Tax Reform: Talk, But No Action Yet

For years now, Congress has kicked the subject of tax reform down the road.  Even so, most everyone is in agreement that the tax laws and regulations are too complex, that the system is inefficient, and that compliance costs are too high. 

The last major tax reform occurred in the 1980s.  Lessons to draw from that exercise are that any industry – including technology – must be prepared to analyze and advocate when major legislative proposals are being developed. 

Last year, the President’s Commission on the Deficit and Fiscal Responsibility brought significant focus to tax reform.  This April we saw a near-government shutdown over spending for the remainder of FY11 – and this crisis again brought to light questions about how the country raises and spends revenue. Such questions will persist as the FY12 budget and debt ceiling battles continue in Congress. 

Against the backdrop of these debates, a small group of bipartisan senators continue to seek a broad fiscal compromise that will no doubt include significant changes to the tax code.  This effort certainly will see greater urgency as the need to address our budget deficit becomes more acute.  The focus undoubtedly will be on what the right balance is with regard to cutting spending, simplifying the existing tax code and raising revenue. Our job is to be sure that any proposals treat the tech industry equitably. 

To date, most tax reform conversations have focused on the reduction of corporate tax rates, in exchange for the elimination of various tax credits, deductions and preferences.  However, others have pointed out that reform cannot just single out corporate taxation.  Most small businesses pay taxes at the individual level on pass-through income and thus would not benefit from a corporate tax rate reduction; however, those small businesses would be penalized with the elimination of certain credits, deduction and preferences.  Clearly, this result would be a non-starter.

CompTIA is working to advocate for the needs of small tech companies in this ongoing debate.  The goal is to support proposals that promote investments in capital and R&D, as well as the creation and sustainability of tech jobs.  Also, we believe that for small businesses, one of the greatest benefits of tax reform should be a reduction in and simplification of compliance requirements.  Compliances costs are as real to small businesses as are taxes.  For too long, Congress has enacted tax legislation without regard to resultant compliance costs, and this must be changed.

In preparation for this tax reform debate, we're working to finalize a questionnaire for some of our members and our partners in TechVoice to identify your specific areas of concern.  Keep an eye out for this survey.  This is an important discussion for your business, and your input will be greatly appreciated.