The Obama administration’s proposal for corporate tax reform ignores what matters most to small businesses, a coalition of small-business advocacy groups says. While the overall plan is sound, critics acknowledge, it overlooks the fundamental need for rate reform.

"The idea of reducing tax breaks and credits in order to broaden the base and lower corporate income tax rates is sound," said Raymond J. Keating, the Small Business & Entrepreneurship Council chief economist. "Unfortunately, President Obama's plan also proposes to increase overall taxes on corporations and investors, while still favoring certain industries over others. The last thing this economy needs is higher taxes on business, investment and the energy sector."

The plan reduces the corporate tax rate to make it more globally competitive, but does not reduce individual tax rates, a move that would help America's small-business owners and the self-employed, Keating said.  However, the president did call for expanding small-business expensing levels to $1 million, and making that permanent.

Although the proposal does include some positive language for small-business tax credits, the National Small Business Association believes that the only way to ensure fairness, transparency and eased complexity of the U.S. tax code is broad reform.

“And that must also include individual income taxes,” said Todd McCracken, NSBA president.

“This plan appears to be driven by the bipartisan consensus that a greatly simplified tax system can unleash greater economic growth,” said NSBA Chairman Chris Holman. “Unfortunately, without broad tax reform, such as the Fair Tax, this proposal falls short of that.”

While the proposal highlights a number of issues and even provides detail on certain pieces, there remains a lack of details on many sections critical to small business.

The National Federation of Independent Business said Obama’s plan for corporate tax reform ignores what matters most to small business: individual rate reform.

“Once again, President Obama has demonstrated that he knows big business, not small,” said Dan Danner, NFIB CEO. “Reforming the corporate tax code does not help the majority of small businesses; in fact, it creates even more uncertainty by taking away the deductions that many small-business owners count on each year.  Furthermore, as complicated as the tax code is, this plan from the administration will make it even more complicated for a small-business owner.  The focus should be on individual rate reform, keeping the tax rates for small business low, and allowing small businesses to actually grow and create jobs, as opposed to being a piggy bank for the IRS.”

The National Association for the Self-Employed took the administration to task for offering recommendations that offer tax reform "exclusive to major corporations and large employers.

"Over and over again, we have continued to see the lack of understanding of the impact of current tax policy on the self-employed and micro-business community," said Kristie L. Arslan, NASE president and CEO.  "While NASE supports broad tax reform, the president’s plan does not have the same bold vision for the self-employed, which pay taxes at individual income tax rates."

Reach BusinessNewsDaily senior writer Ned Smith at nsmith@techmedianetwork.com. Follow him on Twitter @nedbsmith.

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