Tax Day: Exploring the Adverse Effects of High Taxes and a Complex Tax Code (House Small Business Committee hearing, April 10, 2024)
Summary
The printed record of a House Committee on Small Business hearing, Tax Day: Exploring the Adverse Effects of High Taxes and a Complex Tax Code, held April 10, 2024, Small Business Committee Document Number 118–046. The committee met at 10:04 a.m. in Room 2360 of the Rayburn House Office Building with Chairman Roger Williams presiding; Williams and Ranking Member Nydia Velázquez gave opening statements. Four witnesses testified: Dr. Aaron Hedlund, Associate Professor of Economics at Purdue University; Raymond Huff, President of HJB Convenience Corporation, Lakewood, CO; Chuck Wetherington, President of BTE Technologies, LLC, Hanover, MD; and Walter Rowen, President of Susquehanna Glass Co. and Co-Chair of Small Business for America's Future, Lancaster, PA. Small Business Majority submitted material for the record. The committee adjourned at 11:49 a.m.
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TAX DAY: EXPLORING THE ADVERSE EFFECTS
OF HIGH TAXES AND A COMPLEX TAX CODE
HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED EIGHTEENTH CONGRESS
SECOND SESSION
HEARING HELD
APRIL 10, 2024
Small Business Committee Document Number 118–046
Available via the GPO Website: www.govinfo.gov
U.S. GOVERNMENT PUBLISHING OFFICE
55–250 WASHINGTON : 2024
HOUSE COMMITTEE ON SMALL BUSINESS
ROGER WILLIAMS, Texas, Chairman
BLAINE LUETKEMEYER, Missouri
PETE STAUBER, Minnesota
DAN MEUSER, Pennsylvania
BETH VAN DUYNE, Texas
MARIA SALAZAR, Florida
TRACEY MANN, Kansas
JAKE ELLZEY, Texas
MARC MOLINARO, New York
MARK ALFORD, Missouri
ELI CRANE, Arizona
AARON BEAN, Florida
WESLEY HUNT, Texas
NICK LALOTA, New York
CELESTE MALOY, Utah
NYDIA VELÁZQUEZ, New York, Ranking Member
JARED GOLDEN, Maine
KWEISI MFUME, Maryland
DEAN PHILLIPS, Minnesota
GREG LANDSMAN, Ohio
MARIE GLUESENKAMP PEREZ, Washington
SHRI THANEDAR, Michigan
MORGAN MCGARVEY, Kentucky
HILLARY SCHOLTEN, Michigan
JUDY CHU, California
SHARICE DAVIDS, Kansas
CHRIS PAPPAS, New Hampshire
BEN JOHNSON, Majority Staff Director
MELISSA JUNG, Minority Staff Director
(II)
CONTENTS
OPENING STATEMENTS
Page
Hon. Roger Williams ................................................................................................ 1
Hon. Nydia Velázquez ............................................................................................. 2
WITNESSES
Dr. Aaron Hedlund, Associate Professor of Economics, Purdue University,
Columbia, MO ...................................................................................................... 5
Mr. Raymond Huff, President, HJB Convenience Corporation, Lakewood, CO . 7
Mr. Chuck Wetherington, President, BTE Technologies, LLC., Hanover, MD .. 8
Mr. Walter Rowen, President of Susquehanna Glass Co., Co-Chair of Small
Business for America’s Future, Lancaster, PA .................................................. 9
APPENDIX
Prepared Statements:
Dr. Aaron Hedlund, Associate Professor of Economics, Purdue University,
Columbia, MO ............................................................................................... 33
Mr. Raymond Huff, President, HJB Convenience Corporation, Lakewood,
CO .................................................................................................................. 43
Mr. Chuck Wetherington, President, BTE Technologies, LLC., Hanover,
MD .................................................................................................................. 49
Mr. Walter Rowen, President of Susquehanna Glass Co., Co-Chair of
Small Business for America’s Future, Lancaster, PA ................................ 56
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Small Business Majority .................................................................................. 60
(III)
TAX DAY: EXPLORING THE ADVERSE
EFFECTS OF HIGH TAXES AND A COMPLEX
TAX CODE
WEDNESDAY, APRIL 10, 2024
HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 10:04 a.m., in Room
2360, Rayburn House Office Building, Hon. Roger Williams [chair-
man of the Committee] presiding.
Present: Representatives Williams, Stauber, Meuser, Van Duyne,
Molinaro, Alford, Bean, Lalota, Velázquez, Landsman, McGarvey,
Gluesenkamp Perez, Scholten, Thanedar, Chu, Davids, and Pappas.
Chairman WILLIAMS. I want to welcome everybody here today,
and before we get started, I want to recognize Congressman Bean
from the great state of Florida to lead us in the pledge and the
prayer. Would you please stand?
Mr. BEAN. Thank you very much, Mr. Chairman. Let us pray.
Heavenly father, we are grateful for this day. The gift of today.
What are we going to do with it? We ask for energy and a sense
of purpose and direction. Lord, we give thanks for small business,
the people that put America to work and have created one of the
greatest systems of economic stability. We ask those hands that are
first to show up at work, last to leave and last to get paid, that
just—we bless them. We know that they are the engine of putting
other people to work and putting dinner on the table. We ask a
blessing on our country, our leaders, and our defenders. And every-
body said together, amen.
Join me in the pledge, ladies and gentlemen. I pledge allegiance
to the flag of the United States of America. And to the Republic
for which it stands, one nation under God, indivisible, with liberty
and justice for all.
Chairman WILLIAMS. I now call the Committee on Small Busi-
ness to order. Without objection, the Chair is authorized to declare
a recess of the committee at any time. I now recognize myself for
my opening statement.
Good morning to all of you, and welcome to today’s hearing,
which will focus on how tax policy significantly impacts our na-
tion’s small businesses. I would like to start off by thanking our
witnesses for joining us today, and your attendance is greatly ap-
preciated, and we value your input and expertise on these issues.
As our nation’s job creators continue to face harsh economic
(1)
2
headwinds, we must ensure the Tax Code works for them, not
against them.
And in 2017, Congress passed the Tax Cuts and Jobs Act, the
most significant changes in the Tax Code in decades. The TCJA
lessened the tax burden on small businesses and provided much
needed relief for all Americans. When small businesses get to keep
more of their money, they put it to work in either their business
or their communities. I believe that the cuts fundamentally provide
how cutting taxes is good for small businesses, good for all Ameri-
cans, and good for our economy.
You don’t have to just take my word for it, though. The year fol-
lowing the tax laws enactment, businesses revenue went up and
generated the highest single year increase in government revenue
since 1977. This bill also helped families. In the 2 years following
the TCJA’s enactment, the median household income increased by
$5,000. Unfortunately, some of the main provisions in this law are
starting to expire, which will make it harder for businesses to con-
tinue their operations. The House of Representatives acted in Jan-
uary and passed a bipartisan bill to extend some of these key provi-
sions affecting the small business community. But unfortunately,
this bill is still waiting for Senate action.
I hope the stories from our witnesses here today will help spark
action by impressing the bill’s benefits and the time sensitive na-
ture of these tax policies. This morning, higher than expected infla-
tion reading shows that President Biden’s tax and spend policies
continue to hurt everyday Americans. Not only that, with inflation
remaining stubbornly high, it will likely force the Federal Reserve
to keep interest rates high, which will make it more challenging for
businesses to access capital. As the small businesses continue to
deal with inflation, labor shortage and onslaught of burdensome
regulations, it is imperative that we don’t allow the Tax Code to
further penalize success.
In addition to larger tax liabilities, if these provisions expire,
business owners are facing a new, troubling reality. Statistics show
that small businesses are receiving audits at an alarming rate. On
average, small businesses owners will pay over $1,000 per year to
have a CPA firm prepare their taxes, and that is money they don’t
have. This is just another cost that a business owner has to write
off as a loss when those dollars could help build on their core busi-
ness model. We in Congress must make small businesses—are not
forced to play defense against an overly aggressive IRS. Unfortu-
nately, we also saw in the President’s budget that he wants to in-
crease taxes on many small businesses. We can’t tax our way into
economic growth and need to let our job creators do what they do
best and generate economic activity for their communities and ev-
erybody.
I would like to once again thank our witnesses for being here
with us today. I am very much looking forward to our conversation.
And with that, I want to yield to our distinguished Ranking Mem-
ber from New York, Ms. Velázquez.
Ms. VELÁZQUEZ. Thank you, Mr. Chairman. Good morning, ev-
eryone, and thanks to the witnesses for being here with us this
morning. Main street businesses are the lifeblood of our nation’s
economy, driving innovation and job creation and helping millions
3
of Americans achieve their American dream. As such, they are key
to our federal tax strategy. When our tax system works for them,
it brings the most value. However, despite their fundamental im-
portance, small firms are often used as bargaining chips in the dis-
course around tax reform, while wealthy individuals and large cor-
porations cash in. As a result, our tax system has grown increas-
ingly complex and uncertain, and Congress is forced to jump from
one tax extender package to another.
Meanwhile, our main street firms are left with a convoluted and
onerous tax code, for which they need to hire outside professionals
and spend substantial funds. Unfortunately, this was especially the
case in the Tax Cuts and Jobs Act of 2017. While the main priority
for this legislation included a permanent 40 percent rate cut for the
largest, most profitable companies in history, small firms got a
complex and temporary 20 percent deduction. While many small
companies have undoubtedly received benefits from the 199A de-
duction, nearly half of the overall benefits goes to the top 1 percent
of income earners. My hope is that come 2025, when this provision
is scheduled to expire, we can work together to provide genuine tax
relief to millions of small businesses without saddling them with
another set of complicated and temporary deductions that just end
up further enriching a wealthy few.
Meanwhile, Democrats will continue advocating for a tax system
that is both fair and fiscally responsible. In just the past three
years, Democrats have successfully delivered tax incentives to
bring manufacturing back to America, used the Child Tax Credit
to cut child poverty in half, and established a 15 percent corporate
minimum tax so multinational companies can no longer avoid pay-
ing taxes altogether. Through investment in the Inflation Reduc-
tion Act, we have worked to modernize the IRS. Taxpayers no
longer have to spend hours on hold, and filers are finding it easier
to submit electronic forms. Similarly, the new direct file program
is making tax submissions simpler than ever for millions of Ameri-
cans.
Additionally, wealthy tax cheats are being held accountable, and
the IRS has already recovered over $500 million in unpaid taxes.
So, while Democrats fight for a fairer system that is easier to use,
many of my colleagues on the other side have been working, on be-
half of tax evaders, to defund the IRS. They have also been pro-
posing more tax cuts for the rich to pay for their cuts to essential
programs like Medicare, Social Security, and the Affordable Care
Act. Now, as we emerge from a cost of living crisis and wages are
once again outpacing inflation, President Trump is proposing a 10
percent tariff on all imports. In my opinion, the contrast could not
be any clearer.
With that said, I am encouraged by the bipartisanship shown
earlier this year when we passed the Tax Relief for Workers and
Families Act, which not only extended the Child Tax Credit for
working families but delivered an extension for viable small busi-
ness provision like full and immediate expensing on investment in
machinery and R&D. Unfortunately, those provisions once again
face uncertainty as Republican senators play politics and aim to
kill anything that could be perceived as a win for President Biden
during an election year.
4
I look forward to working with the Chairman to ensure this legis-
lation gets passed and I look forward to hearing from our witnesses
about how best to support small firms using the tax code. I yield
back, Mr. Chairman.
Chairman WILLIAMS. Lady yields back, and I will now intro-
duce our witnesses. Our first witness here with us today is Doctor
Aaron Hedlund. Dr. Hedlund is an associate professor of economics
at the Daniel School of Business at Purdue University located in
West Lafayette, Indiana, and the research director of the American
First Policy Institute located right here in Washington, DC. Addi-
tionally, Dr. Hedlund is a research fellow at the Federal Reserve
Bank of St. Louis and chief economic—economist at the Show Me
Institute, the only think tank in Missouri dedicated to promoting
free markets. Dr. Hedlund was the chief domestic economist and
senior advisor at the White House Council of Economic Advisors,
where he helped design and execute emergency economic measures
during the COVID-19 pandemic. Dr. Hedlund earned his bachelor
degree in economics and math from Duke University and his PhD
in economics from the University of Pennsylvania. I want to thank
you for joining us today, even though you had some Baylor history,
right? And we look forward to the conversation ahead.
Okay, our next witness here with us today is Mr. Raymond Huff.
Mr. Huff is the president of HJB Convenience Co-op—Corporation
located in Lakewood, Colorado. Mr. Huff founded HJB Convenience
Corporation in 2004, purchasing the chain of Russell’s Convenience
Stores, were all located in high-rise office buildings. He is also the
principal of Tenderfoot Software which created the software used
by Russell’s Convenience Stores. Prior to owning his company, Mr.
Huff was president of Trans Pacific Stores Limited, where he opted
Russell’s Convenience Stores—where he operated Russell’s Conven-
ience Stores. He currently serves as Vice Chair of the CONXSS Ad-
visory Board. Mr. Huff earned his degree in accounting and busi-
ness management from Howard University and thank you for join-
ing us here today, Mr. Huff. We look forward to the conversation
ahead.
Our next witness today is Chuck Wetherington. Mr.
Wetherington is the president of BTE Technologies located in Han-
over, Maryland. For over 2 decades, Mr. Wetherington has served
as president of BTE Technologies, a small manufacturing firm
which produces medical device equipment. Since buying the com-
pany in 2001, Mr. Weatherington has brought new products to the
market while dealing with ever changing and burdensome regula-
tions. Mr. Wetherington is a board member and former Chair of
the Small and Medium Manufacturers Group for the National As-
sociation of Manufacturers. He also serves as the Governor’s Work-
force Development Board for the state of Maryland. Mr.
Wetherington holds degrees in engineering from both the Univer-
sity of Illinois Urbana-Champaign and Vanderbilt University.
Thank you for joining us here today.
We appreciate and look forward to the conversation ahead and
I now recognize the Ranking Member from New York, Ms.
Velázquez, to briefly introduce our last witness appearing before us
today.
5
Ms. VELÁZQUEZ. Thank you, Mr. Chairman. Our final witness
today is Mr. Walt Rowen. Mr. Rowen is the President of Susque-
hanna Glass Company, a 113-year-old family owned business in
Columbia, Pennsylvania. Since 1995 he has been the third-genera-
tion family owner of the business and has scaled the company to
sell consumer products to many of the nation’s best known retail-
ers, employing between 35 and 60 people. Mr. Rowen is also the
Co-Chair for Small Business for America’s Future, a national coali-
tion of business owners and leaders working to provide small busi-
nesses a voice at every level of government. Thank you for being
here today, and welcome.
Chairman WILLIAMS. Thank you, and we appreciate all of you
being here today. Very much so. Now, before recognizing the wit-
nesses, I would like to remind them that their oral testimony is re-
stricted to 5 minutes in length. We stick with that, okay? If you
see the light turn red in front of you, it means your 5 minutes have
concluded and you should wrap up your testimony. And what you
will hear—you will hear this to just help you remind, okay? And
also, you are going to see Members coming in and out, we may
have a full house. We may have not so full house. No reflection on
you. There is other committees happening so people will come and
go and that is normal as we proceed.
So, with that in mind, I now recognize Doctor Hedland for 5-
minute opening remarks.
STATEMENTS OF DR. AARON HEDLUND, ASSOCIATE PRO-
FESSOR OF ECONOMICS, PURDUE UNIVERSITY; MR. RAY-
MOND HUFF, PRESIDENT, HJB CONVENIENCE CORPORA-
TION; MR. CHUCK WETHERINGTON, PRESIDENT, BTE TECH-
NOLOGIES, LLC.; AND MR. WALTER ROWEN, PRESIDENT OF
SUSQUEHANNA GLASS CO., CO-CHAIR OF SMALL BUSINESS
FOR AMERICA’S FUTURE
STATEMENT OF DR. AARON HEDLUND, ASSOCIATE PRO-
FESSOR OF ECONOMICS DANIELS SCHOOL OF BUSINESS,
PURDUE UNIVERSITY
Mr. HEDLUND. Good morning, Chairman Williams, Ranking
Member Velázquez, and Members of the committee. It is truly a
privilege to engage with you today on this issue of taxes and not
college basketball. My name is Aaron Hedlund. I have been an eco-
nomics professor for more than a decade, and from 2020 to 2021,
I had the privilege to serve as the chief domestic economist and
senior advisor at the White House Council of Economic Advisors.
The views expressed today are my own.
Before jumping in, I would like to establish some economic con-
text for our discussion. Put simply, America is in the midst of a
policy induced cost of living crisis. One way to describe inflation is
as too much money chasing too few goods, which means there are
two basic ways to end the crisis. The first is to address the too
much money part by withdrawing excess demand. The most nat-
ural way to do this would be to stop Government overspending. But
with the reckless fiscal policy of the past few years, the Federal Re-
serve has had to step in with its own painful medicine of interest
rate hikes to tame demand. The other avenue to reduce inflation
6
is to address the problem of too few goods by putting in place pro-
growth policies that expand supply and create affordable abun-
dance. This recipe has succeeded in the past. The 1980s supply side
revolution of simple, low, and fair taxes, coupled with regulatory
reform and sound money, put an end to stagflation. The second
major success of this approach occurred starting in 2017, following
years of failed attempts by its predecessor at a stimulus driven
growth strategy.
The Trump administration, along with Congress, took a different
approach when they unleashed the beginnings of a second supply
side revolution with the Tax Cuts and Jobs Act, or TCJA, as one
of its centerpieces. The TCJA had three primary goals. One, make
the U.S. competitive on the world stage and repatriate earnings
from abroad by reducing what was one of the highest corporate tax
rates in the developed world. Second, reverse the stagnation of liv-
ing standards that families had been facing since 2007 by simpli-
fying taxes through lower marginal rates and doubling the stand-
ard deduction. Third, boost small businesses and unleash invest-
ment across the country by lowering tax rates, creating the 20 per-
cent Pass-through Deduction, and enacting opportunity zones.
The results were a resounding success as the economy vastly out-
performed the official forecast made in 2016. Unemployment and
poverty rates hit record lows, income gains reached record highs,
and 10 of billions of dollars of net new investment flowed into high
poverty communities. The typical American families saw their in-
come jumped by more than $5,000. Contrast that with the $4,000
decline they saw between 2019 and 2022, driven by inflation. In
short, TCJA unleashed a blue collar boom with the biggest gains
at the bottom.
These accomplishments are notable, but Americans still crave
further progress towards taxes that are simple, low, and fair. Sim-
ple. Tax complexity costs Americans hundreds of billions of dollars
in accounting and compliance headaches, resources that should be
going to productive economic activities, not paperwork and bu-
reaucracy. Tax simplification is deregulation. Make the Tax Code
simpler and people won’t have to contend with so many IRS regula-
tions. Low. One myth about tax cuts is that they deprive the gov-
ernment of needed funds. The truth is that the government does
not have a revenue problem, it has a spending problem. Federal re-
ceipts as a share of GDP have been stable for decades, and in 2022
they reached their second highest level since world War II. Mean-
while, spending had averaged 20 percent of GDP for 50 years prior
to COVID, but is now forecasted to be 23 percent to 24 percent over
the next decade and rising from there. Fair. Everybody wants a fair
Tax Code, but class warfare mythology about the rich paying less
in taxes than everyone else obscures the true sources of unfairness.
The truth is that while the top 1 percent earn about 20 percent of
total income in the economy, they pay over 40 percent of total
taxes. And by the way, corporate CEO’s don’t pay personal checks
when the corporate tax is getting paid. Workers and consumers
bear most of that burden.
So what actually makes taxes unfair? It is unfair that the com-
plexity of the Tax Code advantages those with the resources to hire
teams of lawyers, accountants, and lobbyists. And it is unfair that
7
high effective tax rates disproportionately punish people aspiring to
climb the economic ladder to enter the middle class and start small
businesses. True tax fairness pursues a level playing field, not level
incomes. Equality of opportunity, not equality of outcomes. And
more private investment, especially in human capital, not less. Ex-
tending TCJA should be the foundation upon which to build a Tax
Code that is simple, low, and fair. But I encourage Congress to be
bold and not stop there.
Thank you for the opportunity to speak with you about this im-
portant matter. I look forward to answering your questions.
Chairman WILLIAMS. Thank you, Dr. Hedlund. I now recognize
Mr. Huff for his 5-minute opening remarks.
STATEMENT OF RAYMOND HUFF, PRESIDENT, HJB
CONVENIENCE CORPORATION
Mr. HUFF. Good morning. Thank you, Mr. Chairman, Ranking
Member, and Members of the committee for allowing me to talk to
you today about the 199A Tax Deduction. My name is Raymond
Huff. I am president of HJB Convenience, an S Corp. I have been
in the convenience industry since 1988. Today I operate seven con-
venience stores and have 16 employees. I am here today on behalf
of myself and the National Association of Convenience Stores.
In the United States, the convenience industry includes more
than 150,000 stores employing 2.44 million people. It is truly an in-
dustry of small businesses. 60 percent of the industry is comprised
of single store operators. The industry handles about 165 thou-
sand—65 million transactions each day, a number equivalent to
half of the U.S. population. Today, I will focus on Section 199A of
the Tax Code, which provides a small pass-through business—pro-
vides small pass-through businesses, like mine, a deduction of a
taxable income to help bring us into rough parity with C Corpora-
tions. From a tax perspective, I will cover the need for tax fairness
for small businesses, the benefits of the provision for the economy,
and the importance of making 199A permanent.
Initially, the reduction in tax burden for section 199A allowed me
to reinvest in my business, expand to open new stores, and hire
more employees. It did what it was intended to do. It created a
level playing field, and that level playing field is better for my em-
ployees and my customers. Then came COVID. My stores are lo-
cated in commercial office buildings and these employees are now
working from h Prior to 2020, I had 23 stores operating in major
cities but had to close two-thirds of those stores due to low or no
off—office occupancy. The 199A tax deduction and other provisions
of the law allowed me to invest in technology that allowed me to
keep some of those stores open.
However, other than in 2018 and 2019, I have not made a profit
and have not been able to use Section 199A. I am not alone. I have
seen many other businesses located near mine, in the central busi-
ness districts, struggle for years. My main message to you is do not
pull the rug out from under me just when I am finally starting to
recover. My—many small businesses, including mine, need the
199A tax provision to stick around so we can get healthy again.
This prospect of losing the benefits of this tax law is very troubling.
If my business is faced with a significant tax increase at the end
8
of next year, it would set my business back in a way I really can’t
afford or plan for. A 20 percent or higher increase will require me
to slow or cancel my store reopening’s hiring plans in the future.
This is just the stimulus that 199A in bonus depreciations were
meant to spur. They allow small businesses to invest, expand, hire,
and compete with the big boys. The Tax Code should not favor my
larger competitors. Without 199A, those large competitors would
have a better effective tax rate and would be able to invest those
funds, allowing them to have an unfair advantage in the market-
place. That is not right. I can hold my own, but I do need a level
playing field, and 199A for the first time leveled that field. That
is we should all want that.
Small businesses are the backbone of the U.S. economy. I urge
the Members of this committee and all Members of Congress to rec-
ognize the urgency of this pending tax increase and take action to
allow for proper business planning. The business community needs
certainty, especially small businesses like mine. Waiting to resolve
this issue would certainly not be as beneficial as extending and
making those tax provisions permanent now. Thank you for your
time today. I welcome your questions.
Chairman WILLIAMS. Thank you, Mr. Huff. I now recognize Mr.
Wetherington for his 5-minute opening remarks.
STATEMENT OF MR. CHUCK WETHERINGTON, PRESIDENT,
BTE TECHNOLOGIES, LLC
Mr. WETHERINGTON. Good morning, Chairman Williams,
Ranking Member Velázquez, and Members of the committee. My
name is Chuck Wetherington. I am president of BTE Technologies,
a 40 person medical device manufacturer near Baltimore. I appre-
ciate the opportunity to testify about the importance of pro-growth
tax policy for manufacturing in America. This is actually my second
time appeared before this committee. My first appearance was al-
most 6 years ago at a hearing on how trade policy affects small
manufacturers. Thank you for having me back.
I am pleased to see that this committee is still focusing on poli-
cies, specifically tax policies, that are impacting small manufactur-
ers throughout the country. The most important message I want to
leave you with today is that small manufacturers need consistency
from Washington. Straightforward, predictable tax laws means I
don’t have to spend time locked away with my accountants trying
to figure out the rules of the road. Instead, I can get out on the
shop floor and focus on growing my business and creating quality
jobs in our community.
In 2017, Congress was able to take stale, outdated Tax Code and
update key provisions to reduce taxes on small manufacturers. Tax
reform put the U.S. on a path towards years of consistent, predict-
able tax policy. The Tax Cuts and Jobs Act was a new wave—drove
a new wave of economic activity and industrial expansion. BTE and
many of our peers in the industry experienced historic growth in
the years between tax reform and the pandemic. But as we saw
with COVID, the world in which small manufacturers operate can
change in an instant. In 2020 and 2022—21, shutdowns and mate-
rial shortages for our suppliers had a direct impact on BTE. We
9
were able to survive and maintain operations, but many weren’t so
lucky.
Now, tax increases are harming BTE and others in our supply
chain. Over the past two years, critical tax incentives that drove
growth in our sector have expired. The most damaging tax policy
change for BTE has been the new requirements that we amortize
our R&D expenses, and about face for more than 70 years of imme-
diate R&D expensing in the U.S. Bringing a medical device to mar-
ket is extremely risky and takes years and millions of dollars. But
now BTE cannot immediately express those costs, reducing the
working capital I have available to invest in my business and my
employees. This R&D change has delayed projects to redesign and
improve BTE’s flagship products.
As a result, our growth plans have stalled, delaying expansions
that would have allowed BTE to increase our employee headcount
by 50 percent. We are feeling the pain from the loss of full expens-
ing and new, stricter interest deductibility standard as well. Cap-
ital equipment is now more expensive and we face new barriers to
operating our equipment rental business, which enables smaller
medical practices to have access to high quality made in America
healthcare equipment. BTE and other small manufacturers are all
experiencing these tax increases.
Worse, more tax increases are coming our way at the end of next
year. Most of BTE’s suppliers are pass-through businesses. They
will lose the 20 percent Pass-through Deduction at the end of 2025,
and their tax rates will go up. Many also face increased estate
taxes. Higher taxes in the manufacturing supply chain will directly
increase BTE’s operating costs. And small businesses like ours will
face uncertainty as Congress debates how and if Congress will ad-
dress the full suite of pro individual, corporate, and international
provisions set to expire next year.
Fortunately, the House has taken the first step to stave off this
uncertainty. I want to thank every Member of this committee who
voted for the Tax Relief for American Families and Workers Act,
common sense bipartisan legislation to restore R&D expensing, and
other expired 2017 provisions. But a larger tax policy reckoning is
looming. Smaller manufacturers are depending on Congress to pre-
vent damaging tax increases before the end of next year. We de-
serve a Tax Code that promotes innovation and demonstrates to
the rest of the world what our values will be for the next decade
and beyond. It is urgent that Congress deliver on that promise.
Manufacturers like BTE are ready to work with all of you on pro-
growth tax policies that allow us to create jobs, innovate, compete
globally, and provide a better future for all Americans. Thank you.
Chairman WILLIAMS. Thank you, Mr. Wetherington. And also,
now, we want to recognize Mr. Rowen for his 5-minute remarks.
Thank you.
STATEMENT OF WALTER ROWEN, PRESIDENT/CO-CHAIR, SUS-
QUEHANNA GLASS COMPANY/SMALL BUSINESS FOR AMER-
ICA’S FUTURE
Mr. ROWEN. Good morning, Chairman Williams, Ranking Mem-
ber Velázquez, and Members of the committee. My name is Walt
Rowen and I am president of Susquehanna Glass Company in Co-
10
lumbia, Pennsylvania, and I am Co-Chair of the Small Business for
America’s Future, a national coalition of small business owners and
leaders dedicated to providing the strong voice for small businesses
at every level of government. SPAF has long advocated for tax re-
forms that benefit small businesses and is committed to ensuring
that policymakers prioritize the needs of main street, by promoting
an economic framework that supports small business owners, their
employees, and the communities they serve.
Susquehanna Glass is a family owned business in the glass deco-
rating industry and we have been operating for 114 years. Think
about that. We have survived multiple economic upheavals, two
world wars, one Great Depression, recently the COVID-19 pan-
demic, and our business is still here. We currently employ about
35 employees and are proud to provide good jobs and economic ac-
tivity to our local community since 1910. We are actually 114 years
old, not 13. However, our ability to weather these storms has not
solely been due to our own efforts. During times of crisis, govern-
ment programs like the pay—Paycheck Protection Program and the
Small Business Administration’s EID loans have been crucial life-
lines that have allowed us to keep our doors opened. I am sure all
of our businesses have recognized that.
That is important because the success of my business like that
of all small businesses, is inextricably linked to the success of my
community. America’s 30 million small businesses are responsible
for nearly half of all private sector employment and have been the
primary source of job creation for decades. We need investments
and policies that create an economic climate that allows small busi-
nesses to thrive, which in turn will lead to thriving communities.
However, the current Tax Code, particularly the Tax Cuts and
Jobs Act, has not adequately addressed the needs of most small
businesses. A recent survey by the Small Business For America’s
Future shows that the vast majority of small business owners,
somewhere around 75 percent of them, said the TCJA did not help
them hire, raise salaries, or invest in their businesses. This failure
to support small business growth represents a missed opportunity
to create jobs, raise wages, and empower entrepreneurs to con-
tribute to the vitality of their communities. To support, truly sup-
port small businesses, there must be a comprehensive approach
that includes a fair tax system and investments in creating eco-
nomic opportunities and building a strong workforce.
Merely extending the TCJA provisions beyond 2025, would lock
in a tax system that does not invest in small business growth or
resilience. Instead, we need to take this opportunity to create and
pass tax reform that supports small business success, closes loop-
holes, and ensures everybody pays the same or fair tax rates. Help-
ful policies for small business would include a tax cut for small
business owners hiring their first employee to stimulate growth,
making the first $25,000 in profit for small businesses tax-free,
raising the corporate rate to 28 percent, and ensuring that billion
dollar corporations pay at least 21 percent of their income in taxes
to give lawmakers the means to make impactful economic invest-
ments.
And finally, we must simplify tax matters for small business
owners—you have heard that from the entire panel—as the current
11
Tax Code is far too complicated and costly for small businesses to
navigate. The need for tax reform is particularly urgent. The U.S.
Census Bureau data shows there is a historic surge in new busi-
ness starts, nearly 16 million since 2021, which is an 85 percent
increase in the average compared to 2004 to January 2021. This
wave of entrepreneurship represents a tremendous opportunity to
build a more robust economy. Smart tax reform and ensuring the
taxes rightly owed are collected will open pathways to address the
challenges that small businesses and their employees face. Sup-
porting policies that help small businesses will build a prosperous
economy.
In conclusion, the current tax system and TCJA have failed
small businesses. The expiration of key provisions in that law is an
opportunity to take bold action to create a Tax Code that works for
main street because investing in small businesses is investing in
vibrant, thriving communities where everyone can prosper. Thank
you for the opportunity to testify today. I look forward to your
questions.
Chairman WILLIAMS. Thank you very much. And we will now
move to Member questions under the 5 minute rule. I recognize
myself for 5 minutes.
I have been a small business owner in Texas for over 52 years.
I am a car dealer and understand the many challenges facing Main
Street America. Over the last few years, it has been much harder
to find and keep qualified workers, regulations are forcing us to
play defense, and inflation has been cutting our margins and mak-
ing it harder to keep the lights on. Tax policy is the single most
important thing we can do to help all entrepreneurs facing these
challenges. And when a business owner is able to keep some of
their profits, they don’t just put in a bank and let it sit there, we
spend it. They hire additional workers that creates more taxpayers,
or they buy the extra equipment to keep their business growing.
So, Mr. Huff, can you discuss how you were able to utilize the
199A small business deduction to grow your business and, more
generally, what you do when you are able to keep more of your
hard-earned money?
Mr. HUFF. In my case, I wasn’t up on tax law and my CPA in
2019 called and says you invested in equipment, did a self-serve
store, and the 199A and the bonus depreciation is available to you.
And I said, what does that mean? He says, it means you have more
cash. I was shocked. I called that an Easter egg. I did not know
that that was going to be the effect doing that, having that extra
funds. I then invested in 2019 in additional technology that actu-
ally paid to keep my stores open during the COVID times. So, the
199A and the bonus depreciation helped me tremendously in those
two years.
Chairman WILLIAMS. Competition is what drives the small
business economy and at the end of the day, your customers will
tell you if you are doing a good job or not as a business owner, we
do not need the government telling us that. And if you offer supe-
rior product at a lower price or better customer service, you will
keep people coming back and your business will survive, and they
will tell others. Unfortunately, we have been, and we have seen in-
creased government mandates that are making it more difficult for
12
businesses to compete. When a business owner is forced to hire a
compliance officer to ensure that they understand the ever-chang-
ing web of regulations or an accountant to deal with an audit firm,
an overly active IRS, it is time and resources away from their core
responsibilities.
So, Mr. Hedlund, can you elaborate on how simplifying the Tax
Code helps both American families and businesses thrive?
Mr. HEDLUND. Absolutely. This is a critical task and it is made
more critical by the fact that we are in the midst of this cost-of-
living crisis, which is entirely artificial. It has been created by reck-
less policy for the past few years. And I will return to one of my
remarks, which is that tax simplification is deregulation. Tax sim-
plification is tax fairness. Fairness is about a level playing field
where you don’t have to hire teams of accountants and lawyers to
do your taxes, but it is a lot simpler. The TCJA helped with that,
for one, by doubling the standard deduction. So, prior to TCJA, 50
percent of joint filers itemized their taxes. They had to go through
and look at all the receipts and look at what gets deducted. After
TCJA, that fell to 12 percent. That benefits small business owners
as well. So, this is why we need to start with extending TCJA and
go further than that.
Chairman WILLIAMS. Now, I have got a limited amount of time
here, but Mr. Wetherington, as you have grown your and developed
your company, how has the R&D tax credit contributed to your suc-
cess? Because, as you said, you are highly regulated and a long
way from bringing a product to the shelf. So, how has the tax cred-
its contributed to your success?
Mr. WETHERINGTON. So, the key to me in R&D are my tech-
nical people, my engineers, my software developers, and the clinical
staff that I have to help in the development of those devices. It is
key for me to know that some portion of that expense that I have
that is not current revenue yielding, it is future revenue yielding,
that I have some return on being able to invest that. R&D is inher-
ently risky. I don’t get a win with everything that we go through
making. And it is critical that we have that other nations around
the world have that. We tend to fall behind in how we have done
that, particularly with moving to amortization. Since we have
moved to amortization, the rate of growth of R&D in Europe has
doubled the rate of growth of R&D in the United States. So, it is
critical that we refocus on that.
Chairman WILLIAMS. The Chair now yields his time back and
I now recognize the Ranking Member for five minutes of questions.
Ms. VELÁZQUEZ. Thank you. Mr. Rowen, your organization’s
recent survey found that 72 percent of small businesses say that
overall, the tax code favors large corporations over small busi-
nesses. As we consider tax reform over the next two years, what
can we do to restore trust in the system and deliver benefits for
true small businesses?
Mr. ROWEN. Thank you for that question. Everybody knows Tax
Codes are complicated. They have to be complicated, but they don’t
have to be overly complicated. I believe that things like deprecia-
tion, quick depreciation, immediate depreciation is essential for
small businesses to survive. There is no question almost everybody
in the business community would say that. What I think I disagree
13
with is the idea that the Tax Code itself, what the rate of taxation
is for a business, is the most important thing to that business. Be-
cause the reality is businesses only pay that when they are making
profit. So, I, for one, since 2020, haven’t made any money. So, the
tax rate that I am paying right now doesn’t mean a thing to me.
Depreciating means a thing to me. Interest rates means things to
me, but the tax rate doesn’t. So, focusing just on tax rate doesn’t
make sense to most small businesses because most small busi-
nesses actually are not making a lot of money.
Ms. VELÁZQUEZ. Thank you. Mr. Rowen, the Inflation Reduc-
tion Act provided an additional $70 billion to the IRS for customer
service modernization and enforcement. Yes or no, do you believe
the IRS is using this funding to put greater scrutiny on small busi-
nesses?
Mr. ROWEN. Absolutely no.
Ms. VELÁZQUEZ. Thank you. Mr. Huff, yes or no, do you believe
the IRS will use additional funds to target small businesses above
historical averages?
Mr. WETHERINGTON. I have no evidence to tell you one way
or the other.
Ms. VELÁZQUEZ. Okay, Mr.——
Mr. HUFF. Yeah, I have no evidence of that either. My CPAs
handle the rules and get back to me on what I should and
shouldn’t be doing.
Ms. VELÁZQUEZ. Thank you. Mr. Rowen, as we know, the IRS
is using much of their new funds to target people with high income
that routinely avoid paying taxes. Mr. Rowen, how does it benefit
entrepreneurs when people who cheat on their taxes are held ac-
countable?
Mr. ROWEN. I have reinforced over and over again that in small
business community—in small businesses, we live in our commu-
nities. There are things in our communities that need to be helped.
Something like childcare, something like health insurance, things
like overall education. And those are the areas that government
policies and programs can address. When I have people who are ab-
sent from work because their child is sick, or they simply can’t af-
ford childcare, that affects my business, my ability to hire, and my
ability to have stable employment and make a profit.
Ms. VELÁZQUEZ. I guess you are aware Republicans are once
again proposing cutting Affordable Care Act subsidies to pay for
more tax cuts for the rich, and so that is something we need to
keep in mind.
Mr. ROWEN. That would be catastrophic for my business. We
absolutely depend upon the ACA.
Ms. VELÁZQUEZ. Mr. Rowen, the current leader of the Repub-
lican Party, former President Trump, is proposing an across the
board 10 percent tariff on all imported goods. Yes or no, would you
raise prices for consumers if this tariff was implemented?
Mr. ROWEN. Yes. We live in a global economy. Half of the prod-
ucts that I am decorating and selling are produced here in the
United States. We would like to make that more, but the reality
is we have to buy products overseas. Every product we buy from
overseas that has a 10 percent tariff will be more expensive from
14
me to my customer, and therefore to the ultimate consumer. So, it
is an inflationary policy.
Ms. VELÁZQUEZ. Thank you. Mr. Chairman, I yield back.
Chairman WILLIAMS. Lady yields back. I now recognize Rep-
resentative Van Duyne from the great state of Texas for five min-
utes.
Ms. VAN DUYNE. Thank you very much, Mr. Chairman, for
holding this important hearing. There is no doubt that the TCJA
helped supercharge the economy and provided much needed relief
to small businesses. The economic success of the 2017 tax reforms
was undeniable. Small business optimism peaked, and investments
in research and development hit record highs. Small businesses fi-
nally felt untangled from an impressive Tax Code, and it is great
to hear these stories from our witnesses today. In 2025, Congress
will be facing an important choice. Continue the success of the
TCJA, looking at new ways to be competitive, such as continuing
the work that we have done, in my subcommittee, by finding new
ways for small businesses to access capital or go back to taxing job
creators at record levels. If we do not take action, the small busi-
ness deductions will expire, and small businesses will be faced with
a tax rate of 43 percent, compared to the 20 that they now pay.
And don’t be fooled, in the absences of higher taxes, Democrats are
finding new ways to burden small businesses across the country.
Not only are agencies such as the SBA creating regulatory burdens,
but every day, the IRS under President Biden is growing and ex-
panding. It is expanding its reach into American wallets and small
business ledgers. Lastly, we also have an opportunity to get things
right the first time, with new opportunities when it comes to digital
assets in cryptocurrency. Mr. Huff, I am curious. You have heard
that some of the criticism on the TCJA was just a bailout for
wealthy corporations and one percenters. You have talked about
how it has benefited you. Do you feel like your business falls into
either one of those two categories?
Mr. HUFF. Which were the categories again?
Ms. VAN DUYNE. Well, that you are a wealthy corporation or
a wealthy one-percenter.
Mr. HUFF. No, I am definitely not either. I am a small business
owner who goes to work every day trying to make a dollar and pay
my employees and grow my business. I would like one day to be
wealthy in those things.
Ms. VAN DUYNE. But it is great to hear that we actually are
hearing from small business owners, mom-and-pop shops and oth-
ers who have actually been able to take advantage of the TCJA.
Mr. Hedlund, I am going to ask you. President Biden’s budget pro-
posal contains many new tax provisions. Does any particular pro-
posal stick out as being the worst for small business?
Mr. HEDLUND. There is a lot of bad options to pick from. It is
hard to pick one of them. But I say the worst thing we could do
for the economy right now is to hike taxes when people have al-
ready been paying the inflation tax and the regulatory tax. This
would not—that would make the cost of living crisis worse, make
our growth worse, and not be good for the economy.
15
Ms. VAN DUYNE. So, you have heard President Biden repeat-
edly state that he is not going to tax anyone making less than
$400,000. Is that accurate?
Mr. HEDLUND. Well, that promise has already been broken. As
I mentioned, the inflation tax. The typical American family has
seen their real income fall by $4,000 because of inflation, and that
will just be compounded by the expiration of thousands of dollars’
worth of tax cuts to them if that were to be allowed to happen.
Ms. VAN DUYNE. I appreciate that. Mr. Wetherington, what
would you do differently if the R&D provisions of the Tax Code had
not changed?
Mr. WETHERINGTON. So, for me, I would be hiring more engi-
neers, more software developers. I would have a higher level of cer-
tainty over what the Codes were and what my expenses would be
and what my liabilities would be associated with doing that devel-
opment. It would yield me getting to new products faster, which
helped me not only in selling products to the United States, but I
export to over 40 countries around the world, including China. And
it is important for us to bring out, to beat other competitors around
the world who also make medical devices by being innovative and
being on the leading edge. R&D tax credits is a key tool in us being
able to do that.
Ms. VAN DUYNE. Tell me also, how would higher taxes impact,
because you talked about how we are competing with other, with
other countries and other businesses outside of America. Can you
tell me how higher taxes impact manufacturing?
Mr. WETHERINGTON. So, the vast majority of small and me-
dium manufacturers are actually suppliers to larger employers. So,
even though we may be not necessarily main street, but small in-
dustrial parks around the United States, that higher tax rate has
a ripple down, a trickle-down effect. And we have seen a real ren-
aissance in reshoring of manufacturing in the United States. And
I think the Tax Code has been a big piece of that. Not only the sup-
ply chain problems for the pandemic, but it was already starting
before then, in 2018 and 2019, because of the improved Tax Code.
Ms. VAN DUYNE. Outside the Tax Code, can you talk about how
the regulations have been hurting your business? And we have got
10 seconds.
Mr. WETHERINGTON. My regulatory expenses have gone up
over 460 percent in the last eight years and not done anything to
make the products better or safer.
Ms. VAN DUYNE. Wow, that is impactful. Thank you very much
for your testimony.
Mr. WETHERINGTON. You are welcome.
Ms. VAN DUYNE. I yield back.
Chairman WILLIAMS. Lady yields back. And now I recognize
Representative Scholten from the great state of Michigan for five
minutes.
Ms. SCHOLTEN. Thank you so much, sir. Thank you to our wit-
nesses for being here today. What an incredibly important con-
versation. Small businesses make up over 99 percent of private sec-
tor employers, employing nearly half of the workforce and creating
two thirds of all new jobs. In my home state of Michigan, nearly
1 million, over 900,000 small businesses employ 1.9 million people.
16
To that end, it is incumbent on Congress and us here in this com-
mittee to help create a tax system that is both easy for our small
businesses to use, and one that promotes fairness.
This question is for Mr. Rowen. In your experience navigating
our tax system at a small business for nearly 50 years, what pro-
grams or policies have made that experience easier? And can you
speak to any changes that you would like to see specifically?
Mr. ROWEN. Boy, I am not quite sure how to respond to easier.
We are a large enough company that we employ an outside ac-
countant. And he is bringing all the complexities of the tax laws
to us. We don’t have to employ. We have bookkeepers that do our
books. But the Tax Codes. But there have been. I mean, they are
just crazy.
Ms. SCHOLTEN. And I am not meaning to interrupt, none is a
perfectly appropriate answer.
Mr. ROWEN. None.
Ms. SCHOLTEN. If that is your genuine answer.
Mr. ROWEN. Yes, that is my answer.
Ms. SCHOLTEN. What can we do?
Mr. ROWEN. So, one, and it has been said by everybody today,
let us create a tax system that everybody believes is fair, is con-
sistent, and stays stable. Because every year, if we, every two or
three years, we change, that throws all of us into chaos.
Ms. SCHOLTEN. Absolutely. And you just said it yourself, you
hire an outside accountant. Right?
Mr. ROWEN. Yes.
Ms. SCHOLTEN. Not many small businesses have that luxury,
right? This Congress, we have heard from a lot of small businesses
about labor shortages and supply chain issues impacting their abil-
ity to grow and thrive. I hear about that back home in West Michi-
gan as the number one concern. Maybe number two, only to access
to capital. Mr. Rowen, again, as we continue to bounce back as a
country, can you describe how you think we could potentially use
the Tax Code as a leverage to alleviate the workforce shortages
that small businesses have been struggling with in recent years?
What changes would you like to see? What avenues are already
there? And how can we use this to our advantage?
Mr. ROWEN. So, I think some of the things we have talked
about today that actually are still in the TCJA, I would absolutely
encouraged to stay in. So, things like having the—being able to
write off quickly, things like—but the two things that are the most
important things for me with employees is healthcare and
childcare.
Ms. SCHOLTEN. Yeah.
Mr. ROWEN. If we could have better healthcare and childcare
programs, that would make an enormous difference for the vast
majority of small businesses that I am familiar with.
Ms. SCHOLTEN. Heard. Thank you so much. I yield back.
Chairman WILLIAMS. Lady yields back. I now recognize rep-
resentative Bean from the great state of Florida for five minutes.
Mr. BEAN. Mr. Chairman. Thank you, Mr. Chairman, a very
good morning to you. Good morning, Small Business Committee. To
our witnesses, glad to have you here. Welcome to your nation’s cap-
ital. I have only been in Congress 15 months, a little over a year,
17
and I have learned that Bidenomics is taking its toll on main
streets in northeast Florida, where I represent, and really all
across America. In fact, with the exception of Joe Biden, I don’t be-
lieve there is one single American who objectively believes that our
nation is headed in the right direction.
To all of you small business owners that have been struggling
with Bidenomics, I want to tell you something, there is a light at
the end of a tunnel. Now many small business owners will say, is
it a train? It is not a train. It is the potential tax relief in the Tax
Relief for American Families and Workers Act. The House has al-
ready passed it, a bill that is both family friendly and business
friendly. And we are poised to deliver big, momentous change in
Washington and all across America. The provisions of this bill have
a track record of increasing wages, providing more job opportuni-
ties, and helping American businesses become more competitive,
more productive, more innovative, and in turn, generating a tre-
mendous economic boom in their communities, whether you are in
research and development or in the convenience store business. As
Americans continue to suffer under back-breaking inflation with an
uncertain economic future, I believe the bill, the Tax Relief bill, the
Tax Relief for American Families and Workers Act, will provide
much relief, opportunity, and certainty.
So, let us get to the questions. In 2017, Congress passed and
President Trump signed into law the Tax Cuts and Jobs Act, which
was the first major reform in the U.S. Tax Code since Ronald
Reagan did it in 1986. Sweeping reform updated the Tax Code to
benefit individuals and companies of all sizes. This tax cuts was in-
credibly successful and provided much needed relief for Americans.
Unfortunately, the bill passed under reconciliation, which bypasses
the 60-vote threshold. And now the program was temporary. We
are soon to see all of that great, the great work expire.
So, my question, Dr. Hedlund, if Congress allows the provisions
of the job—Tax Cuts and Jobs Act to expire, what will be the im-
pact on American businesses?
Mr. HEDLUND. That is a great question. And it would be a very
damaging impact because we saw what positive progress that law
provided. $5,000-plus in income gains for the typical family with
bigger gains at the bottom, people with less formal education, peo-
ple with non-managerial jobs, people at the lower end of the income
distribution had faster gains than at the top. So, if we let the TCJA
expire, we can expect to see less investment, lower wages and
lower overall prosperity.
Mr. BEAN. Very good. Thank you very much. And to Mr.
Wetherington, can we agree America has always been on the fore-
front, cutting edge of inventing things, making the world better,
making quality of life for everybody? And that comes with research
and development. Is it true that our Tax Code now is, is punishing
people who do research and development? And if we don’t make
changes, we are going to see America fall further behind the rest
of the world and research? What do you say to that Mr.
Wetherington?
Mr. WETHERINGTON. That is absolutely true. Manufacturers
are inherently problem solvers. But we want to focus our problem
solving on things about what we are manufacturing. We don’t want
18
to focus our problem solving on a new Tax Code or on changes. So,
it is predictability and consistency that we really need out of Wash-
ington; allows us to focus on the job we need to do not only in cre-
ating new products through R&D, but also on the daily building,
making, shipping, supporting products that we make to help people
get better in our healthcare system.
Mr. BEAN. Ten-four. So, we have got to act or we are going to
go further behind the rest of the world?
Mr. WETHERINGTON. The priority is urgent.
Mr. BEAN. Amen. No. Thank you for saying that. Mr. Huff, I
just want to say thank you and congratulations to you. Seven
stores. I know your family is proud. Sixteen people are getting a
paycheck. They are putting dinner on their table because of you.
Is crime a problem at convenience stores right now?
Mr. HUFF. Not in my stores, but generally crime is, I think,
coming down. But I am not sure about that. The—if I could speak
to——
Mr. BEAN. Hold on one second. My final question, we are going
to flip it back to you.
Mr. HUFF. Okay.
Mr. BEAN. The Inflation Reduction Act, Dr. Hedlund, has been
poised even at this Committee how great it is for small business.
Isn’t it true that spending $1.3 trillion under the Inflation Reduc-
tion Act has greatly enhanced inflation in these United States of
America?
Mr. HEDLUND. Yes. It should be called the Inflation Creation
Act.
Mr. BEAN. Thank you very much Mr. Huff, we will get back to
you next time. Thank you all for coming forward. I yield back, Mr.
Chairman.
Chairman WILLIAMS. Gentleman yields back. I now recognize
Representative Chu from the great state of California for five min-
utes.
Ms. CHU. Mr. Rowen, I would like to ask you a question. I also
serve on the Ways and Means Committee, which has jurisdiction
over the Tax Code. And I so appreciate your small business per-
spective on how a Tax Code geared towards corporations and the
wealthy does not trickle down to small businesses and workers. In
fact, that is why Democrats have fought to end trickle down poli-
cies and instead invest directly in workers and small businesses.
And that is why we continue to advocate for expanding their
Earned Income Tax Credit, or EITC, and the Child Tax Credit.
These are two of the most powerful tools at our disposal for not
only reducing poverty, but also helping more Americans enter the
workforce. Unfortunately, Republicans’ Tax Cuts and Jobs Act did
nothing to strengthen the EITC. And Republicans in the Senate are
refusing to consider even a modest improvement to the Child Tax
Credit that the House did pass on a bipartisan basis.
So, can you talk about why it is important that the Tax Code
support workers and families instead of just corporations and the
wealthy? What benefits might small business owners and prospec-
tive entrepreneurs experience if Democrats EITC and CTC expan-
sions under the American Rescue Plan are made permanent?
19
Mr. ROWEN. So, in the small business world, believe it or not,
taxing is not one of the most important issues that we deal with
day to day. It is employees, it is consumers, it is how do we get
our products out. But more than anything else, primarily as a man-
ufacturer, we have to have employees. And if we don’t have con-
sistent, dependable employees, we don’t have a business. And if we
have—I am an entry level, low skilled—I have a lot of those jobs.
I am hiring a lot of young, new family members. And hey, guess
what? They have kids. And when they have kids and their kids
don’t, they don’t have childcare, they are not going to be depend-
able employees. So, those kinds of programs, health insurance is
another one. If I have an employee that is going to get sick and
doesn’t have health insurance, they are not going to go to the doc-
tors. And the consistency, dependability of our employees is some-
thing that is vital to us. Those programs are necessary.
Ms. CHU. Thank you for that thoughtful answer. I would like to
follow up with talking about the impact of the Tax Cuts and Jobs
Act on small business. As a Member of the House Ways and Means
Committee, I was there in 2017 when Republicans pushed through
their rushed partisan Tax Cuts and Jobs Act, and I saw firsthand
that the goal was simple, to lower taxes for the wealthiest individ-
uals and the largest corporations. That is why the TCJA made the
corporate tax cut permanent, while the provisions for small busi-
nesses and individuals were made only temporary. But even
though Republicans said that some of these temporary provisions
were targeted at main street, like the 20 percent qualified business
income deduction for pass-throughs, also known as the Section
199A deduction, we know that the majority of the benefits have
gone to the wealthiest businesses. In fact, the Joint Committee on
Taxation estimates that in 2024, 61 percent of that benefit will go
towards the top 1 percent; and, businesses in the bottom two-thirds
of income will only get 4 percent of the benefit. That is in part be-
cause the TCJA created a number of complex rules that made it
harder for small businesses to navigate the Tax Code and actually
take advantage of these potential deductions.
So, Mr. Rowen, you indicated in your testimony that we need
meaningful tax reform to help small businesses, but that simply ex-
tending these expiring TCJA provisions is not the answer. Can you
expand upon some of the challenges that small businesses faced in
navigating the TCJA’s provisions? How would small business own-
ers, and especially the smallest and most underserved, stand to
benefit if Congress finally moves past the TCJA and instead pur-
sues a fairer tax system?
Mr. ROWEN. So, we can talk about what fair means. And I think
that we believe, as small business owners, that if everybody is
doing the same thing and paying the same amounts, that is fair.
The fact is that the corporate tax rate had been at between 30—
the top rate had been around 35 percent to 39 percent, and a 40
percent reduction took it to 20 percent, 21 percent. The small busi-
ness community only got a 20 percent deduction as a pass-through.
And you just look at those numbers and any economist and any lay
person can be, can understand that that wasn’t fair. And the fact
that one was permanent, and one——
Chairman WILLIAMS. The gentlelady’s time is up.
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Mr. ROWEN.—was not permanent was also not fair.
Chairman WILLIAMS. You yield back?
Ms. CHU. Thank you. I yield back.
Chairman WILLIAMS. Thank you. I now recognize Mr. Meuser
from a state that is represented well here today, the great state of
Pennsylvania, for five minutes.
Mr. MEUSER. Yeah. Thank you Mr. Chairman, very much.
Thank you all. Great discussion. Really important. A lot of different
ideas, but you can have a lot of different ideas, but facts are facts,
I guess, right. When the Tax Cut and Jobs Act went into effect,
yes, the corporate tax rate came down. You know, for some reason,
we want to beat up on, you know, small businesses that, you know,
become large businesses. That would happen. All large businesses
were once small businesses, and they grow. As Mr. Huff said, that
is the whole idea. When the corporate tax rate came down to 21
percent, the whole world got far more competitive than the United
States of America. That is why right afterwards we saw almost a
trillion dollars in repatriation come back. And by the way, many
small businesses have large businesses as their, either their sup-
pliers or their customers. So, it all needed to be reviewed. Now we
are the Small Business Committee, so that is in fact where we
want to focus.
So, let me just ask you this, Mr. Wetherington, and we had some
past business similarities. I was in the home medical equipment
business. So, when you receive your 20 percent reduction and you
had your 100 percent R&D deduction and carried interest could be
written down, when you were showing more revenues, in the end,
more net income, what did you do with it?
Mr. WETHERINGTON. It went right back into business.
Mr. MEUSER. Of course. I would have bet and knew exactly
what you were going to say; went right into the business. You
hired, you invested, you grew, you became stronger, more built to
last. Okay? That is where employment comes from. From a busi-
ness that is figuring out how to not only sustain itself but also
have some level of profitability. And that is, by all means, what the
TCJA did. I mean, there is no question about it. You know, the 20
percent reduction, the R&D reduction. Now the idea is it was a bi-
partisan vote here in the House, but that this is going to be, you
know, removed. I mean, it is not being taken up in the Senate and
President Biden showing no interest in and carrying it on. And
they are not carrying it on because the messaging continues to be
that this did nothing but help billionaires, right, and the super-
rich. And yet I go to more chamber meetings as a former small
business person that grew into a somewhat larger business and I
never have one person out of a group of 150 say to me, boy, that
Tax Cut and Jobs Act really was detrimental to me, I am sorry it
happened. No. They are saying bring back the R&D, bring back the
bonus depreciation, keep our 199A in effect.
Mr. Huff, let me ask you something. What if after COVID and
everything else, you know, when you are speaking of the 20 percent
reduction: A, what if that never occurred and B, how devastating
is going to be if that gets eliminated?
Mr. HUFF. Well, I can testify today that for the first time the
199A actually brought funds to my corporation that I was able to
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invest. And I believe that if I didn’t have that, I would not be here
sitting here today as a business person. It gave enough funds that
I was able to invest in technology and open up self-serve stores
that are still currently operating.
Mr. MEUSER. Yeah, great, thanks. Mr. Wetherington. R&D tax
credit. Very important. I was looking at your products. Of course,
a lot goes into that. Design engineers, all types of engineers, elec-
tronic EEs. That gets reduced or even now with the, with the 20
percent over a five-year period. How has that affected your busi-
ness, your profitability, your hiring, your growth, and your R&D in-
vestment?
Mr. WETHERINGTON. Well, as I stated in my testimony, this
is slowing us down from bringing out major redesigns of our two
flagship products that represent 80 percent of our product revenue.
Our expectation is that we are going to grow by 50 percent once
those launch, but we continue to have to push those out because
of the inability to cover the expenses without the assuredness of
having the R&D tax credit. It is back to predictability and consist-
ency in what the Code is.
Mr. MEUSER. Absolutely. Amen to that. Mr. Hedlund, you in
your work and you working on the TCJA, just related to inflation.
When the former administration, Trump Administration was talk-
ing about tariffs and, and getting to zero percent tariffs and recip-
rocal tariffs, was there inflation back in the Trump days because
of that?
Mr. HEDLUND. Leaving 2020, inflation was under two percent.
It wasn’t until 2022 that we got to 40-year high inflation.
Mr. MEUSER. Thank you very much. I yield back, Mr. Chair-
man.
Chairman WILLIAMS. The gentleman yields back. I now recog-
nize Representative Landsman from the great state of Ohio for five
minutes.
Mr. LANDSMAN. Thank you, Mr. Chair, and thank you all for
being here and your testimony. The bill that we just passed was
a bipartisan bill, and it put back on the books and or expanded a
number of things that I think we all in this room would agree were
hugely important. And the Senate should pass what we already
passed. The President is very supportive of this, of course, is the
R&D piece of all of this, which we have been pushing for in this
committee in a bipartisan way. And thanks to the Ways and Means
folks, for getting it done and getting it to the floor.
Being able to deduct the interest payments when interest pay-
ments are so high right now, it has been such a burden for small
businesses, families in general. So, being able to do that was really
important. The Child Tax Credit, hugely important to help families
pay all their bills. And oftentimes those dollars end up back with
our small businesses. So, it is really good that they are in the pock-
ets of our families as opposed to up here or somewhere else. It also
included the LIHTC expansion and making sure that this tool for
helping to build more affordable housing. So, these are all really
smart bipartisan tax endeavors, again, passed here and then went
over to the Senate. Hopefully they will pass it.
The issue, and the question for me is, we know what bipartisan
tax reform looks like. We just passed it. The challenge is that al-
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most all Americans know that the tax system is rigged for the
super wealthy, right, that especially because of the Trump tax give-
aways to millionaires and billionaires and these big corporations.
If all of the companies and millionaires and billionaires, the super
wealthy, were to pay all their taxes on all their income and wealth,
wouldn’t we have the money to invest in healthcare and childcare,
which are at the core of successful small businesses? Wouldn’t we
have the resources to invest in additional tax relief for small busi-
nesses?
So I am curious. I will start with you, Mr. Rowen, your thoughts
on that. I mean, it just seems that fixing the tax system is, for
small businesses and families, is the next big moment of truth for
this economy and for the country, for this Congress. And it does
seem pretty straightforward, and the American people are clear,
make those who are super wealthy pay all their taxes on all their
income and wealth, and then put us in a position where we can in-
vest in childcare and healthcare and more tax relief for small busi-
nesses.
Mr. ROWEN. We keep going back to bipartisan tax reform and,
gosh, all of us would like that to happen. The question becomes
what is fair. And again, what I say is the small business commu-
nity that we represent is not coming today to say we don’t want
the changes that the TCJA gave to the small business community
in deductions in the pass through 20 percent. It is not like we don’t
want those, those were helpful, absolutely. We all accept that.
Mr. LANDSMAN. Exactly.
Mr. ROWEN. But the bottom line is that the small business com-
munity is basically being taxed at about a 28 percent rate. And we
also know that the corporations are being taxed at the 21 percent
rate.
Mr. LANDSMAN. If, if, if.
Mr. ROWEN. If. And the average corporate tax rate is closer to
10 percent.
Mr. LANDSMAN. Correct.
Mr. ROWEN. So, that is not, in the American eye, fair. We know
that tax policy can incentivize business development. We know
that. We just have to figure out how to do it. And things—small
business people recognize that childcare, health insurance, making
our communities stronger, government policies that do that do help
small businesses, and we grow when those programs are working.
Mr. LANDSMAN. Anyone else?
Mr. WETHERINGTON. The TCJA wasn’t perfect, but it did cre-
ate a manufacturing boom and it created a beginning of onshoring
that only continued once we started into the pandemic and having
the supply chain issues. I think it is still very important that we
make that permanent and we stop the additional provisions from
expiring in 2025.
Mr. LANDSMAN. Thank you. And I yield back.
Chairman WILLIAMS. The gentleman yields back. I now recog-
nize Representative Alford from the great state of Missouri for 5
minutes.
Mr. ALFORD. Thank you, Mr. Chair. Good to see you back. And
thank you to our witnesses for being here. I know it is a little bit
of a sacrifice to come here away from your businesses, but we
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thank you for the investment because I think this is a very impor-
tant hearing.
I want to start with four simple truths today. Number one, cut-
ting taxes is good for American taxpayers and their businesses.
Number two, President Biden’s new budget reveals his intention to
tax Americans families into oblivion. Fact number three, complying
with President Biden’s war on small business, including over regu-
lation, is a tax within itself. And number four, the IRS is now tar-
geting more small businesses as it looks to claw away money to
fund the radical agenda of this administration. My message to
President Biden is, sir, end your war on small businesses now.
The Federal Tax Code currently sits at over 75,000 pages, includ-
ing guidance from the IRS. For context, if you were to stack 75
pages up, take a look at the ceiling right now, guys, this is about
a 16-foot ceiling. The Federal Tax Code and all the guidance that
goes along with it would be twice the height of this ceiling. That
is crazy.
Next week, hundreds of millions of Americans will be required to
comply with all that paper, 32 feet high worth of regulations, and
contend with the President’s new 87,000 IRS agents. He hired
those new IRS agents for a reason: to execute the extreme taxation
policy laid out in his 2025 budget. The President’s budget includes
a staggering $4.9 trillion in new taxes, alongside allowing $2 tril-
lion in tax savings from President Trump’s Tax Cut and Jobs Act
to expire. Allowing these pro-growth tax policies to expire and in-
creasing taxes will not only further hurt the competitiveness of
your small businesses and all small businesses in America, it will
crush them, the jobs they provide, the communities they serve.
Mr. Huff, one of the most important pieces of the TCJA was a
small business deduction. It allowed a 20 percent deduction for
pass-through business owners, allowing them to keep more of their
own money and invest it in their businesses and in their employ-
ees. It has led to an estimated $66 billion in tax savings for small
entities. Mr. Huff, what will happen to your small business if the
small business deduction expires next year, sir?
Mr. HUFF. I will not be able to invest in my planned reopening
of my stores. I have stores that are actually mothballed and
planned to reopen as the office buildings fill up.
And just one other thing I would like to—the 199A was the first
time that I actually felt that the Tax Code affected me as a small
business person. I am grateful to have it.
Mr. ALFORD. These savings that you are realizing under the tax
cuts now, you are not taking fancy trips to Tahiti or anything like
that, are you, with the money?
Mr. HUFF. Actually, I am going to go to Tahiti, but not because
of the Tax Code.
Mr. ALFORD. You are investing this in your business and the
people who work for you.
Mr. HUFF. That is absolutely correct. We reinvest in our busi-
ness. And I actually have to do that because I would like to get
back to 23 stores across the United States.
Mr. ALFORD. Mr. Hedlund, our farmers are the backbone of our
nation, working sun up to sundown. In Missouri, we had, 5 years
ago, 95,000 farms in Missouri. Now we are down to 87,000. Our
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food security is our national security. We are losing 1,000 farms a
month in America. And a key policy keeping these businesses,
these family farms going is the stepped up basis which allows a son
or daughter to inherit their family farm without paying the dev-
astating tax bill.
President Biden wants to do away with this in his budget, and
it is going to hit two-thirds adversely, two-thirds of the family
farms. What impact will that have on our ag industry, do you
think?
Mr. HEDLUND. It would be a very damaging impact. We have
seen overall prices go up by 20 percent and food prices have gone
up by more than that. And that is just part of a trend. This admin-
istration has also talked about taxing unrealized gains, which
would be similarly devastating to the economy.
Mr. ALFORD. Well, I appreciate your answers. Mr. Huff, have
a good time in Tahiti. I appreciate—I wish I could go with you, but
I just got back from spending a week in Israel, and I am telling
you what, we need to pray for those people in Israel and support
them.
Thank you so much. Mr. Chair, I yield back.
Chairman WILLIAMS. The gentlemen yields back. I now recog-
nize Representative Thanedar from the great state of Michigan for
5 minutes.
Mr. THANEDAR. Thank you, Mr. Chair. And I have a couple of
questions for Mr. Rowen.
You know, when I ran a small technology business in Michigan,
buying equipment was very critical, keeping up with the new tech-
nology so that I can provide better service to my customers, create
more jobs. And so often I used my profits, so to speak, to buy
equipment and invest in my own business, so I can grow, grow the
business. And at times, you know, I had some tax benefits that
helped me.
Now, we have a bill, I am sure you are familiar, that is being
with discussed in the U.S. Senate. And in terms of providing some
tax benefits, especially able to write off entirely the purchase of
equipment. What would you advise the senators to do on this par-
ticular bill?
Mr. ROWEN. There is no question in my mind, it is the experi-
ence I have had with my business, that every time I can expense
something like a piece of equipment in the year that I purchase it,
it helps my business. It is an absolutely vital component of what
I think should be a fair tax policy and tax reform, so it should be
included in tax reform.
Mr. THANEDAR. All right. The 199A deduction benefits many
small businesses that operate as pass-through, but 50 percent of
the benefits go to the top 1 percent. What can we do to cater bene-
fits more towards the average small business owner who makes
closer to $70,000 a year?
Mr. ROWEN. So, one of our proposals is to take the first $25,000
worth of income on a business and make it tax free, give small
business owners who begin to hire employees a credit for new
hires, things like that. So, when you are down at the level where
all entrepreneurs start, at the bottom and build up, give better tax
breaks and incentives that way.
25
Mr. THANEDAR. All right. Finally, you know, what specific poli-
cies you recommend that would help the small businesses? Often
when we have tax breaks, tax incentives planned, we see a lot of
that benefit go to the top 1 percent who really don’t need those in-
centives. It is the small businesses which are struggling, the
mama-papa businesses, small businesses trying to grow. You know,
they can benefit more. How can we design policies that benefit
more of the lower end, smaller businesses and not so much of it
goes to the top 1 percent?
Mr. ROWEN. I believe, our organization believes that govern-
ment is not necessarily always the bad, evil part, and taxing is how
we fund our government. We have just experienced 4 years’, 5
years’ worth of a pandemic that would have crushed most busi-
nesses. My business would not be here today, I would bet you these
two gentlemen sitting next to me, their businesses very possibly
would not be sitting here today, be in business, if we didn’t have
the protections like the PPP funding and the Small Business Ad-
ministration EIDL loans. Those are the things that backstop the
American economy and that is what America needs to be. We need
to strengthen that.
Mr. THANEDAR. Thank you, Mr. Rowen. And Mr. Chair, I yield
back.
Chairman WILLIAMS. The gentlemen yields back. I now recog-
nize Representative LaLota from the great state of New York for
5 minutes.
Mr. LALOTA. Thank you, Chairman, for your leadership and for
getting us together to today to hear about the challenges that small
businesses face regarding our Tax Code and the uncertainty in it.
I want to thank our witnesses for being here today.
I want to spend my 5 minutes today addressing an issue that is
paramount to my Long Island constituents, and that is the state
and local tax deduction, otherwise known as SALT. Long Island is
already one of the most expensive places in the country to live due
to incredibly high state and local taxes. Specifically, New York
State has the dubious distinction of having the highest effective in-
come, sales, and property tax rates in the country. It is not even
close how bad we are in our state.
Now, that is a problem mostly created by Albany politicians and
nobody in this town, thankfully. Nevertheless, the complex Federal
Tax Code presents challenges to small businesses and individuals,
like many of my constituents. And to help provide relief to that
problem, many of my colleagues and I are working to increase or
eliminate the SALT deduction cap to help support our constituents.
One of the first bills I introduced in Congress was my SALT
Fairness and Reduction Act, which would increase from $10,000 for
individuals to $60,000 for individuals, $120,000 for married cou-
ples, and would also index that for inflation. This, many think, is
commonsense legislation that provides tax relief to those who need
it, specifically small businesses and middle class families, who are
having to cut costs every day.
I made a promise to my constituents that I wouldn’t support any
tax package here in the House without a reasonable SALT fix. And
since day one, I have made that clear to every one of my colleagues.
Unfortunately, earlier on in this Congress, the Wyden-Smith tax
26
package did not have any reasonable fix for SALT, and I was forced
to vote no on that package.
I am not giving up, however. Many of my New York Republican
colleagues and I then fought tooth and nail to ensure that a vote
on a SALT increase got to the floor. We proudly introduced the
SALT Marriage Penalty Elimination Act that would remove the
marriage penalty and raise the SALT deduction cap to $20,000 for
joint filers who have an adjusted gross income of $500,000 or less.
Sadly, this dysfunctional town, every single House Democrat who
previously said they were very much in favor of an increase in the
SALT deduction, and specifically 14 New York House Democrats,
voted against that and blocked that bill from even coming to the
floor. It was pro family, pro worker, pro American legislation and
the dysfunction of this town, the partisanship of this town pre-
vented that from moving forward.
This leads me to my first question. Mr. Hedlund, I see you are
from Purdue. Sorry about the game the other night. A vast major-
ity—you guys finished second in the world. That is very good.
Mr. HEDLUND. A lot better than last year.
Mr. LALOTA. Yes, sir. A vast majority, I understand, of small
businesses are pass-through entities, meaning income is reported
on from the business owner on their individual taxes and is taxed
under the individual income tax. Is that correct?
Mr. HEDLUND. That is correct.
Mr. LALOTA. This means the limitation of the personal income
tax code, like the SALT cap, directly negatively impacts the busi-
ness. Is that correct?
Mr. HEDLUND. They are affected by that provision.
Mr. LALOTA. And it is a negative impact. They get to deduct
less?
Mr. HEDLUND. They get to deduct less.
Mr. LALOTA. Which means they have to pay more?
Mr. HEDLUND. Sure.
Mr. LALOTA. And does anybody want to pay more?
Mr. HEDLUND. No one I have encountered.
Mr. LALOTA. We agree on that. Would you agree, moving on,
would you agree that a double tax, where the federal government
and then later on the state and local governments tax the same in-
come, that a double tax is unfair?
Mr. HEDLUND. So, I would take a little bit of a different view
there. I would say if there is a federal taxpayer living in Texas and
one living in New York and they have the same income, that the
one in Texas should not have to pay a higher federal tax because
of the bad decisions that New York government is making.
Mr. LALOTA. Great point. I have heard that from some of my
colleagues. Now, what would you say about return on investment?
If you are going to analyze, in your words, that a Texas taxpayer,
God bless Texas, shouldn’t have to subsidize the largesse of Albany
politicians, I generally agree with that concept. But what would
you say if the analysis then said that this town sends more back
to Texas and some other states than they send back to New York
based upon the revenue it collects from those? Specifically, New
York State is a donor state, meaning that for every dollar a New
York taxpayer sends to the federal government, we get a mere 85
27
cents back. In many of those same states who claim they are sub-
sidizing my state’s largesse, they are getting $1.25, $1.50, and $2.
Would you say that is unfair, sir?
Mr. HEDLUND. I would say that the money going back to a lot
of these states, no one is really feeling the benefits of it. Govern-
ment is way too big. So, I am 100 percent on board with you about
we need to reduce the tax burden on everybody.
Mr. LALOTA. Great. Let’s talk about the marriage penalty real
quick. So, certain parts of the Tax Code disincentivize marriage,
and specifically with respect to the most recent adjustment in the
SALT code, the limitation is $10,000 regardless if you are an indi-
vidual or you are married. So, one person gets to deduct $10,000
from their taxes, but two people who happen to be married get to
deduct the same 10,000, not 20,000. Is that fair, sir?
Mr. HEDLUND. I am definitely against marriage penalties.
Mr. LALOTA. Great. With that, I yield back, Mr. Chairman.
Chairman WILLIAMS. The gentlemen yields back. I now recog-
nize Representative McGarvey from the great state of Kentucky for
5 minutes.
Mr. MCGARVEY. Thank you, Mr. Chairman. Appreciate this
hearing today, especially given that Monday, let’s not forget, is Tax
Day. So this is everybody’s friendly reminder it is coming, whether
we want to admit it or not.
Mr. Wetherington, I appreciate your statement that the Tax
Code must be simple, consistent, and must support job creation
here in America. I couldn’t agree more. We need a Tax Code that
is accessible to every American. And I think everyone needs to pay
their fair share. It is not viable and I think it is certainly not fair
that the top 10 percent of earners are oftentimes taxed at far less
than teachers and firefighters and people below.
And let’s look at what the Tax Code and what has happened re-
cently. Trump’s tax plan was a massive windfall for large multi-
national corporations. By implementing a flat 21 percent tax rate,
President Trump gave some of the largest, most profitable corpora-
tions up to a 40 percent break on their taxes. But this is the deal.
We are in the Small Business Committee. They did this while sub-
jecting the smaller businesses and C corporations, who were pre-
viously taxed at 15 percent, a tax increase. So that 21 percent tax
rate that they imposed, a flat tax, it lowered it for the biggest cor-
porations, it raised it for many small businesses.
I have got twins at home, and so I say this all the time, it can
be fair, right? It can be equal without being fair. And that is what
has happened. They made the tax rate equal, but it is not fair to
our small businesses and our entrepreneurs who are trying to grow
their businesses.
It is not hard to see why, right? When signing his corporate tax
giveaway into law, President Trump said, ‘‘Corporations are lit-
erally going wild over this.’’ You heard that quote correctly. Not
people are going wild over this, not main street is going wild over
this. Our largest corporations are going wild over this. And unfor-
tunately, under the plan, it is not just people and programs that
will suffer. The Congressional Budget Office estimates that with a
full extension of the Trump corporate tax giveaways, deficits will
rise up to $3.5 trillion, the highest percent of GDP outside of a war
28
or a recession. We simply can’t afford to do that, and it will be a
wasted opportunity to improve our Tax Code if we do.
With that being said, we have a great opportunity to extend the
parts of the tax cut that helped people, like doubling the standard
reduction and the child tax credit. And we can work together to
create a reformed tax system that is simple to understand, helps
small businesses, promotes commerce, and enhances the welfare of
everyday Americans.
Mr. Rowen, what are some of the previous—what are some of the
provisions in the Tax cut and Jobs act that helped small businesses
that you would like to see continued in a new tax package?
Mr. ROWEN. Well, I do think the 199A 20 percent reduction was
good. I think the 100 percent amortizing, you know, taking those
deductions right away, those are good. There is a lot of provisions.
Anything that simplifies the Tax Code would be great.
But again, we do believe that if you simply leave this law in
place and keep the corporate rate at 21 percent and give back to
the small businesses their 20 percent reduction, you are still cre-
ating this uneven balance where small businesses are effectively
being taxed at somewhere around 28 percent and corporations are
still at 21 percent.
Mr. MCGARVEY. In my brief time remaining, we talked about
deficits. We talked about that. We heard Mr. LaLota talk a little
bit about recipient states and that sort of thing. I can tell you, I
am from Kentucky. And last week, a few weeks ago, there was a
study by the Republican Committee that proposed budgets that
would cut Medicare, Social Security, and Affordable Care Act. In
Kentucky alone, there are almost a million people enrolled in Medi-
care, more than 500,000 receiving both Social Security and ACA
benefits. How do programs like these alleviate the workforce short-
ages that small businesses have been struggling with in recent
years?
Mr. ROWEN. We can’t compete with big businesses that can give
health insurance to their employees. We just can’t. We have finally
fallen below 50 employees, so we don’t have to have our own health
insurance, which we had to carry for years and very few people in
my company were actually able to afford it.
Chairman WILLIAMS. The gentleman’s time is up.
Mr. MCGARVEY. Mr. Chairman is being nice. I see my time has
expired. I yield back.
Chairman WILLIAMS. The gentlemen yields back. I now recog-
nize Representative Molinaro from the great state of New York for
5 minutes.
Mr. MOLINARO. I apologize to the witnesses that you had to get
double teamed by New Yorkers, although my colleague adequately
divided the two of us and said Trump as many times as he could,
and I appreciate the fear in which he expected to instill upon all
of you. But let me offer that, Mr. Chairman, we appreciate the time
at today’s hearing, and certainly to each of you.
This is an important moment for small businesses. As we know,
we are going to have to advance a tax policy that assists American
families and American small businesses. Now, I was actually, as a
New Yorker, very proud to vote for the Tax Relief for American
Workers and Families Act. This bill, I think, is the first step to de-
29
livering relief to millions of Americans, and I was encouraged to
see it come together in a bipartisan way. I trust and hope the Sen-
ate will take action soon.
I also am proud to introduce the Think DIFFERENTLY Small
Business Accessibility Act. This bipartisan bill will expand the ex-
isting disability—excuse me, disabled access credit, which helps
small businesses invest in accessibility for customers and employ-
ees of every ability. Now, these bills are proof that there is common
ground to be had on tax policy, but there is a long road ahead to
secure long-term extensions of the essential tax provisions that will
deliver relief for families, farmers, and small businesses across the
United States.
Dr. Hedlund, you outlined what you refer to as the blue collar
boom in the immediate aftermath of adoption of the Tax Cuts and
Jobs Act, actually quite a big benefit to small businesses and entre-
preneurs across the country. According to your testimony, workers
without a bachelor’s degree saw a 130 percent acceleration in earn-
ings from January 2017 to February 2020, a big benefit for small
businesses and entrepreneurs. For a district like mine, in which
less than half of the workforce has a bachelor’s degree or higher,
the impact of this growth cannot be understated.
So, could you highlight for us some specific industries that saw
the most growth after the 2017 adoption, and then just speak to
sectors where you foresee continued growth if we can come together
on extending these important provisions?
Mr. HEDLUND. Absolutely. Well, I mean, the great thing about
tax relief and a more competitive Tax Code is that it advantages
all industries. There are too many policies where, unfortunately,
the government ends up picking winners and losers and would go
for this industry, not that industry, but what we actually saw was
all industries gaining. We saw a lot of investment throughout the
country and, as you pointed out, it benefited especially blue collar
workers. And that is the thing with tax policy. It is not just the
immediate dollars that the tax cuts themselves put in the pockets
of people. It is the fact that it creates growth and that growth has
massive benefits.
Mr. MOLINARO. I appreciate you saying that. And for countless
small businesses, and those who, by the way, often feel like they
have the skill and the capacity, but not society’s expected level of
education, to show the ability to succeed and to have policy that
supports them, critically important.
Mr. Huff, good to see you again. I hope you enjoyed the cherry
trees around Washington yesterday.
Mr. HUFF. I could not find a sole, so we are good.
Mr. MOLINARO. Okay, fair enough. Don’t want you taking one
home. Now, you highlight the importance of the 199A tax deduction
in your testimony. As you know, over 95 percent of businesses in
the United States are what we call pass-through entities, which
means the TCJA helped millions of small businesses in New York
and across the United States in the form of the 20 percent pass-
through deduction. In fact, over 47,000 business owners in my dis-
trict alone, small businesses, benefited and claimed the deduction
in 2020. For this reason, I proudly cosponsor H.R. 4721, this is the
Main Street Tax Certainty Act, with 169 other Members of the
30
House. The bill would seek to permanently extend the 199A deduc-
tion. If that deduction were to expire today, and I know you have
talked about this, so let’s reinforce it, if that deduction were to ex-
pire at the end of next year, could you speak to the impact on your
business and some of the decisions you would have to make should
that sunset?
Mr. HUFF. If this, the 199A and the bonus depreciation,
changes, based upon my projections, rather than opening nine
stores in the next 3 years, I will be only able to open one or two
stores in the next 3 years.
Mr. MOLINARO. Massive benefit to businesses like yours. Now,
Mr. Wetherington, the data shows that in 2018 alone, manufactur-
ers added over 200,000 new jobs, the best year for job creation in
manufacturing in 21 years. The same year, manufacturing produc-
tion grew 2.7 percent, with December 2018 being the best month
for manufacturing output. I will run out of time, but could you—
without question, the impact of tax reform on manufacturing is
clear. Can you just elaborate in 10 seconds or less the impact to
your sector?
Mr. WETHERINGTON. Thank you for that. Policies have con-
sequences. When there is a high tax rate, large employers moved
offshore their manufacturing jobs. The lower tax rate, large em-
ployers started reshoring. It was going great before COVID. With
COVID came the supply chain issues. It continues to go strong. We
have got to keep these Tax Codes where they are.
Mr. MOLINARO. Mr. Chairman, the Tax Cut and Jobs Act helps
small businesses, and we have got to come together to ensure they
continue to get our support. And with that, I yield.
Chairman WILLIAMS. The gentleman yields back. I now recog-
nize Representative Gluesenkamp Perez from the great state of
Washington for 5 minutes.
Ms. GLUESENKAMP PEREZ. Thank you, Chairman Williams,
and thank you to our panel of witnesses for being here today.
So, I own an auto repair and machine shop with my husband.
And actually I have spent a lot of time reading, you know, books
on tax savvy for small businesses and the kinds of things that
make you want to crawl into a sleeping bag under your desk and
never come out. And it is actually very frustrating and alienating
for me to hear from—I will just be candid. I am grateful you are
here. It is hard for me to hear people in ties tell me that, like, this
is helping the trades because I feel like people in my world will
never—we don’t have the power to lobby for the tax cuts that
would actually—right. We want a level playing field, we want a
clear policy, we want to see a return to high-quality manufacturing,
not just fueling consumption.
And I appreciate, you know, the testimony, Mr. Huff, particularly
you were making about the investment in things like coolers, ma-
chinery. And I am thinking particularly, I am hoping you could ex-
pand, because my experience is if you can buy the nice thing, if you
can buy the work boots that will last 3 years, you have got a real
asset, right? You know, if you have got to buy the cheap thing be-
cause you are thinking about your depreciation schedule, not only
does American manufacturing hurt, but we hurt in the middle
class.
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So, I wonder if you could talk about that, talk about your experi-
ence with your capacity for hiring and retaining employees.
Mr. HUFF. Yes, I can. The purchasing coolers, fixtures, point of
sale systems, all of those create jobs and things like that. But for
me specifically, it creates an environment where I can grow, I can
make money and grow my business. And the 199A and the bonus
depreciation actually allowed me to do more than I planned to do.
Ms. GLUESENKAMP PEREZ. I appreciate that and I think it is
important that we are able to invest in high-quality equipment.
But I, also, when I think about the sort of stuff versus people di-
chotomy, I think it is really important that our communities and
our small businesses are able to invest in fixing their roof, putting
more insulation in their shop, things that are investing in the cap-
ital. That is how communities actually build wealth in the long
term. Grow your tax base, right? Make it so my shop isn’t 107 de-
grees in the summer, things like that.
And one of the things that we see a lot is—I mean I have cus-
tomers who tell me all the time like I didn’t really want to buy a
dually, but I needed to get above 6,000 GVW to qualify for the first
year depreciation. And I am like, let me tell you how much it costs
to replace a set of tires on a dually, you know. And so really think-
ing about ways that we can encourage a tax policy that prioritizes
investment in human capital, in people, and not just a churn of
stuff. And I am wondering, you know, to that end, who could speak
on what they have seen that does prioritize investment in people
and tradespeople.
Mr. HEDLUND. I would say that human capital investment is
one of the most important types of investment, and it is not talked
about enough. We need a Tax Code that is overall pro investment.
And the challenge with steep tax penalties that are better now
than they used to be, but we can make them even better, is that
they discourage people from investing in themselves, because work
is not just the paycheck you are immediately earning, it is the in-
vestment in your own future capacity. So if we have simple, low,
and fair taxes, we can get a lot more of that.
Mr. ROWEN. And something like a small business tax cut for
the first employee that they hire or if they send one of their em-
ployees to schools or you are just training somebody onsite, there
used to be programs for workforce development years ago that had
tax incentives. There is all sorts of things that can be done that
small business folks will take advantage of.
Mr. HUFF. As I open stores, I have to hire a manager, an assist-
ant manager, I have to hire associates. It is really critical that we
continue to come up with tax policies that allow small businesses
to grow because that is where the growth in employment is really
happening, is in the small businesses.
Ms. GLUESENKAMP PEREZ. A workforce that is nimble, that
has, you know, prioritizing the critical thinking, the sort of skills
that you can take to any business, that allow you to open your own
businesses, these are the kinds of investments that I think we need
to see. We want to see shop classes in our high schools thriving and
competitive. But I thank you for your time here.
Thank you, Chairman. I yield back.
32
Chairman WILLIAMS. Lady yields back. And we have come to
the end of our hearing today. I want to thank all of our witnesses
for the testimony, for appearing before us and coming, leaving your
home and your business to do this.
Without objection, Members have 5 legislative days to submit ad-
ditional materials and written questions for the witnesses to the
Chair, which will be forwarded to the witnesses.
Again, I want to thank all of you for being here. We are the back-
bone of this great country.
And if there is no further business, without objection, the Com-
mittee is adjourned.
[Whereupon, at 11:49 a.m., the committee was adjourned.]
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