taxes that are already applied to wireless service could be expanded to include Internet access, increasing the cost of service. This despite the fact that the FCC National Broadband Plan says that cost is the largest barrier to consumer broadband adoption. We urge Congress to address this issue once and for all by enacting a permanent ban on Internet access taxes before the December 11th deadline. We can’t afford anything less.
View the original post at myWireless.org:  http://bit.ly/1LtinGf 

House Passes Permanent Internet Tax Freedom Act – GUEST POST

by Rob Shrum, myWireless.org

Good news from the U.S. House of Representatives!

myWireless logoThe House voted to pass the Permanent Internet Tax Freedom Act (H.R. 235), which is strongly supported bipartisan legislation that permanently protects consumers from having to pay taxes on Internet access.

Now it’s time for the Senate to do the same. The Internet Tax Freedom Forever Act (S. 431), as it’s called in the Senate, is the companion to the bill passed by the House today.

The Internet Tax Freedom Act, as both bills are commonly known, was originally passed in 1998 to foster and encourage the continued expansion of Internet use in the U.S. As we all know, the Internet has revolutionized the way we are able to communicate, learn and do business. This legislation has been incrementally extended over the years, and is scheduled to expire October 1, 2015.

Please take a moment to write your Senators today and urge them to pass S. 431.

Let’s work together to make sure Internet access remains affordable and accessible to everyone, and tax-free forever!

See the original post at:  http://bit.ly/1NFX4DF

 

 

More Taxes? No Taxes? How About Fair Taxes

By John Stanford, WIPP Government Relations

WIPP recently submitted testimony to the House Small Business Committee on comprehensive tax reform. This blog gives an overview of WIPP’s advocacy efforts. For more details, I encourage you to read the testimony. Our government relations team strives to make official communications as easy-to-read as possible, but should you have questions please reach out to WIPP.   

 

Women entrepreneurs deserve a tax system that rewards the effort, tenacity, and risk it takes to start and grow a business. Moreover, they deserve a system of revenue collection (because that’s what taxes are) that is simple and fair.

In testimony submitted to the House Small Business Committee, WIPP said just that. Citing reports from the IRS National Taxpayer Advocate as well as the SBA Office of Advocacy, the testimony documents what women business owners already know: the tax system is broken, failing under the weight of complexity, uncertainty and outdated policies. But more importantly, the testimony addresses the impact of possible reforms – and the need for any overhaul to be comprehensive.

What does that mean? It means that the idea to lower the corporate tax rate, favored by the White House and some in Congress, must not happen independently of adjusting individual rates in a similar manner. This distinction matters because so many businesses, including almost 9 in 10 women-owned businesses, are structured as “pass-through” entities paying taxes as individuals (including S-Corps, Sole-proprietorships, partnerships, and LLCs).

Corporate-only reforms would be unfair to these businesses – and for that reason WIPP has always supported comprehensive (corporate + individual) reform. The testimony underscored this important point.

In addition, WIPP identified tax policies that, absent major reforms, would benefit women entrepreneurs. This includes making more small business tax credits and deductions permanent. In recent years, these tax “extenders” have been extended (hence their name) at the last minute, or even retroactively – not a good way for business owners to plan their budgets.

WIPP also asked Congress to consider tax credits that benefit new businesses, helping offset the costs of launching a new company. Another policy request was to avoid changing the Employee Stock Ownership Plan (ESOP) provisions in the tax code, as these have proven to be both popular and good tools to incentivize productivity and long-term business health.

In agreement with the idea that simple businesses (sales – costs = income) should have simple taxes, WIPP also supports simplifying the cash accounting method and expanding its optional use to more small businesses. Finally, with healthcare costs an always-growing burden on employers, WIPP continues its support of expanding the Small Business Health Care Tax Credit so more women entrepreneurs minimize the cost of providing healthcare to employees.

More ideas for reforming the tax system to incentivize entrepreneurship and innovation are out there. WIPP will continue working to identify policies that let women business owners focus more on their business and less on complex tax requirements. At the end of the day, all of these decisions should be made with the basic principles of simplicity and fairness in mind. And that’s exactly what we asked Congress to do.