"Up until now, I've felt like people in Washington have no appreciation for what entrepreneurs go through," says Chris Turner, the co-founder and chief executive of Stampede Consulting, a Virginia-based business that generated $4.3 million in sales last year and landed on Inc.'s 2017 list of the fastest-growing private companies. "There are going to be a lot of entrepreneurs who will get a few more restful nights because of this bill."
The main objective of the plan, as most recently outlined in mid-November when the House passed its version of the 440-page bill, is to reduce taxes on U.S. businesses. The GOP proposes lowering the corporate tax rate to 20 percent from the current 35 percent. Moreover, smaller "pass-through" entities--businesses in which the owner pays taxes on the profits at his or her own income tax rate--would see the rate reduced to 25 percent from a top tax rate of 39.6 percent (the Senate bill would let most pass-throughs deduct 17.4 percent of their income). Companies would also see new, different types of tax breaks, including the ability to deduct all the costs of purchasing new equipment for five years.
There are limitations, however, so not everyone is happy. Professional services would not qualify for the pass-through tax rate, encompassing many architecture firms, law offices, and consultancies. Broadly speaking, all income groups under the Senate plan would see their after-tax income rise in the first few years--but the benefits for middle and lower income groups would drop after 2025, when the cuts expire. According to the most recent estimate by the Joint Committee on Taxation, the legislation would still cost more than $1 trillion.
Senate Democrats are fiercely opposed to the bill. "The Republican tax plan cuts taxes for corporations and the top 1 percent of Americans. Two ways it pays for those tax cuts: adding to the deficit and raising taxes on middle-class families," said Kamala Harris (D.-Calif.) in a tweet on Thursday. The Senate plans to hold a vote on the tax plan later tonight. If it passes, it would have until Christmas to work through discrepancies with the House and get a final version of the bill onto President Trump's desk.
Many U.S. companies are pleased by the possibility of tax relief, inasmuch as the current code--for all of its complications and nuances--may be hurting the bottom line. "Our members are overwhelmingly in favor of tax reform," said Jack Mozloom, a spokesperson for the Nashville-based National Federation of Independent Business, in a phone call with Inc. this week. The NFIB represents hundreds of thousands of U.S. businesses, most with fewer the 20 employees. "They'll all tell you that taxes are too high, and complying with the tax code is too costly," Mozloom added, noting that entrepreneurs will hire outside tax experts to do the legwork, whereas larger corporations tend to have advocates in-house.
Stampede's Turner, whose wife and co-founder recently took a job in the U.S. Small Business Administration as an attorney, is excited by the possibility of not having to pay taxes on some expenses. That could help him recoup funds, such that Stampede isn't operating in the red, he says. "Entrepreneurs look like gazillionaires on paper, but the reality is we're extending a huge amount of money," Turner says. "I've had my credit card declined at Starbucks, because I'd put tens of thousands of dollars in payroll on it."
Others are more reticent about championing the bill, acknowledging that President Trump's aggressive and often colorful approach to politics might not be the most effective method. "I don't necessarily agree with the approach and the presentation," says Ryan Neal, the co-founder and CEO of the Bellevue, Washington-based startup Blueprint Consulting Services. Nevertheless, Neal sees the likely passage of the bill as a net win. "I'm extremely happy with the spirit behind the physical policies," he says.
There are also those who go so far as to call the bill a scam. Anupam Satyasheel, the founder and CEO of the New York City-based Occams Advisory, serves more than 70 businesses, ranging from mom-and-pop shops to companies with $1 billion in revenue. Only a small portion of his clients--those that generate profits of more than $150,000--would actually benefit from a tax break, he says. "This whole tax bill, if one drills down, is fundamentally skewed toward 'small businesses' that make a lot of money," Satyasheel says. "This is only going to benefit those who are really rich to begin with."
Satyasheel, whose business generated $4.2 million in 2016 and landed on the Inc. 5000, gives the proposal a 60 percent chance of passing. "Mr. Trump has been a person who can sell anything to anyone all his life," he adds. "This is a continuation of my overall disappointment with this particular administration."