Tax Code Burden on Small Business

1
Tax Code Burden on Small Business
David L. Hurley, President

• Presidents Advisory Panel on Federal Tax Reform
• March 8, 2005
• Tampa, Florida

2
Introduction

• Landmark started business in 1984
• 80 employees
• Approximately 5 million in revenue
• Civil Engineering and Land Surveying Services
• Labor costs represent 60 of total revenue

3
Survey of Small Business Paperwork Burdens

• NFIB Study - Coping with Regulations (2001)
• Survey of small business members about greatest
  compliance difficulty
• Survey results show that tax rules create the
  greatest difficulty for responding small
  businesses

4
What types of regulations, federal, state or
local create the greatest difficulty for you?
5
Most Problematic Tax Regulations

• NFIB Study - Coping with Regulations (2001)
• Survey of small business members about greatest
  compliance difficulty
• First five categories were supplied, next six
  categories were volunteered responses
• Survey shows that income tax withholding
  represents a significant burden

6
What type of tax-related regulations?
7
Paperwork and Recordkeeping Burden

• NFIB Study - Paperwork and Recordkeeping Burden
  (2003)
• Survey of small business members about
  recordkeeping burden and who prepares tax records
  for small businesses
• First Slide - Survey shows significant number of
  small businesses used an outside person to
  compile records
• Second Slide Survey Shows that per-hour
  recordkeeping costs were highest for tax-related
  records

8
Who does your business's tax records?
9
The Per-Hour Cost of Small Business
Record-Keeping by Record Type
10
Tax-Driven Business Decisions

• Capital Acquisitions and Expenditures
• Buy vs. Lease
• Section 179 Expensing
• Expiration in 2008 creates unintended
  consequences for equipment vendors
• Volatility of ever changing rules creates
  uncertainty for buyers and sellers
• Makes planning difficult
• Vehicle Example
• 6,000 lb. SUV vs. smaller vehicle for small
  business needs?

11
Small Business Compliance Costs

• Compliance Costs Related to Taxes for Small
  Business are Significantly Higher as a Percentage
  of Revenue
• Costs for larger businesses are a smaller
  proportion of their revenues.
• Federal Tax Compliance is Only One Layer of
  Burden for Small Businesses
• S Corporation Example
• 630 of compliance costs for other line of
  business with approx. 20,000 of revenue (3 of
  total)

12
Conclusion

• Important Role of Small Business in the Economy
• High Compliance Costs to these Small Businesses
• Dont Forget the Important Role of Small of
  Business in Providing Information and Withholding
  to Taxing Authorities
• Tax Collector for Federal, State and Local
  Governments