Congressional Hearings
THE TAX LAW'S IMPACT ON MAIN STREET
Congressional Hearings
SuDoc ClassNumber: Y 4.SM 1
Congress: House of Representatives
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| AUTHORITYID | CHAMBER | TYPE | COMMITTEENAME |
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| hssm00 | H | S | Committee on Small Business |
[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]
THE TAX LAW'S IMPACT ON MAIN STREET
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HEARING
BEFORE THE
COMMITTEE ON SMALL BUSINESS
UNITED STATES
HOUSE OF REPRESENTATIVES
ONE HUNDRED FIFTEENTH CONGRESS
SECOND SESSION
__________
HEARING HELD
JULY 25, 2018
__________
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Small Business Committee Document Number 115-087
Available via the GPO Website: www.govinfo.gov
__________
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HOUSE COMMITTEE ON SMALL BUSINESS
STEVE CHABOT, Ohio, Chairman
STEVE KING, Iowa
BLAINE LUETKEMEYER, Missouri
DAVE BRAT, Virginia
AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
STEVE KNIGHT, California
TRENT KELLY, Mississippi
ROD BLUM, Iowa
JAMES COMER, Kentucky
JENNIFFER GONZALEZ-COLON, Puerto Rico
BRIAN FITZPATRICK, Pennsylvania
ROGER MARSHALL, Kansas
RALPH NORMAN, South Carolina
JOHN CURTIS, Utah
NYDIA VELAZQUEZ, New York, Ranking Member
DWIGHT EVANS, Pennsylvania
STEPHANIE MURPHY, Florida
AL LAWSON, JR., Florida
YVETTE CLARKE, New York
JUDY CHU, California
ALMA ADAMS, North Carolina
ADRIANO ESPAILLAT, New York
BRAD SCHNEIDER, Illinois
VACANT
Kevin Fitzpatrick, Majority Staff Director
Jan Oliver, Majority Deputy Staff Director and Chief Counsel
Adam Minehardt, Staff Director
C O N T E N T S
OPENING STATEMENTS
Page
Hon. Steve Chabot................................................ 1
Hon. Nydia Velazquez............................................. 2
WITNESSES
Mr. Wettlin Treppendahl, Owner, Treppendahl's Super Foods,
Woodville, MS, testifying on behalf of the National Grocers
Association.................................................... 5
Mr. Tibi Czentye, Chief Executive Officer, All Pro Solutions,
Rock Hill, SC.................................................. 7
Mr. Gary Ellerhorst, President/CEO, Crown Plastics Co., Harrison,
OH............................................................. 8
Ms. K. Davis Senseman, Founder, Davis Law Office, Minneapolis,
MN, testifying on behalf of the Main Street Alliance........... 10
APPENDIX
Prepared Statements:
Mr. Wettlin Treppendahl, Owner, Treppendahl's Super Foods,
Woodville, MS, testifying on behalf of the National Grocers
Association................................................ 32
Mr. Tibi Czentye, Chief Executive Officer, All Pro Solutions,
Rock Hill, SC.............................................. 36
Mr. Gary Ellerhorst, President/CEO, Crown Plastics Co.,
Harrison, OH............................................... 38
Ms. K. Davis Senseman, Founder, Davis Law Office,
Minneapolis, MN, testifying on behalf of the Main Street
Alliance................................................... 44
Questions for the Record:
None.
Answers for the Record:
None.
Additional Material for the Record:
Statement of David Borris, Owner, Hel's Kitchen Catering..... 51
Statement of Kelly Conklin, Owner, Foley-Waite LLC........... 52
Statement of Hon. John Curtis................................ 53
Statement of Mike Draper, Owner, RAYGUN...................... 59
Statement of Deborah Field, Owner, Paperjam Press PDX........ 60
NFIB Small Business Economic Trends.......................... 61
NFIB Research Center......................................... 82
Statement of Maurice Rahming, Owner, O'Neill Construction
Group...................................................... 107
Small Business Index......................................... 108
SBA Table of Small Business Size Standards................... 132
Statement of ReShonda Young, Owner, Popcorn Heaven........... 178
THE TAX LAW'S IMPACT ON MAIN STREET
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WEDNESDAY, JULY 25, 2018
House of Representatives,
Committee on Small Business,
Washington, DC.
The Committee met, pursuant to call, at 11:02 a.m., in Room
2360, Rayburn House Office Building. Hon. Steve Chabot
[chairman of the Committee] presiding.
Present: Representatives Chabot, King, Luetkemeyer, Kelly,
Blum, Marshall, Norman, Curtis, Velazquez, Evans, Lawson,
Clarke, Chu, Adams, and Schneider.
Also Present: Representative Harper, and Norman.
Chairman CHABOT. Good morning. I call the Committee to
order, and we thank everyone for being with us.
After more than 30 years of thinking and talking about tax
reform, Congress produced and passed the Tax Cuts and Jobs Act.
On December 22nd of last year, President Trump signed this
historic tax package into law. Today, the unemployment rate is
at historic lows. New claims for unemployment benefits have
recently plunged, and equipment purchases are on the rise. The
economy as a whole is recording very positive marks. Beyond
macroeconomic data trends, this tax law will be judged on its
direct impact on the ground. From a business perspective,
optimistic scores, optimism, it is really sky high. That is a
very good thing, and for small businesses, it is a great thing.
According to the NFIB, National Federation of Independent
Business, their most recent Small Business Optimism survey
recorded the sixth highest mark in history. When it comes to
problems facing small businesses, the NFIB survey showed that
small firms listing taxes as a major problem has fallen
considerably. It used to be way up there on the list but now
people think that we finally dealt with it. It does not mean we
are done but we are certainly headed in the right direction as
a result of the Tax Cuts and Jobs bill.
Additionally, NFIB released a separate survey specifically
looking at the Tax Cuts and Jobs Act. According to that report,
more than 85 percent of all small business owners believe that
the tax reform package will produce positive results. In
another report, the U.S. Chamber of Commerce and MetLife joined
forces and found that small business owners were forecasting
continued growth as the year progresses.
And I ask unanimous consent to enter these three surveys
into the record.
And without objection, so ordered.
While reports capture the overall temperature of the
industry, I want to hear directly from those that are on the
ground. And that is the folks sitting before us here this
morning. That is what we are here to discuss today--the
reactions, the impact, and the effects of the Tax Cuts and Jobs
Act on small businesses all across the country. And I think we
all look forward to hearing from each witness about the
business environment in their community and how they have been
impacted from the tax reform package. Additionally, I think we
are interested in hearing where your companies were a year ago
and where they are today as a result of the tax cut. From Ohio,
to Mississippi, to Utah, small businesses are transforming
communities and neighborhoods. They are responsible for the
creation of two out of every three new jobs in the private
sector, small businesses are, and as we continue to study the
impact of tax reform, it is important to hear from those
employing nearly half of the private sector workforce. Simply
put, the economy runs on small businesses.
Before we move forward in this hearing, I want to take this
time to especially thank all the witnesses for being with us
here today. I know that you are sacrificing time and energy
away from your business to testify before us, and we really do
appreciate that. So thank you for joining with us.
And I would now like to yield to the Ranking Member for her
opening statement.
Ms. Velazquez?
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
A little more than 7 months ago, President Trump signed
into law a partisan Republican tax bill. Unfortunately, it has
become increasingly clear that the lion's share of benefits
from this law will fall disproportionately to the largest
corporations and the very wealthy. At the same time, small
businesses who could have benefitted from well-crafted targeted
tax reform are largely left behind. Some small firms are
seeing, at best, marginal benefits. Many others have yet to see
many meaningful advantages at all. A longstanding challenge for
small businesses has been managing Tax Code complexity.
Complying with intricate and frequently changing tax rules
imposes a significant burden on small enterprises, many of whom
do not have in-house tax professionals. Instead, small firms
need to spend time and money on outside counsel and tax
preparers. We have heard time and again from small businesses
that this uncertainty and unpredictability imposes additional
costs for them making it difficult, if not impossible, to plan.
Unfortunately, the Trump tax law did little to alleviate
the twin problems of uncertainty and complexity. Instead, it
has fueled more confusion and uncertainty. For instance, as of
today, an overworked, underfunded IRS has yet not released
Section 199A, Pass-through Regulations. Another example is the
promise that small businesses will be able to file their taxes
on a piece of paper the size of a postcard. As always, the
devil is in the details.
Recently leaked IRS documents suggest there will be
additional paperwork and worksheets small businesses will need
to navigate. For those firms that think they will be able to
capitalize on the new tax laws through restructuring, they can
expect an expensive and time-consuming process that may eclipse
any benefits.
While benefits for Main Street small businesses are minimal
at best, the Trump tax law will be a boom to Wall Street big
companies and the extraordinarily wealthy. Millionaires will
receive an average tax cut of nearly $70,000 this year, more
than 100 times the size of the average tax cuts for families
earning less than $150,000 annually. Not only does this cast
doubt on how large a tax cut most entrepreneurs will receive
but it also suggests most locally owned businesses will not see
much secondary stimulative economic benefit. Unlike the very
wealthy, when working and middle class families get a tax cut,
they are most likely to spend it quickly at local Main Street
businesses, spurring customer demand for small businesses'
goods and services.
Simply put, the cost of tax reform has been put on the
backs of small employers and working families that will see any
rate reduction expire at the end of 2025, while corporate rate
deductions continue permanently. On top of it all, the Trump
tax changes will mean the federal deficit grows by trillions of
dollars. So much for fiscal conservancy.
Already, the tax plan jeopardizes health coverage for 13
million Americans, and these future deficit pressures could
imperil Social Security, Medicare, and Medicaid. Most small
business owners I know want to take care of their employees.
Ultimately, cutting the ACA and vital social safety net
programs imposes indirect costs on responsible entrepreneurs
who want to do right by their employees. The fact is real
bipartisan tax reform that helps small businesses, American
families, and it is fiscally responsible could have been
achieved if Republicans had worked across the aisle.
Unfortunately, the Trump tax plan was pushed through rapidly
with the support of just one party aimed at achieving a
political goal. Not good policy. It is my hope that in the
future Congress can work together on more responsible tax
solutions that help small firms and strengthen our economy for
the long term.
With that I yield back.
Chairman CHABOT. Thank you. The gentlelady yields back.
I will take just a moment before introducing our panel to
explain our lighting system and timing things.
We operate under the 5-minute rule. Each of you will have 5
minutes to testify. The green light will be on for 4 minutes.
The yellow light will come on for a minute to let you know that
you should be wrapping up. And then the red light will come on
letting you know your 5 minutes is up. And we would ask that
you stay within that time if at all possible.
And I would now like to yield to the gentleman from
Mississippi, who is the Chairman of the House Administration
Committee, Mr. Harper, in order to introduce our first witness
here this morning.
Mr. HARPER. Thank you, Chairman Chabot, and Ranking Member
Velazquez for allowing me the opportunity to participate
briefly in this Committee's hearing this morning in order to
introduce my constituent and friend, Mr. Wettlin Treppendahl.
Wettlin is the Owner of Treppendahl's Super Foods in
Woodville, Mississippi, a town of just over 1,000 people, and
one of our state's oldest communities having been incorporated
in 1811, 6 years before Mississippi became a state. While the
first Treppendahl did not arrive in Woodville until almost 100
years later, the Treppendahl family name today is readily
recognized throughout Southwest Mississippi and immediately
identified with Woodville and Wilkinson County.
The Treppendahl family history is the classic American
success story. In 1903, as a 24-year-old, Carl Treppendahl was
sent from Denmark to New Orleans wearing a shipping tag pinned
to his coat that said, ``send me to Woodville, Mississippi. I
do not read or speak English.'' He had been promised a job as a
bookkeeper by a fellow Danish immigrant, but unfortunately,
that business failed shortly after Carl immigrated to the
United States. Carl was left in Woodville with nothing, so he
got busy. He opened a small store where he bought and sold
everything from hardware and dry goods to lumber and
fertilizer. In 1924, he added a grocery store in downtown
Woodville to his enterprises. Carl's son Adolph took over
operation of the business, which eventually passed to his son
and our witness today, Wettlin Treppendahl, Jr. Wettlin is
assisted in the daily operation of the family's full-service
grocery store by his son and daughter, Adolph Wettlin
Treppendahl III and Susan Treppendahl LeBlanc.
Mr. Treppendahl is testifying today on behalf of the
National Grocery Association, and I would like to welcome him
today to this hearing and to Washington, D.C., on behalf of the
House of Representatives.
And I thank you, Mr. Chairman. I wish I could stay longer
but I have to go and chair a matter over in the Committee on
House Administration. Thank you for allowing me to introduce
Mr. Treppendahl.
Chairman CHABOT. Thank you very much for that, and you are
excused. We appreciate you being here.
And our next witness, I would recognize the gentleman from
South Carolina, Mr. Norman, for the purpose of introducing our
second witness.
Mr. NORMAN. Thank you, Chairman Chabot. And I would also
like to thank Ranking Member Velazquez and the rest of the
Committee for the opportunity to introduce one of our witnesses
who is from my hometown. Tibi, great to see you again, and
thank you for traveling all the way from the great state of
South Carolina to join us today in our talk about tax reform
and what it means for small businesses, particularly yours.
I have known Tibi for quite some time now and I have not
only found a smart businessman but also a great friend. If you
do not know, Tibi is the CEO of his company, All Pro Solutions.
All Pro Solutions is a very small business in my hometown of
Rock Hill, South Carolina, which is just south of Charlotte,
North Carolina. Twenty-six years ago, after fleeing from
communist Romania and coming to America, Tibi started All Pro
Solutions and has turned it from a small startup to a thriving
small business. Ten years ago, Tibi and his family moved to
South Carolina. They have enjoyed every minute, and he
attributes his move to South Carolina not only as a personal
decision for him and his family but a business decision where
he would be able to grow his family-run business, which he did.
Since I have known Tibi, I have grown to know him as an honest,
hard-working, and dedicated family man, businessman, and
friend. I look forward to his testimony. He is a true success
story. When we went through his business, he really was excited
about his business and what he does. I welcome his wife here
today, and Tibi, again, thank you for taking the time to come.
And I look forward to your testimony.
Chairman CHABOT. Thank you very much.
And I will introduce our next witness, who is Gary
Ellerhorst, who actually is from my district in the great State
of Ohio, and about a half hour outside the city of Cincinnati
in Harrison, Ohio, where he is the Chief Executive Officer and
President of Crown Plastics Company. Crown Plastics is an
innovator and manufacturer of advanced plastics and polymers
that has locations in both Ohio and internationally. With
impact-resistance characteristics, Crown Plastic's materials
are helping advance the shipping and transportation industry,
as well as the ski and snowboard markets. The company was
founded back in 1972 by Mr. Ellerhorst's father, Robert
Ellerhorst. Today, the company is led by Gary Ellerhorst, who
has over 40 years of experience with Crown Plastics. In
addition to his responsibilities there, Mr. Ellerhorst is past
president of Main Street Harrison and the Greater Harrison
Chamber of Commerce. And we thank you for taking time away from
the business, and we welcome you here today.
And I would now like to recognize our Ranking Member, Ms.
Velazquez, for the purpose of introducing our fourth and final
witness.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
It is my pleasure to introduce Ms. Davis Senseman, the
Founder of Davis Law Office in Minneapolis, Minnesota. Her law
firm employs five people and serves a roster of over 800
Minnesota-based small business clients. Ms. Senseman graduated
from Becknell University and magna cum laude from Mitchell
Hamline School of Law. She serves on several nonprofits and
hails from Brooklyn, New York. She is testifying today on
behalf of the Main Street Alliance, a national network of small
business owners.
I want to welcome you and all the witnesses. Thank you so
much for being here today.
Chairman CHABOT. Thank you very much. The gentlelady yields
back.
And if Committee members have opening statements, I would
ask that they be submitted for the record.
And we will now turn to our witnesses.
Mr. Treppendahl, you are recognized for 5 minutes.
STATEMENTS OF WETTLIN TREPPENDAHL, OWNER, TREPPENDAHL'S SUPER
FOODS; TIBI CZENTYE, CHIEF EXECUTIVE OFFICER, ALL PRO
SOLUTIONS; GARY ELLERHORST, PRESIDENT & CEO, CROWN PLASTICS
CO.; K. DAVIS SENSEMAN, FOUNDER, DAVIS LAW OFFICE
STATEMENT OF WETTLIN TREPPENDAHL
Mr. TREPPENDAHL. Good morning. Thank you to Chairman Chabot
and Ranking Member Velazquez, and to the members of the Small
Business Committee for the opportunity to testify and share my
family business story.
My name is Wettlin Treppendahl, and I am a fourth-
generation retailer and owner of Treppendahl Super Foods in
Woodville, Mississippi. My family business originally opened in
the 1800s and later expanded to the grocery store that we own
and operate, and have been since 1924. Treppendahl's is a full-
service grocery store offering specialty items, a deli, a
bakery, and premium meats. My daughter assists me in the
operation and plans to take over the business someday.
I am testifying on behalf of the National Grocers
Association, the national trade association representing the
retailers and wholesalers that comprise the independent sector
of the supermarket industry. Woodville is a 1-square mile town
of 1,200 people, and Treppendahl's is the largest employer with
50 employees. We are the only grocery store in town where 60
percent of our customers are eligible for the SNAP benefit and
would face significant difficulties in accessing fresh fruits
and vegetables if not for our store.
The new tax law has had an immediate impact on my
business's ability to invest in our store and community. We
have upgraded and replaced 12 doors of frozen foods section
providing work for our local refrigeration company and allowing
us to expand our selection of frozen food and save on energy
costs. We are also in the process of upgrading our check lanes,
which are 18 years old. Tax reform has allowed me to provide
full-time employees with raises.
The estate tax has also been a concern of our business.
Supermarkets are somewhat unique in that most of our assets are
nonliquid, tied up in property, inventory, fixtures, and
equipment. Paying a big estate tax could mean going into debt
or selling off part of the company. The new tax law's double
exempt threshold for the estate tax has reduced fear I have
about the future of my business as it is to be passed through
generations. The permanency for this provision would assure me
that our store will remain in business for years to come.
The 20 percent pass-through deduction is a positive for my
business as we are organized as an S corporation, but long-term
certainty for this provision and rate parity with C
corporations is desired for the future since we must compete
with chain stores.
Another important aspect to the tax reform is 100 percent
bonus depreciation qualified improvement properties. As a
supermarket owner, I must replace expensive equipment over
time, as well as upgrade shelving units, flooring, ceiling
tile, wiring. These items carry high price tags, and the
ability to write them off fully and immediately gives me the
confidence to invest in my store.
However, a drafting error in the new tax law prevents me
from being eligible for the benefits, and I urge Congress to
fix this issue as soon as possible.
Thanks to the new tax law, I have received new confidence
in my business. As Congress looks to improve the tax law, I
urge you to make permanent pro-growth policies for small
businesses that would remove uncertainty so I can continue to
invest in my employees, my business, and my community for years
to come.
Thank you, and I am happy to answer any questions you may
have. Thank you.
Chairman CHABOT. Thank you very much.
Mr. Czentye, you are recognized for 5 minutes.
STATEMENT OF TIBI CZENTYE
Mr. CZENTYE. Good morning, Mr. Chairman, Ranking Member
Velazquez, and members of the Committee. I am honored for the
opportunity to testify before the Committee today on how the
Tax Cuts and Jobs Act helps small businesses.
My name is Tibi Czentye, CEO of All Pro Solutions located
in Rock Hill South Carolina. I am a legal immigrant and a proud
U.S. citizen. I escaped from Romania in 1989 and after 2 years
of vetting, I received political asylum for U.S. After 5 years
of working three jobs, I opened my own company, bought my own
house, and sent my kids to good colleges in California. And
then after 18 years there, we left California and found our
dream state, South Carolina, where we enjoy family values, good
business opportunities, and a lower cost of living.
All Pro Solutions was created in 1996. We are a
manufacturer of disc publisher archiving systems and digital
services. We sell our equipment all over the world, including
the government.
When we started the company, we were two people and now we
are 10. Recently we added two. We were eight; now we are 10.
And we expect to hire even more at the end of the year. Because
of the Tax Cut and Jobs Act, the optimism in the small business
community is very high. I am a member of York County Chamber of
Commerce, and after each meeting I notice the optimism of our
community entrepreneurs growing higher and higher.
The tax reduction is huge and the extra in the company's
pocket is a big amount of money a small company can do a lot
with. Until last year, many companies, including us, didn't
want to spend their money, but now, because of this big tax
cut, any entrepreneur can see the opportunity to invest in its
company with the goal to make more money and for the employees
also. It is a very good feeling.
All Pro Solutions' forecast for the end of this year and
beginning of the next increased four times compared to the last
period of the year. Because of that, we already started to buy
new inventory to build our equipment. Last year, we built 50
units, and this year we plan to build 150-185 units. Because of
this extra number of products, we already began to expand our
company, and in the end, when everything is done, we will hire
between two and maybe even four people.
One of the other good signs on how the Tax Cuts and Jobs
Act works can be seen through jobs advertising on Craigslist. I
used to advertise each year, and I used to receive 200-300
resumes, and now we received just 20-30. It is clear why. The
economy is booming, people have jobs, and the job market starts
to be a huge issue to hire for us. Therefore, we have to
increase the employees' wages, and also, when we hire, we have
to offer them more than usually just to be able to catch them.
Another big opportunity for us, arisen because of the tax
cut, is to try to bring in U.S. Chinese manufacturers that
already sell their products here. To manufacture their products
here could be a big advantage for them comparing to making them
in China which adds some expenses, and also the transporting
can be a huge amount. And besides that, I believe we even can
have lower costs to build products to them than what they have
there. And also, it is more safe.
We already have a company interested. They visit us and we
are in the third phase of dealing with them. The company name
is Oulupa Filtration, a manufacturer of high precision filters.
I hope we will be able to partner with them, and I am really
happy to bring companies from China to the U.S. This shall be
something special for us.
Reduction in the individual income tax is another big help
for the employees, and a lower tax by an average of $1,334 per
family per year, which is 2.2 percent, put more money in their
pockets.
Expanding the Child Tax Credit, which I think is big, too,
from $1,000 to $2,000, and preserving the mortgage interest
deduction, this is one very big, good thing to preserve it so
the people, if they buy, it is good to be able to be helped.
Because of all these wonderful results of the Tax Cuts and
Jobs Act, you can see many happy faces in the streets, more
people shopping our malls and eating out in the restaurants.
Whatever people say, what I know is that money brings
happiness.
Thank you for listening to me, and I would be pleased to
answer any questions you might have.
Chairman CHABOT. Thank you very much.
Mr. Ellerhorst, you are recognized for 5 minutes.
STATEMENT OF GARY ELLERHORST
Mr. ELLERHORST. Chairman Chabot and Ranking Member
Velazquez, good to see you both again. Thank you very much for
having me. It is an honor to testify.
In 1972, my father started Crown Plastics Company. After
working several years as a second shift machine operator while
attending Xavier University, I came on full time at Crown in
1978. In the past 40 years, I have experienced just about every
level of financial difficulty and success due to both general
economic as well as market-specific conditions. What I have
come to learn is that although a singular situation or event
can bring a solid successful business to its knees, for
example, streaming videos, complete annihilation of Blockbuster
Video or regulatory impact on small community banks, it takes a
combination of specific market and economic conditions to fuel
significant profitable growth. These include internal aspects,
such as a skilled workforce, product value and innovation,
wages and benefits, external items, such as general economy,
global competition, regulation, taxation, and availability to
capital, and other more nebulous things, such as corporate and
consumer confidence in the future economic environment.
Although each of these aspects play an important individual
role on overall economic performance, it is a combination of
these that create the synergistic rocket fuel of a booming
economy. Separately, Mentos will freshen your breath, and Diet
Coke will quench your thirst, but together in the proper
environment they are explosive. Either of them alone will not
do it, nor could you replace them with Tic Tacs or Diet Pepsi
and get the same result. So trying to evaluate the impact of
the recent tax bill contextually removed from the other
contributing economic influences, which combine to generate the
overall economic picture, can be difficult and potentially
misleading. I will to the best of my ability provide my
perspective as to how the bill both directly, and more
importantly, in conjunction with other economic and policy-
based contributors, is impacting my business.
The attached exhibit is a drastically simplified
illustration of the direct impact on our tax liability. As an S
corp, under the new bill, Crown shareholders would be eligible
for the 20 percent pass-through tax deduction. However, we also
lose the 9 percent domestic production activity tax deduction
that was eliminated. Based on a million dollars in taxable
income, which is about where we budgeted for 2018, Crown would
see a net decrease of just over $64,000 in shareholder tax
liability. As with most S corporations, we commit to
distributing to the shareholders enough to cover their Federal
and state tax liabilities, so the result is that the company
would be able to reduce its distributions by the $64,000 and
still provide our shareholders the funds to meet their tax
requirements.
Now, that may not sound like a big deal for a $14 million
company, but in reality, it is. Over the past 10 years, we have
invested over $5 million in new equipment, process
improvements, and technological updates, and have paid out
little to nothing to our shareholders. Even if we decided to
just pay out the pre-tax bill numbers, it would provide the
opportunity for the shareholders to keep their portion of the
tax reduction and use it for themselves and their families. And
as a privately held company, our shareholders are just regular
folks like myself, many of them, the children of initial
investors who have inherited the stock from their parents.
We could also choose to use the money to pay down debt,
further reducing interest costs. $64,000 a year would also
provide us with the capability to service well over $1 million
in additional loans for further investing in our business,
which is very timely as we just signed a contract on an
additional building adjacent to ours, which with upgrades will
cost us about $1.1 million. The tax savings will allow us to
cover this additional expense without adversely affecting our
current cash flow, which is the most critical factor to a
growing business.
A key impact for us is with regard to our medical insurance
benefits. We continue to pay 100 percent of the premiums for
our employees' high deductible HSA medical insurance policies,
as well as 40 percent of the deductible on the backside. This
has been a commitment of ours to our employees, and over the
past 10 years, we have worked hard with our insurance broker to
do whatever we could to maintain that benefit through increased
deductibles, change in carriers, and sponsoring employee
wellness programs. We are at a point where one more large
increase in premium costs could force us to start requiring
employees to contribute to the program.
But with the new tax bill, not only can be maintain the
status quo for 2019, but for many years to come. Why? Because
when we realize the impact of a booming economy, along with the
returns from recent investments we have made in the business,
we expect to double profits next year, which means $64,000
becomes $128,000 in tax savings, and even more in 2020.
Another aspect that is potentially even more impactful than
the tax rate itself is the ability to accelerate depreciation
of our investments into our company. Outside the purchase of
the new facility, we have budgeted capital expenditures of
$800,000 for 2018. Although the net impact over time is a wash,
the ability to expense these investments, rather than
depreciating them over 5 to 7 years, will provide us with an
additional $200,000 of cash in 2018, which again is often the
most critical item for a growing company. With increased
receivables, inventory, and work in process, a growing business
requires significant cash.
So in closing, the recent tax reduction in and of itself
will have a positive impact on our employees and our business
in 2018 and beyond. But when augmented by the reduction and
regulation, and most importantly, the hugely positive outlook
by business leaders and consumers which started the day after
the 2016 election, the resulting booming economy takes that
positive impact of the tax bill and increases it exponentially.
Thank you very much.
Chairman CHABOT. Thank you very much.
Ms. Senseman, you are recognized for 5 minutes.
STATEMENT OF K. DAVIS SENSEMAN
Ms. SENSEMAN. Chairman Chabot, Ranking Member Velazquez,
and members of the Committee, thank you for the invitation to
testify today examining how the Tax Cuts and Jobs Act has
affected real Main Street small businesses.
My name is Davis Senseman, and I am a member of Main Street
Alliance, a national network of over 30,000 small business
owners. I have owned a small business law firm for more than 8
years, currently employ five people, and have a roster of over
800 business clients, many of whom I have consulted with about
the TCJA.
The vast majority of those clients, like others across the
country, are not seeing consequential gains from the TCJA and
its 20 percent pass-through deduction. It is nice that some of
the other testifiers here today are but they are most certainly
the exception and not the rule. And from what they offered as
concerns about their businesses, I wonder how many Americans
would actually classify them as small.
At last measurement by the SBA, the median income for self-
employed individuals who own pass-through was $49,204 a year.
These businesses are the bodegas, auto mechanics, and small
farmers who would have to pay more to an attorney like me, or
an accountant, to figure out the new law than they would ever
gain from tax cuts.
The Act's small business provisions were also needlessly
confusing. The TCJA turned the tax treatment of tax treatment
of pass-through entities completely on its head, and now two
businesses making the same amount of money may have completely
different tax situations.
As Ranking Member Velazquez mentioned, we sit here today,
July 25th, still without any IRS regulations about what
specifically will constitute things like qualified business
income or specified trades, making it nearly impossible for
these businesses to do any tax planning.
My law partners and I sit in a very privileged position as
attorneys, and yet we still spent nearly $2,500 with our
accountant on tax planning for 2018, a cost which could have
doubled if we also had to hire legal advisors. In future years,
once we have recouped the cost of our accountants, the TCJA
will likely result in our having a slightly smaller tax burden.
But first and foremost, we did not need it. And it
certainly will not be enough to hire more staff.
And we are not alone. A recent poll by Businesses for
Responsible Tax Reform found that 69 percent of small business
owners do not plan on hiring a new employee because of the new
tax law.
While many Main Street businesses will not feel benefits
from the TCJA, they will feel a hit. The Congressional Budget
Office estimates the TCJA will slash government revenue by
nearly $2 trillion. As many predicted, some of your colleagues
are using this deficit increase to justify deep cuts to Social
Security, Medicare, infrastructure, and other public services
that small business owners and our communities rely on. Many
republicans were ardent opponents of any increase in the
Federal deficit under President Obama, but now remain silent in
the face of a burgeoning deficit due to a new tax law.
The Tax Policy Center estimates that a typical small
business owner, those folks with a median yearly income of
$49,204, will experience a tax cut of roughly $500 in 2018. You
would be hard pressed to find any Minnesota small business
owner who would rather have $500 in hand now than an assurance
that they can access heating assistance if their business is
down in one of our tough Minnesota winters, or in Minnesota
Care, our state Medicaid program, if they need it in the
future. The CBO also found that the TCJA's repeal of the
individual mandate will cause 13 million Americans to lose
access to healthcare and health insurance premiums to climb.
I started my firm in 2010, the first year that the
provisions of the Affordable Care Act took effect, at a time
when large corporations in Minnesota were still reducing their
workforces from the last recession. And do you know what I
spent most of my time doing in those early months? Creating
LLCs and drafting agreements for folks who had been laid off
from Minnesota's largest companies, but who had decided that
they would take the risk to start their own business simply
because they were on longer reliant on a large company to
provide them health insurance.
I would like to close my testimony with a story about an
early U.S. small business owner, Henry Ford. Due to the Model
T's success and an innovative assembly line, Ford had a capital
surplus of $60 million by 1916. He planned to use the money to
employ more workers, make his cars more affordable for his
employees, and help them build their lives, which is a lot of
the promises we heard about the TCJA. Unfortunately, Ford had
two shareholders, John and Horace Dodge, who sued him, arguing
that the purpose of the company is to maximize shareholder
profits, not to benefit the community. The court agreed,
holding that management's primary duty in a corporation is to
maximize shareholder wealth. Dodge v. Ford makes clear that any
attempt to stimulate the economy and create jobs by making sure
that businesses have more money will run right into the issue
that those businesses are legally obligated to use surplus
money to benefit their shareholders through things such as
stock buybacks, which have increased by $615 billion since the
passage of this bill and not for the greater good. For the vast
majority of small business owners, the confusing outcome of the
TCJA has bene of little benefit, especially when compared with
the good, affordable healthcare system, sufficient retirement
funds, and the high quality jobs that sustain a strong customer
base.
I urge Congress to reexamine this entire bill and
reconsider the methods used. I look forward to answering any
questions.
Chairman CHABOT. Thank you very much.
And we will begin our questions now. And I recognize myself
for 5 minutes.
Let me ask Mr. Treppendahl, Mr. Czentye, and Mr.
Ellerhorst, how many employees do each of you have? Let's just
go down.
Mr. TREPPENDAHL. Fifty.
Chairman CHABOT. Fifty.
Mr. CZENTYE. Eight and a couple part time.
Chairman CHABOT. Eight and a couple part time? Two part-
time?
Mr. ELLERHORST. Fifty-three here and 20 in our
international manufacturing facility.
Chairman CHABOT. Okay. And I would ask unanimous consent to
enter into the record the SBA Small Business Administration's
size standards that determine whether a business should be
considered small. And let the record show that all three
businesses before us indicate that they are small according to
the size standards of the SBA, generally 500 or fewer
employees. And they are also within, as far as the gross
revenues.
And without objection, so ordered.
The same three witnesses, let me ask you this.
Mr. KING. Will the gentleman yield?
Chairman CHABOT. I would be happy to yield.
Mr. KING. I just want to ask the Chairman if you have got
that in your hand for the benefit of the Committee, what the
gross receipt number is that is used to measure small business.
Chairman CHABOT. It is $32.5 million under that.
Mr. KING. Five hundred employees.
Chairman CHABOT. Yes. Five hundred employees.
Mr. KING. Thank you, Mr. Chairman.
Chairman CHABOT. So about 10 percent, approximately, of
what is considered a small business in America. And when we
talk about there being 29 million approximately small
businesses in America, that is the numbers within which we are
working.
The three gentleman that I just asked the question, as
compared to last year at this time, do you feel your business
is better off today with the Tax Cuts and Jobs Act being in
place?
Mr. Treppendahl?
Mr. TREPPENDAHL. Yes, sir. I do. I think that we have to
work as hard or harder but I am investing back in my company
because I think that we are on the right track. I would not ask
my daughter to come back and work with me--she has an
accounting degree and I would not ask her to come back and work
with me if I did not.
Let me explain. When you say a small grocery store, we are
a small grocery store on a scale of the big people. We had a 1-
day meat sale. And on our 1-day meat sale, we did really good.
We sold over $50,000 that one day. Now, you realize, I went to
work at 4:30 in the morning and I got home at 8 o'clock that
night. And of that $50,000, our profit was 1 percent to 2
percent. So that is $500 we made for that. So any kind of break
or any kind of cut that can help small businesses. And I am
saying small business. We have got 1,200 people in our town,
and it is 1-mile square. We are little bitty in the scope of
the big boys. But yes. I am 69 years old. I would be retiring
if I did not have faith.
Chairman CHABOT. Thank you.
Mr. Czentye, are you better off today as a result of the
Tax Cuts and Jobs Act?
Mr. CZENTYE. Yes. And even I feel better.
Chairman CHABOT. Thank you.
Mr. CZENTYE. So this is from huge optimist. It is a very
general good feeling where you go and you talk with people and
they have companies, how positive they see it. Usually, the
entrepreneurs, they have to go first, not after, or cannot be
followers. So once we see the opportunity, our job is to go and
spend and do stuff and try to do stuff because with a good
backup you can make 50 percent profit. And it is one chain.
Even some critics at the big companies, I love them. Why?
Because if they spend money, they are going to buy stuff from
me, I have to make stuff, and I have to buy stuff from others.
And this by the way is one side because it is not just small
companies, not big companies. We are related. I have my
forecast, 80 percent big companies are going to buy stuff from
me. And what they did, they purchased one unit, now I have
five, six, seven, which is between $5,000 and can be $25,000-
$30,000. It is a big difference. So it is one chain, which I
love. It is not just a small company. It is one good example.
That is why I am here. But I had the chance to be here. But it
is not just that. Even the big corporations, they have one huge
inference over us and help us because they buy stuff from me.
Chairman CHABOT. Thank you.
Mr. CZENTYE. They buy stuff from me.
Chairman CHABOT. Yeah, I am going to run out of time. So I
want to get to Mr. Ellerhorst.
Mr. Ellerhorst, let me mention one thing.
Mr. ELLERHORST. Yes.
Chairman CHABOT. Are you better?
And then secondly, I think you mentioned that you are in a
group of 37 other small businesses. And what are you hearing?
And what kind of businesses are those? And what are you hearing
from them, too?
Mr. ELLERHORST. I am absolutely better off, and will
continue to be better off as time goes. I am a member of
Vistage CEO Group and another chamber.
Chairman CHABOT. What was the name of that again?
Mr. ELLERHORST. Vistage. It used to be Tech. At another CEO
roundtable with 26 other businesses, and they range anywhere
from banking to restaurants, complete wide gamut, and there is
not a single one, whether they like the president or not, that
will not say that they absolutely are benefitting from the tax
bill. Not a one.
Chairman CHABOT. Okay. Thank you. My time is expired.
The Ranking Member is recognized for 5 minutes.
Ms. VELAZQUEZ. Thank you, Mr. Chairman.
We held a subcommittee hearing on entrepreneurial
development, and we have a table and witnesses just like this.
There were three Republican witnesses and one Democratic
witness. That day, when asked by a member of the other side if
the Republican tax bill benefited them, each one of them
replied in the negative. I was not here. It was on the
subcommittee but I watched the proceedings.
So a postcard filing form was touted as the game changer of
tax reform. This is the card that Speaker Ryan used to show
that it was going to be easy. You know, a small business person
would be able to file their taxes on a postcard like this. Yet,
it is becoming more apparent that this is not just reality,
especially for small businesses. In fact, these are the draft
forms that we have seen. I have to get up because it is this
long.
So after seeing the draft forms, would you consider filing
your own taxes since it is so much easier to file now, Ms.
Senseman?
Ms. SENSEMAN. No. When I have consulted with my
accountants, they have said here is our best guess as to how
things will be interpreted by the IRS because we do not have
any regulations yet. And this law in no way made anything
simpler. It completely flipped the way that LLCs and S
corporations are taxed. So two businesses making the same
amount of money could have widely differing tax results. So no,
I would certainly not do my own taxes, nor advise any of my
clients to do their own taxes.
Ms. VELAZQUEZ. More than 90 percent of taxpayers now e-
file, which also helps a cash-strapped IRS process returns more
efficiently. Does it make sense that we are moving backwards in
that respect?
Ms. SENSEMAN. No. It certainly does not. One of the things
that happens with the IRS is that if you have any changes or
need to communicate any things that stand out from one tax year
to the other you cannot e-file. We could not e-file last year
because we were switching from being an S corporation back to a
partnership. And so I would imagine that most accountants who
are concerned about how taxes will be viewed or construed will
air on the side of caution because that is what accountants do,
and they will paper file rather than e-file to be able to send
in notes.
Ms. VELAZQUEZ. Every time we held hearings on this
Committee about taxes, there were two areas that the witnesses
raised--complexity and uncertainty. This chart, prepared by the
Democratic Ways and Means staff shows the steps to calculate
the pass-through provision.
So my question to you is--by the way, my colleague
Congressman Doggett said it is pass-through purgatory.
Ms. Senseman, can you explain some of the unknowns and
confusions surrounding section 199A?
Ms. SENSEMAN. Absolutely. Section 199A is the new pass-
through 20 percent deduction that was added to the bill after
there was some backlash and some pushback from organizations,
including the NFIB. What it basically says is that pass-through
entities will have this 20 percent deduction, but then it goes
on to cut into that will only be on their qualified business
income, that will only be for income under a certain amount,
that will only be in certain--in specified trades which are
very broadly defined, you will have a phase out. And so the
uncertainty of how these defined terms will be interpreted, the
uncertainty of whether a business owner's--whether what they
are bringing home is qualified business income or not, all of
these things are brand new uncertainties that they never had to
deal with before. Not that was noncomplex before but these are
all uncertainties bred from the new section 199A.
Ms. VELAZQUEZ. Thank you.
I see my time is up.
Chairman CHABOT. The gentlelady's time is expired.
The gentleman from Iowa is recognized for 5 minutes.
Mr. KING. Thank you, Mr. Chairman. I appreciate this
hearing and the testimony of each one of you.
I would like to start out with Mr. Treppendahl. The
introduction that was delivered by Mr. Harper was interesting
to me and I did not commit it all well enough to memory, but
what I wanted to ask you first, and it is a little off topic,
is was your grandfather, his name was tagged and the address
was tagged inside his jacket, did I get that right?
Mr. TREPPENDAHL. Yes, sir.
Mr. KING. And it was 1904?
Mr. TREPPENDAHL. Yes, sir.
Mr. KING. And how old was he when that happened?
Mr. TREPPENDAHL. Twenty-four.
Mr. KING. And he was sent from?
Mr. TREPPENDAHL. From Denmark. He came from Denmark to New
Orleans and caught the train from New Orleans with the shipping
tag that said, ``Ship me to Woodville, Mississippi. I do not
read or write English.'' And when he got up here, I do not know
if anybody knows Jerry Clower, but that was Jerry Clower that
would tell that story. But when he got to Woodville, the
gentleman had closed his business. It was a neighbor of his
from Denmark. And so Grandpa had to do a little bit of
everything and we had every kind of store. And then finally we
ended up with a grocery store.
Mr. KING. He went by ship from Denmark to New Orleans?
Mr. TREPPENDAHL. He went from Denmark to Liverpool,
England, and caught a boat at Liverpool, England, and came in
straight to New Orleans.
Mr. KING. With a shipping tag inside his jacket?
Mr. TREPPENDAHL. And shipping tag. It was on his lapel.
Mr. KING. You know, that is not the only story like that I
have heard. The reason I focus on it is because I have heard a
good number of them.
Mr. TREPPENDAHL. Yes, sir.
Mr. KING. Including a former member of Congress, Tom
Tancredo's grandfather who was shipped across the continent and
ended up in Colorado with a tag on his jacket. And the orphan
trains that went across this country, and the destiny of family
after family was changed by these pretty exciting stories of
people that are faced with adversity but they do not know that
at the time.
Mr. TREPPENDAHL. They do not know.
Mr. KING. It is opportunity to them.
Mr. TREPPENDAHL. Yes, sir.
Mr. KING. And how would he know? Or he would not be able to
know at this day what you have accomplished.
I am also impressed that a town of 1,200 people, and I have
got a couple of hometowns in the 1,100 and the 800 category,
and I am looking at the grocery stores in there. Fifty people
employed in a grocery store that serves 1,200 people is a
pretty good sized employment list.
Mr. TREPPENDAHL. Yes, sir. It is. You know, we are still a
complete grocery store but we still carry out. You do not have
to carry your groceries when you come to Treppendahl's. So if
you get busy up here you can come on down and we will carry
your groceries out.
Mr. KING. You are a marketer, too. But you must reach out
quite a long ways outside the community----
Mr. TREPPENDAHL. Yes, sir.
Mr. KING.--to have 50 employees serving.
Mr. TREPPENDAHL. Woodville is in the southwest corner of
Mississippi, and we have small surrounding towns.
Mr. KING. So they come to you.
Mr. TREPPENDAHL. And we are 8 miles from the Louisiana
line, so we catch some people from Louisiana, too.
Mr. KING. Okay. And I did not catch in your testimony, did
you have a hard number on what this tax cut does to your
company--for your company?
Mr. TREPPENDAHL. Not a hard number, but I can tell you, our
store, in the last 3-1/2 years, we have paid over $466,000 in
taxes.
Mr. KING. Thank you, Mr. Treppendahl.
And I go to Mr. Ellerhorst because you had a hard number.
And I heard the testimony here that you guys, the three of you
are the exceptions not the rule on beneficiaries of this tax
policy. What about your associates? Your number was $64,000
annually on about a million dollars of net income. Did I hear
that right?
Mr. ELLERHORST. Yes, sir. That was from our accountants.
They told us that is what we could expect the difference to be
putting everything in. And it only took them about 10 minutes
to give me that number. So there did not seem to be a whole lot
of confusion.
Mr. KING. Any of your friends and associates that are
business people as well, what are you hearing?
Mr. TREPPENDAHL. A gentleman send me an email, ``We
definitely feel the tax changes will enable us to free cash
that can be used to grow the business. Additional jobs have
been on the fence, adding more now going through. Additionally,
the increase in deductions allow for new equipment buys. Have
made equipment expansions easier to justify. Finally, the
project activity from our customer base has rocketed this year,
capacity being moved, expansions being pushed through.'' That
is from a member of my Vistage group who owns a manufacturing
business in Cincinnati.
Mr. KING. And one of you testified as to the regulatory
relief that is part of all this, too. I know that President
Trump as a candidate said that for every new regulation,
eliminate two old ones. And they gave us a report. I think it
was in February of this year, that for every new regulation
they eliminated 22 old ones. That was pretty interesting to me.
But then my first question was, why in the world did we have
any new regulations?
I wanted to also, and I think this is pretty well
established, and I would say that the business I started in
1975, my oldest son owns that completely today and they do not
even ask me for advice. I would have to pay them to give them
some, but they are doing okay. And they run it through the
software package of their accountant as well and his numbers
look very, very good. I didn't give him a thought actually on
this tax piece, but they are very, very good. And I am hearing
it a lot of places.
I wanted to turn back to Mr. Treppendahl and ask a quick
question about child labor laws within the grocery store
business. Can these young people that are going to be 18 years
old tomorrow, they are only 17 today, can they walk into the
cooler and haul some of that----
Mr. TREPPENDAHL. Yes, sir.
Mr. KING.--$50,000 worth of meat out of there?
Mr. TREPPENDAHL. Oh.
Mr. KING. Can they even go in the cooler at age 17?
Mr. TREPPENDAHL. No. They cannot go in the cooler or the
deli or any place where saws or anything like that are.
Now, as far as out there in the store itself, yes, sir.
Mr. KING. They can do dry goods?
Mr. TREPPENDAHL. Yes, sir.
Mr. KING. But they cannot do produce or meat?
Mr. TREPPENDAHL. They can do produce.
Mr. KING. Can they go in the cooler to get it?
Mr. TREPPENDAHL. No, sir.
Mr. KING. You have to get it out for them?
Mr. TREPPENDAHL. Yes, sir.
Mr. KING. And they can carry it the rest of the way. And
then can they mow the lawn outside the store?
Mr. TREPPENDAHL. I do not have them doing that.
Mr. KING. You cannot do that either?
Mr. TREPPENDAHL. No, sir.
Mr. KING. I just make this point. Some time, Mr. Chairman,
I think we ought to have a hearing in this Committee about the
child labor laws that keep the young people, let's say 16 years
old, that get into a car and can drive anywhere in the country
they want to go, stay up as late as they want to, cannot work
after 7:00 on a school night and they cannot do these silly
things here and many others. And they are not learning the work
ethic that they need to learn.
Mr. TREPPENDAHL. Mr. King, you have got a good point.
Mr. KING. And so that is my request, Mr. Chairman. And I
appreciate your support of that idea. I appreciate all of you
and I yield back the balance of my time.
Chairman CHABOT. I think it is a good suggestion.
The gentleman's time is expired.
And the chair would just note for the record, when we have
been talking about the postcard, in general, we are not
referring to that postcard for businesses to file their taxes
on. It is the vast majority of individual taxpayers. Now,
businesses are probably still going to have to file business
forms, and they might be complicated. And wealthy individuals
are probably going to itemize in many instances, too. But it is
the folks who got their standard deduction doubled and the
child tax credit doubled that are less likely to have to file a
complicated tax form now that could use the postcard in many
instances.
Ms. VELAZQUEZ. Let's roll the videotape.
Chairman CHABOT. Which videotape?
Ms. VELAZQUEZ. Speaker Ryan holding a postcard.
Chairman CHABOT. Yeah, but he is not talking about Proctor
and Gamble that is headquartered in my district or these folks.
They are talking about individuals.
Ms. VELAZQUEZ. He talked about simplicity.
Chairman CHABOT. Which is the vast majority of people.
Ms. VELAZQUEZ. That is what he talked about. And what I
have shown you is not simplicity.
Chairman CHABOT. I do not think anybody said that small
businesses were going to have their tax forms dramatically
simplified or that big corporations were. Or that wealthy
people were. You know, they still have to get tax accountants
oftentimes and that sort of thing. But in any event, we can
agree to disagree.
And the gentlelady from California, Ms. Chu, is recognized
for 5 minutes.
Ms. CHU. Ms. Senseman, thank you for being here today. In
addition to my position on this Small Business Committee, I am
also fortunate to be a member of the House Ways and Means
Committee, which has jurisdiction over tax issues. In fact, I
joined the Committee just last year as republicans began to
tout the grand promises of the highly anticipated tax plan. And
they repeated said that the plan would boost economic growth,
increase wages, and reduce complexity.
While I did get a close-up view of how this law came to be,
it was a very rushed and hasty process. It created more
loopholes, complexity, and increased compliance costs for small
businesses in particular. And you have seen this famous
postcard. Yes, actually, I was in the Committee, and that
postcard was held up over and over again as the promise for
what this tax plan would be.
And instead, just let's take one, you know, Ms. Velazquez
showed this as the tax purgatory process for the pass-through
element of the Small Business Plan. And I actually went and
tried to go through the different loopholes here. You have to
go through each phase and determine where you are in this. And
example, just one of these loopholes, determine taxpayer's
combined qualified business income. I will just read it.
``CQBI equals the sum of the amounts determined under
199A(b)(2)(A), 20 percent of QBI for each qualifying trade or
business, plus 20 percent of qualified 12:09:15xxx partnership
income of the taxpayer for the tax year.'' That is one
loophole.
So that does not sound like simplicity on a postcard to me.
And so there actually a very serious question about the
fate following small businesses. And first of all, it is about
the estimated tax withholding. I mean, you really have to be
sure that you have the correct estimated amount or you pay the
penalty. So has the uncertainty surrounding the pass-through
provision created difficulties for small businesses trying to
estimate their quarterly filings of business taxes? I am very
concerned that some small businesses will ultimately under
withhold due to the confusion and be subject to late payment
penalties.
Ms. SENSEMAN. Yes. That is a very real concern. As you have
mentioned, if you under withhold and do not pay the IRS enough
for the earnings that you made you can face a penalty. Those
penalties can incur interest if you cannot pay them all at
once. There is no way to know until we have regulations from
the IRS how they will define something like qualified business
income or specified trades and industries.
If you have ever seen a hard copy of the IRS Code, there
are two to three books that are the code and there are seven to
eight books that are the regulations. Tax accountants, tax
attorneys, business attorneys do not really spend a lot of time
in the code. They spend a lot of time in the regulations
because it often does not matter what the code says; it matters
how the IRS is going to interpret it. And so you do have
business owners right now who are making their quarterly
estimated payments as best they can but certainly may end up
finding out that they thought they were eligible for the 20
percent QBI deduction but that they were not and that they now
owe 20 percent more in income taxes.
Ms. CHU. And that is a pretty penny there.
In fact, are more small businesses investing in tax
professionals since the passage of the tax law? Do your small
business clients feel that the costs associated with claiming
the deduction will ultimately be worth it for their businesses?
Ms. SENSEMAN. Yeah. I mean, I think there are certainly
small businesses that cannot afford tax advice and will never
take advantage of that 20 percent. They will never know that
they have it so they will overpay. But certainly, more of the
small businesses we work with who had a fairly simple,
straightforward tax situation before--LLCs and pass-through do
not have a separate tax form. Just to clarify what they were
talking about with forms. They do not have their own form. It
is just a schedule on the individual's form. So if the
individual were to have a postcard, I suppose the business
owner should have a postcard with a schedule at the very most.
But they certainly are having to consult with tax advisors to
just tell them how to understand whether they even have a
change or can expect a change.
Ms. CHU. And how much do you think this would cost?
Ms. SENSEMAN. I mean, for us, there are, you know, three of
us and not a very large business, and we paid nearly $1,000
each. I mean, I think that you could see, you know, for those
business owners who make a median of $49,000 a year, I think
you could see up to 5 to 10 percent of their income being spent
just to figure out what they are going to owe and what they
need to withhold.
Chairman CHABOT. The gentlelady's time is expired.
The gentleman from South Carolina, Mr. Norman, is
recognized for 5 minutes.
Mr. NORMAN. I just want to thank each one of you for coming
up and taking your time to testify.
You know, you are in the small business. You are running a
business. Most of the critics have never run a small business,
know the tax plan, or really what we face. I am a small
business owner. I run a development company. You are in it.
Congressman Chabot played college football. He was in it. He
can describe what it means to play college football. So you
need to be in the real world of what we are doing rather than
just saying it does not work.
My first question, Mr. Treppendahl, you mentioned--I think
your quote was, ``If these cuts were to be reversed, I would
not feel comfortable reinvesting in my store.''
Are there certain provisions in the tax reform that lead
you to say this? Or is it the entire package that you are
thinking about?
Mr. TREPPENDAHL. Well, in discussing with my accountant,
and as I said, we added 12 doors of frozen food, and that we
are able to take off right now. We can put our money to use.
And we think it would be very advantageous to continue. He also
said, his old saying, he said, ``You make the money and I will
worry about the taxes.'' But he said, ``We have got to worry
about this.'' And I think anything we can get to help us, and
as we said, 1 and 2 percent in the grocery business is not a
whole lot of profit. So if we can save a little bit here and a
little bit there, it will give me a little bit of confidence to
go ahead and spend the money and put the money back into the
store, in the community, employ the people, I think it will
help us.
Mr. NORMAN. So in your statement, you mention if the tax
cuts were reversed you would not feel comfortable reinvesting?
Mr. TREPPENDAHL. Not completely. I would just feel--I just
feel better now.
Mr. NORMAN. Okay. Right.
Mr. Czentye, in your testimony you state until last year,
many companies, including us, did not want to spend their
money. Why was this the case? And what about overregulation for
the last 8 years that have been reversed now, has that played a
part in your success?
Mr. CZENTYE. My understanding, that is one big picture
regarding the tax cuts. And small companies, and maybe the big
companies, too, like more to be free than have a bunch of
regulations and do not be able to move freely just because
there are so many paperwork. And these regulations remind me
from communist country that I am coming from, that was one big
problem to have lots of regulations and people were not able to
do nothing. So for us, I enjoy that and I really like this kind
of freedom and less regulation than more regulations.
Mr. NORMAN. Okay.
Next question, Mr. Ellerhorst, you are from Harrison, Ohio.
How is the business climate in your city and state? Are folks
more optimistic than they used to be?
Mr. ELLERHORST. Extremely. For many, many reasons. One
being the economy and on the individual basis, the tax cut is
just a part of that. But in general, the economy.
I would like to say, I hope I am a better businessman than
Chairman Chabot was a football player.
Mr. NORMAN. He was pretty good.
Chairman CHABOT. Point of personal privilege, we went to
rival high schools and, yeah, and I think Gary played at Elder
and I played at LaSalle. And so, in any event.
Mr. ELLERHORST. Yes, so.
Chairman CHABOT. Thank the gentleman for yielding.
Mr. ELLERHORST. Yeah, I think the overall is very, very
high. I think there is a lot of pent up things that have just
kind of been released with a lot of the promises that have been
kept since the election as far as reducing regulation and
things. I know we lost our relationship. We were a big fish in
a small pond. We are a very small local bank, but due to Dodd-
Frank, we had a banker in our CEO group that said if you are
not excised, you will not be able to survive the additional
oversight that has been required. And so we are now with a
decent bank, but again, that whole situation was disastrous in
our banking. And now there is much more capital involved. It is
just interesting, all this talk about unwritten rules and
regulations where Dodd-Frank just tied up the whole banking.
And by the time we started dismantling it, I still do not think
the regulations were written. So there is a real example of
tying up, locking up the banks because they still had no idea
what the rules were going to be. Just though it would be worth
bringing up.
Mr. NORMAN. Thank God we are cutting most of those, trying
to on Dodd-Frank.
Mr. ELLERHORST. Yes, sir.
Mr. NORMAN. I want to complement each one of you for
staying active in your local chamber of commerce. You need to
keep the pressure on all politicians. We need to spend less
money on government and give it back to the taxpayer who has
earned it.
So I thank you for taking the time, and I yield back, Mr.
Chairman.
Chairman CHABOT. Thank you. The gentleman's time has
expired.
The gentlelady from North Carolina, Ms. Adams, who is the
Ranking Member of the Subcommittee on Investigation's,
Oversight, and Regulations, is recognized for 5 minutes.
Ms. ADAMS. Thank you, Mr. Chairman. Thank you, Ranking
Member Velazquez. And thank you for your testimony.
In the 1980s, the republicans touted trickledown economics,
claiming that cutting corporate taxes would allow big
businesses to invest in workers and expand the economy.
Instead, income inequality drastically expanded and now the
Center on Budget and Policy Priorities point to the pass-
through, benefitting the wealthiest households significantly
more than the rest of the country.
Ms. Senseman, how would the continuation of trickledown
economics help small business this time around?
Ms. SENSEMAN. I do not know that it would. As I pointed out
with kind of the seminal case in why corporations exist, they
exist to bring money to their shareholders. That is their
primary goal. And as a shareholder, you can bring a
shareholder's suit if you think the management is not doing
that. I do not think that trickledown economics is going to
work. I think there are studies that have shown that 61 percent
of the benefit through this new pass-through deduction will go
to the wealthiest 1 percent and that 4 percent of it will go to
the bottom two-thirds of earners who earn money through pass-
through. So that is a 15 to 1 ratio of going to the top 1
percent versus the bottom two-thirds of owners. I mean, no
matter your economic theory, the end result is that businesses
exist to make money for the shareholders, not to pay it out as
Mr. Ford was hoping to do. To do that, there are some states
where you can organize as a benefit corporation but your
traditional corporations and pass-through entities are designed
to make money for the business and for the owners.
Ms. ADAMS. Thank you.
As you know, the tax law will cost a total of $1.9 trillion
over the next 10 years, a deficit that is harmful to our
society as a whole. But I am particularly concerned about how
the outrageous deficit hurts our nation's youth. I am
disappointed that the tax law does nothing to really address
their needs, like providing families with greater child tax
credits or dependent caregivers.
So Ms. Senseman, if Congress passed laws to address
education rather than giving corporate tax breaks, how would
the Nation's small businesses be impacted?
Ms. SENSEMAN. Well, our youth will become the employees of
our small businesses, and they already are and will continue to
be the customers of our small businesses. And so the more we
can invest in young people, such as folks who Mr. King wanted
to work in the freezers, the more educated they are, the more
we have invested in them, the more that they have what they
need to survive, the more we will have a stronger workforce in
our businesses. And so education is a key component for small
business owners because you need an educated, well-funded
educational workforce so that they can be your future
employees, your future customers, and the future owners of
businesses that will do business with you.
Ms. ADAMS. Thank you.
Mr. Ellerhorst, in your written testimony you alluded to
the fact that it is not just the tax law helping your business,
it is also the general healthy state of the economy. We have
been hearing from small businesses in a wide variety of
industries that the tariffs brought on by trade war will wipe
out any tax reform benefit. So as a manufacturer in China, is
there any concern that you have that your industry will be
impacted?
Mr. ELLERHORST. I do not fear that at this point. In my
opinion, I would rather intellectually analyze the results
rather than to emotionally respond to the process. I do believe
this is a process. I do not believe there will be a tax war. I
believe as a businessman, our president is very well aware of
the negatives of a tax war. He also believes that we are in a
very strong position to take this stance and that the net
result will be a reduction of tariffs on our goods going to
countries. I testified maybe 10 years ago on free trade
agreements, and I believe in those, but they have go to be
fair. I mean, we cannot say, okay, we will reduce all of our
barriers and you keep yours. I think that is what the president
is after, and that is what he stated he is after. I do not
believe in a trade war, but I do not believe the president
believes in a trade war either, but we are in a position of
strength with our economy. Now is the time to negotiate from a
position of strength, and I do believe the results are going to
be, eventually, a reduction in tariffs on U.S.-made goods into
some of these other countries.
Ms. ADAMS. Thank you for your opinion, sir. I yield back.
Chairman CHABOT. Thank you very much. The gentlelady yields
back.
The gentleman from Iowa, Mr. Blum, who is the Chairman of
the Subcommittee on Agriculture, Energy, and Trade is
recognized for 5 minutes.
Mr. BLUM. Thank you, Chairman Chabot. And thank you to our
panelists for being here today. And I would be remiss if I did
not compliment my colleague, Ms. Adams, on her hat today.
Absolutely outstanding.
Mr. Czentye, I believe you said in your testimony something
about being optimistic, which reminds me of my favorite
definition of entrepreneurs, of which I am one, that we go from
one failure to the next with the greatest of enthusiasm.
Mr. CZENTYE. That is our job.
Mr. BLUM. I just want to address a couple things before I
question. I hear over and over again that tax cuts cost our
government, and I look at this, first of all, letting people
keep more of the money that they earn is not a cost to the
Federal government, unless you believe all money belongs to the
Federal government and 435 sitting here in suits decide how
much of your money you get to keep.
Secondly, tax cuts add to our debt. Totally and patently
untrue. 1964, John F. Kennedy cut--taxes were cut. He was
assassinated in 1963. His tax cuts were passed in 1964. Huge
tax cuts. What happened to Federal tax revenues in the next 10
years? They doubled. 1986, Ronald Reagan cut taxes. Big tux in
1986, the last one we have had. And what happened to tax
revenues, the Federal government, they doubled over the next 10
years. In fact, a half a percent increase, half a percent
increase in gross domestic product (GDP) growth rate over a 10-
year period produces $1.5 trillion in Federal revenue. Half a
percent produces $1.5 trillion in revenue. Our GDP growth rate
under President Obama, 2008 to 2016 averaged 1.8 percent
growth. Okay? 1.8 percent. The last five quarters we have
averaged 3.1 percent. I do not want to bore you with
statistics, but that is greater than a half a percent. So these
tax cuts and the rollback and regulations on businesses and the
tax cuts to Americans is working. We are producing a higher GDP
growth rate, and it is not costing the Federal government a
penny. In fact, it would be reducing our deficit right now. It
would be reducing our deficit right now. Federal tax revenues
to our government are at all-time record high. All-time record
high. Never before has this government taken more money out of
the pockets of Americans. Never before. So as Ronald Reagan
said in the 1980s, ``We do not have large deficits because we
tax too little.'' Reagan said, ``We have large deficits because
we spend too much.''
So I just wanted to make that clear that the tax cuts are
going to reduce our deficit. They are not going to increase the
Federal deficit.
Mr. Czentye, in your testimony you said until last year,
many companies, including us, did not want to spend their
money. And I am an entrepreneur; I get that. But can you
explain that? Why would not small businesses until last year
not want to invest their money?
Mr. CZENTYE. Well, once the deregulation is a big step, the
second maybe before that is the tax cut. And once you can save
from an extra 15 percent, you can afford, if you are in
business, an entrepreneur, you have to go and reach for that
because that is the sign you have to do that step. And then
once this optimism is on me, on you, and on others, this will
be one chain. And then you are going to decide to buy something
from me, not because of my accent, because I have something. I
am going to buy something from him. It will be one cycle.
Therefore, you are going to do more, I am going to do more, he
is going to do more. For some reason, after 6 months you are
going to say, wow, we are doing well. Almost everybody. So I
really think the tax cut gives us that huge optimism and this
optimism works for all the entrepreneurs who really want to do
something.
And I just want to tell you something. Somebody here said
if somebody in small business, they are going to have $500
profit, they prefer to have some help from the government.
I escaped from Romania. I am from a communist country. I
want to tell you my story is different. I am happy for the $500
if I can do it. And if I cannot make $500, I close the company,
I do not know what I am doing, and I am going to work for you.
Mr. BLUM. Well said, well said.
I would like to ask one of the entrepreneurs here with the
little time I have remaining, oftentimes here in Washington I
hear about one-time stimulus packages, so it is a one-time
spending versus a 10-year tax cut program that you, as business
people, can plan on is going to be there for 10 years versus a
one-time stimulus. Give me your thoughts on that and how that
impacts your uncertainty.
Mr. ELLERHORST. Businesses rely on consistency and knowing
what the future is going to be in order to make investments. I
know politicians like to change their terms from expenditures,
now they are called investments. Well, an investment requires a
certain outlay with an ROI over a period of time. So it is very
easy to take that investment and say, oh, that is an expense.
No, if it is truly an investment, then you do not take that
number in and of itself and say, oh, it is going to hit the
deficit like this. You have to wait to see what the return on
investment is. You will get much greater return on investment
over time on a much more consistent, steady, stable--we can
plan on. And so if they really want to count them as
investments, then give us a chance to give you some return on
investment before we start talking about what it is going to
cost.
Chairman CHABOT. The gentleman's time is expired.
So Mr. Treppendahl, if you can answer very quickly.
Mr. TREPPENDAHL. I agree with him.
Chairman CHABOT. Okay.
Mr. TREPPENDAHL. I like stability. I like to know what is
going on. I do not like change.
Chairman CHABOT. Thank you. The gentleman's time has
expired.
Mr. BLUM. I yield back.
Chairman CHABOT. Thank you. The gentleman yields back.
The gentleman from Pennsylvania, Mr. Evans, who is the
Ranking Member of the Subcommittee on Economic Growth, Tax, and
Capital Access is recognized for 5 minutes.
Mr. EVANS. Thank you, Mr. Chairman.
Mr. Ellerhorst, I want to deal with something you said a
few minutes ago.
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. On the words of semantics about investment
versus spending. You would consider infrastructure what? What
would you consider infrastructure?
Mr. ELLERHORST. It would be an investment.
Mr. EVANS. Okay. Then there is a direct connection between
infrastructure and economic growth; would you not agree with
that?
Mr. ELLERHORST. There is an impact, whether it is dollar
for dollar, but there absolutely is. There absolutely is.
Mr. EVANS. Right. Because you have to transport whatever
you have, may it be on roads, ships, airlines. You have to
transport it; right?
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. Because whatever product you have, it has to be
transported some way; right?
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. Okay. And that is the only differ I have with
your comment about, what did you say, politicians, about
spending and investment, because specifically, I do not think
you build roads or bridges; am I correct?
Mr. ELLERHORST. I do not.
Mr. EVANS. Okay. So you are like a supplier to government
since you are in the plastics, to the entity called government
so it can invest in roads and bridges; right?
Mr. ELLERHORST. Yes. I am also an investor since my tax
money is being used.
Mr. EVANS. Correct. Correct.
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. And I thank you. I thank you for what you do
because I come from that little state next to Ohio,
Pennsylvania.
Mr. ELLERHORST. Yes.
Mr. EVANS. And, you know, we know a lot about, you know, in
Meadville, and Erie, and all those places. And as a matter of
fact, I started a company that was called Fame. And the purpose
was to deal with--we had a company called Crown, Cork, and
Seal, a packaging company. Are you familiar with that?
Mr. ELLERHORST. I have heard the name.
Mr. EVANS. So that is why I am saying I do not think this
should be an either/or. I do not really think this is democrat
and republican if you are talking about the economy.
Mr. ELLERHORST. Right. Yes, sir.
Mr. EVANS. That is what I am saying.
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. But I am just concerned that sort of the view
like, you know, democrats think this and republicans think
this, but the name of the game is to grow the economy.
Mr. ELLERHORST. Yes, sir. And my comment was not saying
that no expenditures were investments. It is just that all
expenditures are not investments. And the understanding of an
investment is there is an outlay and an expected time of
return.
Mr. EVANS. Correct. But Dwight Eisenhower was the one who
led the charge for the roads.
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. Based on national security and what he did;
right?
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. We did not have that, obviously, as you take
Route 76 across Pennsylvania going into Ohio, or Route 80. We
need that; right?
Mr. ELLERHORST. Absolutely, sir. Absolutely.
Mr. EVANS. I just figured I wanted to add that point.
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. I want to go to--I have got a minute. I want to
go to--one other thing you said, which I think psychologically
I heard you say you wanted to deal in specifics, particularly
around the area of trade.
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. And I heard you say--and this is not the
Agriculture Committee. I am on the Ag Committed.
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. And I know you are not here to defend the
president, so I want to make that very clear that is not your
role. You know, when the president on one hand says what he
says about the tariff situations and then on the other hand
kind of give a $12 billion initiative; right?
Mr. ELLERHORST. Yes, sir.
Mr. EVANS. On the one hand, he is saying $12 billion for
the farmers, and then on the other hand he is saying we do not
really want to be in a trade war. So I do not understand, you
know, the basis.
Mr. ELLERHORST. Well, I believe that in the process, it is
not going to be a painless process like everything else. That
the trade is going to create some pain in some areas short
term. And what the president is saying is take some of the
revenues that are generated from the taxes to help out those
who are being impacted until the situation is resolved to
hopefully we eliminate or reduce all barriers, at which point
in time there is no trade war which there is no longer a need
for bolstering, but a short-term assistance to those being most
effectively, or most, I guess, greatly impacted during the
process, I believe is what he is trying to accomplish.
Mr. EVANS. Well, you are pretty good if you can figure out
what he says.
Mr. ELLERHORST. That is my opinion.
Mr. EVANS. Ms. Senseman, small firms often have the fewest
resources to spend on accountants to identify potential tax
breaks. How does this complexity in the new tax law expand the
ventures for firms that can devote resources to identify tax
loopholes?
Ms. SENSEMAN. Yeah, that is certainly a concern. Small
companies are generally just at the mercy of how much their
accountant knows. And if they are dealing with a one or two-
person accounting firm, it is unlikely that they may know. You
know, I think uncertainty as folks here have said is the enemy
of any business you want to be able to plan. Larger firms will
be able to employ larger teams and pay more money to
accountants and will likely be able to take advantage of the
many loopholes that are available in the law, and smaller firms
just will not have that ability.
Mr. EVANS. I thank you, Mr. Chairman, and yield back the
balance of my time.
Chairman CHABOT. Thank you very much. The gentleman yields
back.
The gentleman from Illinois, Mr. Schneider, who is the
Ranking Member of the Subcommittee on Agriculture, Energy, and
Trade, is recognized for 5 minutes.
Mr. SCHNEIDER. Thank you, Mr. Chairman, Madam Ranking
Member. I appreciate the opportunity to have this hearing. It
is an important issue. Small business, obviously, is the driver
of our economy. So many small businesses are working just to
make ends meet on a day-to-day basis, but in doing so they hire
people, they produce products, they help make our community
stronger.
Mr. Ellerhorst, like you, I was a member of Vistage. I
understand the value that those connections bring.
I just want to be clear on a couple things.
Mr. Treppendahl, you may have said this but I believe, is
your business organized as a pass-through entity?
Mr. TREPPENDAHL. Okay, you are going to have to----
Mr. SCHNEIDER. Are you organized as a pass-through? Are you
an S corp or LLC?
Mr. TREPPENDAHL. An S corp.
Mr. SCHNEIDER. S corp. So the income that shows on your
business is included with your personal income.
Mr. TREPPENDAHL. Yes, sir.
Mr. SCHNEIDER. And Mr. Czentye, how about you? Is your
business a pass-through entity or C corp?
Mr. CZENTYE. We are C.
Mr. SCHNEIDER. You are a C corp. Okay.
And Mr. Ellerhorst, you said in your testimony you guys are
an S corp?
Mr. ELLERHORST. Yes, sir.
Mr. SCHNEIDER. Ms. Senseman, you are a law firm. A little
bit different than a partnership, but also I assume a pass-
through entity?
Ms. SENSEMAN. Yes.
Mr. SCHNEIDER. And I know when I had my business it was a
pass-through. And the money we invested in our business was a
function of the decisions we were making as a family. And it
has a real big impact. And impacts on our personal finances
could impact our business just as much as the other way around.
I have a firm in my district. It is called Hell's Kitchen.
It is a small business, catering business that has been in
business since 1985. Its owner, David Boris, actually just
testified in this Committee. He would be the first to share
with you through his work he has been able to create hundreds
of jobs over the years that they have been in business. They
are providing jobs, and it is not just for the people who work
for the company but also people who provide services and
products to the company.
Now, Illinois is one of the states that is being hammered
by the tax bill because of the elimination of the state and
local tax deduction. And David shares that because of that
elimination, the new law is not putting any more dollars in his
business, in his pocket, not investing in his business.
Whatever benefits he might be getting from the pass-through are
being wiped out by the elimination of the SALT deduction. And
as a result, despite the republican talking points, he is not
going to hire anymore people. He is not going to be able to buy
anymore equipment. In fact, many of the businesses in my
community are talking about this. They may be left in a hole,
not an opportunity.
So Ms. Senseman, I will ask you. How common from your
members, how common is the experience I just described?
Ms. SENSEMAN. In states where you have high state and local
taxes and that has been capped, I think that is not an uncommon
experience. There were other things that were taken away in the
tax bill or things that must now be taxed, such as parking
benefits for your employees. I could not give a good
explanation to clients about why this has a change and this
does not. But I think that you are right. If it is not a state
like yours where the state and local tax cap is affecting
business owners, it is paying someone to help them figure out
what exactly is going on. Or just taking time out of their day
if they are someone who charges by the hour who provides a
service, when they cannot be providing that service because
they are filling out new I-9s for their employees and filling
out new withholding forms because their employees have
different deductions now. I think that all of that adds up to
eat into any benefit, any savings they would see through that
complicated pass-through 20 percent deduction.
Mr. SCHNEIDER. And it was mentioned in the conversations
earlier today, businesses thrive on stability. They thrive on
the ability to look forward and say, I believe that if I make
this investment today--Mr. Ellerhorst, you talked about this--
if I make an investment today, I am making that investment
because I believe I am going to get a return. It is not
guaranteed. We wake up early in the morning before dawn. We
will go home at the end of the day. And are going to fight and
struggle for that $500 profit each day. But if you do it every
day, hopefully you get rewarded for your hard work.
I think one of the challenges, and we talked a little bit
earlier about the process that we went through on this last tax
cut, it was not a formal process. There were no hearings. In
fact, there were zero hearings, zero discussions about what
would be the broader implications of tax return. We need tax
reform. We need to make sure as a country we are deciding and
having a debate, where should we be investing? Whether, as Mr.
Evans said, investing in infrastructure so that we can invent
things here, make things here, and literally ship them around
the world to allow companies to prosper. But if we have this
partisan activities like we saw last year, then the pendulum is
just going to swing back and forth and create the uncertainty
that as businesspeople we all worry about. So I hope as we go
forward there will be a way to work across the aisle--
democrats, republicans, and everyone in between--to make sure
that we have investments in our future, in our children, in our
infrastructure, in the business opportunities that will ensure
the United States cannot just compete on the global stage but
we can lead and win and ensure our economy is growing for
everybody. But it has to be done in a way that is sensible,
done in a way that balances, and done in a way that takes into
consideration all the impacts. As we talked about here, the
states that are affected by the elimination, punitive
elimination of that SALT deduction, are not benefitting from
this bill. They are really struggling.
And with that, I yield back.
Chairman CHABOT. Thank you. The gentleman's time is
expired.
And the Chairman would note that he agrees with the
gentleman that it would definitely be better to work together
in a bipartisan manner when that is possible. In the Tax Cut
bill it did not look like that was possible, and I would have
liked it perhaps when we were dealing with healthcare, the
Affordable Care Act or the Obamacare, whichever terminology one
prefers, that there would have been a little bipartisanship
there. But it didn't happen in either case.
Mr. SCHNEIDER. Let's agree we have to do it on everything.
I was not here for the healthcare debate. I was here for this
tax debate. And we reached out, and I think we can work
together.
Chairman CHABOT. And I was not either because I lost in
2008. So when they passed that--I was going to say horrible
thing but I do not want to comment on that--I was not here
during that time.
Mr. SCHNEIDER. No, but we see when bills do pass, working
together, as we have done in this Committee.
Chairman CHABOT. And we are a much better institution since
you and I are here.
Mr. SCHNEIDER. Agreed.
Chairman CHABOT. Okay. Very good. Thank you very much.
Mr. SCHNEIDER. Thank you. I yield back.
Chairman CHABOT. Thank you. The gentleman's time is
expired.
And I think our last interrogator this morning and now into
this afternoon, will be the gentleman from Florida, Mr. Lawson,
who is the Ranking Member of the Subcommittee on Health and
Technology. You are recognized for 5 minutes.
Mr. LAWSON. Thank you, Mr. Chairman. And welcome to the
Committee.
I have been in business before I came here for the past 36
years. And so I understand what tax breaks mean to small
businesses. And from my perspective just coming here, it was
not an issue with me whether it was democrat or republican. It
was just what is best for the business, which I thought
everyone should be concerned about. But sometimes it is not
like that here. In Washington, it might be who really gets
credit. But my concern in dealing with a lot of small
businesses, small businesses, you know, really always like get
relief because they are concerned about their employees, they
are concerned about the bottom line, they are concerned about
escalating costs in different areas, whereas intangible taxes
or whatever you have to pay.
Also, so my question would be to all of you is how can we
reform if there is reform and listen to some of you on the tax
package that we passed last year to reduce the level of
complexity in our tax codes for small business? And the reason
why I say that is in Florida, we had to pay the intangible tax.
And it used to cost more money for a small business to pay the
CPA to fill out the form for the intangible tax, and so, you
know, I filed legislation to really kind of change that because
they were saying you need to pay attention, but you paid more
money than it was for the intangible tax. And so if we have
that same kind of situation coming up, I would like to know,
what can we do in Congress to alleviate some of the complexity
that would go along with the tax package? And everyone can
comment on it.
Mr. TREPPENDAHL. Well, I think stability. And I think
uniformity would be, you know, we kind of put out here and
really not sure what is going to happen, whether it is with the
Tax Code or the tax era, I do not think we are just really sure
which way we were going. I operate a lot better--I do not like
surprises. And I think that if we can just have it where what
we are doing, and we know from day in to day out, week in to
week out, and I am sure there is somebody in here that when
they were a younger boy worked in a grocery store. And you know
what it is working in a grocery store. It is pushing those cans
and putting rice on the shelf and then getting it out the door.
And getting it out. And it is not just a lot of profit in it.
It is a lot of hard work and a lot of fun. And we have fun with
our employees. We classify ourselves as a family. Because I
better be. I am with my employees more than I am with my own
family. So it had better be.
Mr. ELLERHORST. If I could answer your question of what you
all can do, my perspective, and I know the perspective of a lot
of small business people, and Americans in general, our
founding fathers set up our dual party system based on
different means to a common end. In my opinion, in the last
decade or so, we have lost the common end. It seems like we are
now at an ongoing philosophical battle about what kind of
country we are going to be. Are we going to be a democratic
republic? Are we going to be a social democracy and things? And
we have completely divided along party lines, which is a shame.
And that is why there cannot be any cooperation because now you
are talking about people giving up core beliefs of what they
think is the right thing to do.
So if Congress can do one thing, it is to get together and
decide what our country is going to be and then go back to I am
a conservative constitutionalist, but I realize I need the
opinion of every liberal individual in this country as well. I
am not always right. I am not the smartest person in the room.
But the only way we are going to ever solve the issues is to
really come up with a common goal and decide how in our
differing opinions is the best way to get there. And until we
get that back, this is going to be a partisan absolutely break.
And so I would plead, as most of us in America are, tell
Congress to please decide on what it is that we can work
together on and what our goals are going to be, because until
we do that, we are going to be stuck with exactly what we have
today.
Ms. SENSEMAN. And I would just say the four of us certainly
do not have the answers, but neither do all of you. I would ask
that you consult with experts and you would have studies, like
the ones that are coming out now, before you take any action,
not in the months after. I would ask that you look to people
who do this all the time instead of trying to ram something
through in 2o months without a single hearing. I think that
that could only provide you more insight into what effect they
will have.
Mr. LAWSON. Mr. Chairman, if I could have one more minute.
Chairman CHABOT. The gentleman is recognized for an
additional minute.
Mr. LAWSON. I just want to say about working in a grocery
store, as long as I was bagging and getting tips, I was okay.
When they moved me to produce I did not want to do produce. I
wanted to get those tips.
I yield back.
Chairman CHABOT. The gentleman yields back.
And we want to thank the panel this morning, and now this
afternoon. And I think all four did an excellent job in kind of
explaining their points of view and helping this Committee on
both sides to deal with this very important issue, which is the
Tax Code, and did the Tax Cuts and Jobs Act have a positive
impact on the economy or negative or a combination thereof?
And Mr. Ellerhorst, as you mentioned, we do need to hear
each other. And this is one Committee where we actually do
that. We tend to work in a very bipartisan manner. Last week we
passed eight bills, all of which were bipartisan. Had
republican and democratic cosponsors. So this Committee
operates that way, although we do not always agree on
everything, like that darn postcard that Ms. Velazquez was
talking about there. But in any event, we listen and we are
respectful.
So again, thank you all for continuing in that line that we
try to follow here.
And I would ask unanimous consent that members have 5
legislative days to submit statements and supporting materials
for the record.
Without objection, so ordered.
And if there is no further business to come before the
Committee, we are adjourned.
Thank you very much.
[Whereupon, at 12:37 p.m., the Committee was adjourned.]
A P P E N D I X
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]
| MEMBERNAME | BIOGUIDEID | GPOID | CHAMBER | PARTY | ROLE | STATE | CONGRESS | AUTHORITYID |
|---|---|---|---|---|---|---|---|---|
| Velazquez, Nydia M. | V000081 | 8073 | H | D | COMMMEMBER | NY | 115 | 1184 |
| King, Steve | K000362 | 7918 | H | R | COMMMEMBER | IA | 115 | 1724 |
| Clarke, Yvette D. | C001067 | 8072 | H | D | COMMMEMBER | NY | 115 | 1864 |
| Chabot, Steve | C000266 | 8091 | H | R | COMMMEMBER | OH | 115 | 186 |
| Luetkemeyer, Blaine | L000569 | 8017 | H | R | COMMMEMBER | MO | 115 | 1931 |
| Chu, Judy | C001080 | 7837 | H | D | COMMMEMBER | CA | 115 | 1970 |
| Schneider, Bradley Scott | S001190 | H | D | COMMMEMBER | IL | 115 | 2124 | |
| Adams, Alma S. | A000370 | H | D | COMMMEMBER | NC | 115 | 2201 | |
| Brat, Dave | B001290 | H | R | COMMMEMBER | VA | 115 | 2203 | |
| Knight, Stephen | K000387 | H | R | COMMMEMBER | CA | 115 | 2228 | |
| Blum, Rod | B001294 | H | R | COMMMEMBER | IA | 115 | 2241 | |
| Kelly, Trent | K000388 | H | R | COMMMEMBER | MS | 115 | 2294 | |
| Comer, James | C001108 | H | R | COMMMEMBER | KY | 115 | 2297 | |
| Evans, Dwight | E000296 | H | D | COMMMEMBER | PA | 115 | 2298 | |
| Murphy, Stephanie N. | M001202 | H | D | COMMMEMBER | FL | 115 | 2318 | |
| Marshall, Roger W. | M001198 | H | R | COMMMEMBER | KS | 115 | 2328 | |
| Espaillat, Adriano | E000297 | H | D | COMMMEMBER | NY | 115 | 2342 | |
| Fitzpatrick, Brian K. | F000466 | H | R | COMMMEMBER | PA | 115 | 2345 | |
| Norman, Ralph | N000190 | H | R | COMMMEMBER | SC | 115 | 2361 | |
| Curtis, John R. | C001114 | H | R | COMMMEMBER | UT | 115 | 2363 |
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