The plan is burdensome for small businesses

For small businesses, taxes are a financial and administrative burden that directly impacts their ability to invest in their business, their employees, and compete in the broader economy. In fact, 77% of small business owners reported that federal business income taxes were very or moderately burdensome according to NFIB’s 2021 Tax Survey. This was followed by payroll taxes (69%) and state and local income taxes (66%). The survey also found that 64% of small business owners reported that federal business income taxes create an administrative burden in operating their business. Payroll taxes (60%) and state and local income taxes (58%) followed.

Tax related issues also rank high among small business problems. Of the top ten most burdensome problems small business owners report, four are tax related. At the top of the tax list, federal taxes on business income ranked as the third most severe problem, with 20% reporting it as a critical issue. Property taxes followed in fourth place, state taxes on business income ranked seventh, and tax complexity ranked eighth in problem importance.

Why are taxes so challenging for small business owners? Taxes reduce profits, and profits are the primary source of financing for small businesses – financing owners use to increase wages, for capital investment, and expansion opportunities. And for small business owners, profit levels are not always consistent or predictable year to year. Owners rely on strong profits to often support times of profit declines, which many owners continue to experience in the pandemic. Almost one-third (32%) of small businesses report revenues still below 75% of pre-pandemic levels.