▶ 0:19:53I'd like to say good morning to everyone and uh as we get started with I will lead us in prayer and then Senator Erns will lead us in the pledge of allegiance. So can you stand please bow your heads? Heavenly Father, God of all people, thank you for allowing us to meet today and discuss great things in this country and to do as good a job as we can do under your leadership. We appreciate the opportunity to serve you and to serve this great institution. In your name we pray. Amen. Amen.
▶ 0:20:21Please remain standing and recite the pledge. I pledge algiance to the flag of the United States of America and to the republic for which it stands. One nation under God, indivisible, with liberty and justice for all. Good morning everyone.
▶ 0:20:47Uh and I ask unanimous consent to hold today's joint hearing before the House Committee on Small Business and the Senate Committee on Small Business and Entrepreneurship. Without objection, so moved. I now call the joint hearing before the House and Senate Committees on Small Business to order. Without objection, the chair is authorized to declare a recess of the committee at any time. I now recognize myself for my opening statement. I want to thank our witnesses for being here today.
▶ 0:21:11Many of you have traveled a long way to share your experiences and perspectives, and we deeply value your time and your voice. Additionally, I would like to take a moment to welcome our colleagues from the Senate. Both chambers of Congress coming together to conduct this joint hearing underscores the importance of today's topic, keeping taxes low for small businesses. Extending small business tax cuts will drive growth on Main Street America.
▶ 0:21:34Today's hearing will focus on the importance of making the Tax Cuts and Jobs Act of 2017 permanent to continue to enable Main Street to thrive by providing muchneeded tax breaks to small businesses. As the nation continues to recover from the Biden administration's disastrous economic policies, this hearing could not come at a more important time. Small businesses are the engine of the American economy. In order to excel, they need to be able to put their hard-earned money back into their businesses instead of forking it over to the federal government.
▶ 0:22:04This is especially true when those tax dollars uh fund an anti- small business government like that of Joe Biden. Over and over again, this committee has heard how the Biden administration's policies have negatively impacted Main Street. Last Congress, a small oil and gas operator, testified that the Biden administration was trying to ruin their uh industry financially. Can you imagine that?
▶ 0:22:27your tax dollars going towards the sale salaries of bureaucrats only for them to tell you that they want you to lose your life's work. For the sake of small business owners and entrepreneurs across the nation, we reelected President Trump. Under his leadership, Main Street America's more help hopeful than ever. And President Trump's 2017 uh TCJA was the most significant tax system overhaul since 1986. These tax cuts brought rapid growth in job creation, US GDP, and domestic investment.
▶ 0:22:57Many of the tax cuts in the CCGAA are set to expire at the end of this year. This would devastate small business and the US economy at large. Making the provisions that benefit small businesses permanent is critical in sustaining economic growth and fostering an environment where small businesses can succeed. Just last week, a small business owner testified before the House Committee that the TCJA saved his business $11,000 last year, allowing him to reinvest those funds back into his business.
▶ 0:23:27This is just one example of why we need to extend President Trump's 2017 tax cuts. Small businesses should enjoy a tax system that encourages their success. In turn, we will see the job creation, innovation, and economic growth. And when Main Street America succeeds, the American economy succeeds. With that, I now recognize Chair Ernst for her opening remarks. Thank you.
▶ 0:23:48Good morning and thank you, Chairman Williams, and I appreciate your friendship and our ability to work together on behalf of America's small business. I am glad that we can hold this joint hearing of our two committees today to examine an issue that impacts every small business in America.
▶ 0:24:07Eight years ago, working alongside President Trump, Congress passed the most significant simplification of our tax code in decades, the Tax Cuts and Jobs Act of 2017, otherwise known as the TCJA. The TCJA provided relief to every American, simplifying and reducing personal income tax and expanding important deductions used by small businesses across the country.
▶ 0:24:34These changes have allowed small businesses to thrive and contributed to the incredible growth we saw under President Trump's first term, which led to strong real wage growth for workers, the lowest unemployment rate in 50 years, and annual GDP growth that reached 3%. These tax provisions have also allowed small business owners, including our witnesses today, to grow their businesses and reinvest in their communities and their employees.
▶ 0:25:04But the reality is these gains are in jeopardy if Congress allows the DCJA to expire, and Americans would suffer the largest tax increase in history. Small business owners will be hit particularly hard if the TCJA expires as over 96% of small businesses are structured as pass through entities that benefit from the qualified business income deduction and the general reductions in personal income tax rates.
▶ 0:25:34The TCJA empowered small business owners to invest in themselves through provisions like bonus depreciation, enhanced business expensing, and the R&D deduction. More importantly, the TCJA enabled small businesses to invest more in their employees. I've heard from small business owners all over Iowa who use that extra money to provide their workers with health insurance, parental leave, and retirement plans.
▶ 0:26:04I have also talked to small business owners who hired staff and expanded, but who would have to make hard decisions about who to keep if these cuts were to expire. When I talk to Ians back home, the message is clear. They can't handle a tax hike. Workers are also concerned that if employees have to give more of their revenue to Washington, jobs and benefits will have to be cut on top of the higher taxes they will have to pay due to the individual rate hikes.
▶ 0:26:33The consequences are real to workers and their families. I also want to address a tax policy issue of particular concern to Ians. The TCJA reduced the death tax, giving families the ability to keep their farms and businesses after a loved one's passing. This change was particularly important in my state, preventing families from being forced to sell off farms or businesses that have been in theirs for generations.
▶ 0:27:03The bottom line is that America's small businesses need the TCJA along with the certainty it provides. If we let the TCJA expire now, Americans and small business owners will be forced to shoulder another $4 trillion in new taxes. When small businesses grow, the American economy grows.
▶ 0:27:24I strongly support making the TCJA permanent and will fight to ensure that the interests of small businesses continue to be a priority in this Congress. I'd like to thank our witnesses for being here today and I look forward to your testimony. I yield Lady yields back and I now recognize a ranking member and my friend Velasquez for her opening remarks. Thank you, Mr. Chairman.
▶ 0:27:50Throughout the past 40 years, our tax code has been repeatedly adjusted to favor the wealthy and the largest corporations, funneling wealth upward and hollowing the system that built the largest middle class in world history. This time is no different. Americans largely feel that the tax code is built in favor of the wealthy.
▶ 0:28:16According to a recent survey, 90% of small businesses agree in the belief that the tax system favors large corporations. Now, Republicans and the Trump administration are tripling down.
▶ 0:28:31Not only are they proposing to permanently entrench the inequality of TCGA into our tax code, but the president just last week unilaterally enacted one of the largest middle class tax hikes in history.
▶ 0:28:48This will have devastating effects on the economy particularly for small firms who operate on thin margins and don't have sophisticated supply chain management skill to navigate this complex and ownorous tariffs. These tariffs will raise prices in the midst of a cost of living crisis, lower growth and cause layoff and businesses closures across the economy.
▶ 0:29:17When President Biden left office, the US economy was in a Goldilocks zone. Low unemployment, falling inflation, falling interest rates, record business creation, and talks and stocks at all-time highs. Many of the investment we made in infrastructure, clean energy, and restoring domestic manufacturing were just beginning to work their way through the economy. It was the emblem of the world.
▶ 0:29:47Yet in less than three months, President Trump has squandered that progress. In the first quarter, American stocks posted their worst performance relative to the rest of the world in 23 years. Banks and analysts are unanimously warning of a recession in the next year while inflation is already jumping and interest rate cuts are paused.
▶ 0:30:15This is President Trump's In a time when our nation suffers extreme levels of income and wealth inequality, the Republican plan is to continue to shift the tax burden onto the working class while lavishly cutting taxes for the top 1% and adding to the b to the deficit. But what about fiscal responsibility and cutting the deficit?
▶ 0:30:44Despite projections that extending the TCJA over the next decade will cost up to $4 trillion, they are using budget gimmicks to say that it costs nothing. According to one of my Republican colleagues, this is a fairy dust. I agree. Instead of cutting taxes for small firms and working families, they are proposing to cut vital resources for the most disadvantaged people.
▶ 0:31:14from $880 billion in cuts to the Medicaid program, which provides health care to our nation's poor to hundreds of billions of dollars in cuts to nutrition assistant programs that help families put food on the table to the extent that they have tax cut for the working class and seniors through no tax on tips, overtime and social security.
▶ 0:31:41I ask, what good is not taxed on tips if restaurant margins are erased by tariffs and they are forced to close? What good is erasing taxes on social security if the administration is rendered incapable of benefits? The Republican budget and the economic policies of President Trump are a disaster for our country.
▶ 0:32:09These policies are the exact opposite of what we need right now. They will raise costs significantly for the working class and cause main street businesses to lay off staff or close altogether. They are spiraling our economy into recession as we speak. We can still work together to deliver genuine relief for Main Street.
▶ 0:32:33We could extend the enhanced premium tax credits to keep health care costs from spiking for small businesses. Next year, we could expand tax credit for child care, which will grow the workforce and keep small businesses competitive. We could reform 199A and ensure the bulk of benefits go to those who need it the most.
▶ 0:32:58But we have a duty to reject policies that deepen inequality and undermine the future of small businesses and working families. Today's hearing is an opportunity to clearly confront those dangerous choices, stand up for small businesses, and fight for an economy that works for everyone, not just at the very top. My colleagues could stop this carnage at any time.
▶ 0:33:24I call on them to reclaim tariff powers along with the power of the purse and return them to Congress and work with Democrats on delivering genuine tax relief for the middle class in a fiscally responsible way. Thank you. I yield back. Lady yields back. I now recognize ranking member Marky for his opening remarks. Yeah. Thank you, uh, Chairman Williams.
▶ 0:33:50Less than 100 days in, this administration has only delivered pain for Main Street across America. Since Trump's tariff announcement last week, the stock market has lost trillions of dollars. And analysts at JP Morgan say it is likely the United States will enter a recession this year. Commerce Secretary Howard Lutnik said that going through a recession would be quote worth it.
▶ 0:34:16Small business administrator Leler called Trump's tariff salvation for small businesses. Donald Trump posted on True Social over the weekend that big business is not worried about tariffs. Meanwhile, small businesses are calling Trump's tariff salt in the wound that is just now beginning to heal.
▶ 0:34:39As a result of these tariffs, small businesses like Clem's General Store in Spencer, Massachusetts, is having to consider hiring freezes are scaling back the the stores selections. These reckless tariffs and the impending retaliation will ruin many small businesses. 97% of exporters and importers in the United States are small or medium-sized businesses.
▶ 0:35:09They do not have the ability to absorb the increased supply chain costs leading to thinner profit margins, clo force closures, mass layoffs, and increased costs for customers. Small businesses are having Pepto-Bismol moments in the marketplace. They're just holding their stomachs every single day as they see all of this turmoil, uncertainty be introduced into a marketplace.
▶ 0:35:38And it's estimated that American households will pay an additional $3,400 in cost. Small businesses and their communities uh cannot afford this. And is clear who this administration serves. And it's not small businesses or working people. The budget resolution passed by the Senate this weekend lays out a plan that would send trillions more in tax breaks to big corporations and the wealthiest in our society.
▶ 0:36:08All at the expense of essential programs like Medicaid and SNAP and investments in NIH to find the cure for Alzheimer's and cancer and um that millions of hardworking Americans are looking to protect their families and that's unacceptable. The wealthy do not need another tax giveaway.
▶ 0:36:34The top 1% of the wealthiest households hold onethird of all of the wealth in this country. The three wealthiest men in America who sat right behind Donald Trump at the inauguration, Elon Musk, Jeff Bezos, and Mark Zuckerberg, their net worth do of those three people is equal to the bottom 50% of our entire population combined. And they're going to get massive tax breaks under this legislation.
▶ 0:37:03That's just crazy. These three people are absolutely not deserving of another tax break. And and that's what the Republicans are doing. Their proposed tax policies would supercharge wealth inequality in our society. Even the Republican so-called small business tax deduction, section 199A, does not primarily help true small businesses.
▶ 0:37:31Instead, the vast majority of these small of these uh tax breaks on what government would spend on this deduction goes to the highest earners. I would support a provision if it was tailored to true small businesses. In fact, according to a 2023 report by the nonpartisan joint committee on taxation, 55% of the section 199A benefits go to the top 1 percentile in our country.
▶ 0:38:01Those aren't small business people. The upper 1 percentile are not by definition small businesses. they get 55% of the tax break in quote unquote the small business tax break that the Republicans want to put extended into this whole uh process.
▶ 0:38:18We need a small business tax policy that benefits true small businesses, not the $5.8 trillion in a tax giveaway which they are planning on uh continuing and putting on the books. We need tax breaks for working families. We need we need child tax uh child care tax breaks. We need to protect Medicaid.
▶ 0:38:40We need real tax reform in this country that will propel our economy, not this drain on the limited revenues we have in the country to send more to the upper 1 percentile. That's not the problem in our society right now. I look forward to this hearing and it just feels great to be back here in the House of Representatives where I served for 36 years. uh and uh I I just love uh this institution and I yield back.
▶ 0:39:09Gentleman yields back and I now will introduce our witnesses. Our first witness here with us today is Mr. Tom Click. Mr. Click is the president, chief executive officer and co-founder of Patriot Industries in Louis in in Louisa, Virginia. And Mr. Click and his wife Sarah founded Patriot Industries in 2010. Prior to that, Mr.
▶ 0:39:32Click spent 10 years in metals industry, most recently as vice president of market development for Norse Hydro Aluminum and previously as vice president of marketing and product development for Index aluminum. Before entering the metals industry, Mr. Click managed the product management and engineering departments for the Amrock division of New Rubbermaid. Mr. Click is an advisory board member of the Genage Alliance and a member of the Virginia Growth and Opportunity Foundation. Mr. Mr.
▶ 0:39:59Click holds a masters of business administration from the Gaton College of Business and Economics and a Bachelor of Business Administration from the University of Kentucky. We appreciate you being here today and your and your wife. Our next witness with us today is Mr. Preston Brashier. Mr. Brashier is a research fellow in the Heritage Foundation's Grover M. Herman Center for the Federal Budget in Washington DC. Mr. Brashier has been with the Heritage Foundation since 2021. Prior to that, Mr.
▶ 0:40:27Brerier was a tax policy specialist in the research and fiscal analysis division of the Washington State Department of Revenue and a transfer of pricing manager at Price Waterhouse Coopers. He also contributed to the analysis uh for the Heritage Foundation's budget blueprint for fiscal year 2023 and the budget blueprint for fiscal year 2022. Mr. Bier holds a PhD in master of science and economics in the University of Kentucky. Did you all know each other in school? Same.
▶ 0:40:55and earned a bachelor of science and economics from the University of Washington. I want to thank you for joining with us today. Now, it's my honor to yield to Chair Erns to introduce our next witness. Thank you, Mr. Chair, and I am pleased to have a fellow Ian with us today. Mr. Jerry Acres is the president of Sharpness, Inc. and Mocha, Inc. and is from Po, Iowa. Mr.
▶ 0:41:21Acres started his journey as a great clips franchisee and with the help of his two daughters and son-in-law, he now operates more than 40 franchises across the three different businesses in both Iowa and in Nebraska. He holds a bachelor's degree from Upper Iowa University. The peacocks, right? That's right, the fighting peacocks.
▶ 0:41:45Again, thank you for taking the time and making the trip to Washington DC to share with this committee your perspective on the Tax Cuts and Jobs Act and thanks to your family as well. Uh, Mr. Acres has a fantastic family and I hope to hear about their experience with your business as well. Thank you and I yield back, Mr. Chair. I now recognize the ranking member from New York, Miss Velasquez, to introduce our last witness appearing before us today. Thank you, Mr. Chairman.
▶ 0:42:13Our final witness today is Miss Anne Zimmerman, the founder and owner of Zimmerman and co-CPA's Inc., a public accounting firm with offices in Cincinnati and Cleveland. Since the m the mid 1980s, she has provided financial and tax services to small businesses and individuals and acts as the offsite CF CFO for many businesses.
▶ 0:42:40She also co-ounded and sold a number of businesses including a large IT cloud company in 2017. She's currently a co-chair of small business for America's future, a small business advocacy organization that helps to ensure policy makers prioritize Main Street by advancing just and equitable economic framework that works for small business owners, their employees, and their communities.
▶ 0:43:09She holds degrees in both business management and accounting from the University of Cincinnati and Northern Kentucky University. Thank you for being here this morning. Gentle lady yields back and I want to thank all of you myself for being here today. And before recognizing the witnesses, I'd like to remind them that their oral testimony is restricted to 5 minutes in length. If you see the light uh in front of you turn redu it means your five minutes is up.
▶ 0:43:38and concluded and you should wrap up your testimony. When you get if you get around five minutes and hear this, you need to stop. Okay. And uh with that, I now recognize Mr. Click for his fiveminute opening remarks. Chairwoman Ernst, Chairman Williams, and distinguished members of the Senate Committee on Small Business and Entrepreneurship and the House Committee on Small Business.
▶ 0:44:05Thank you for the opportunity to provide testimony on the importance of permanently extending provisions of the Tax Cuts and Jobs Act, TCJA, benefiting privately owned businesses like Patriot Industries and our employees. Since the passage of the 2017 Tax Cuts and Jobs Acts, our investments in equipment and workers have increased, fueling economic growth at Patriot. If Congress does not act this year, both our business and our employees will be hit with a massive tax hike.
▶ 0:44:28Furthermore, without the extension of section 199A, businesses like Patriot are at risk of falling victim to the ongoing consolidation of economic power that is shifting control away from America's main street and further into the hands of a few dominant and oftentimes foreignowned corporations. My wife Sarah, who is with me here today, and I started Patriot in 2010 with a thousand square feet of space and one manual conduit threading machine that I purchased on eBay for $5,000.
▶ 0:44:54Like so many small businesses in America, we encountered both triumphs and setbacks along the way. In addition to navigating complex tax policies, burdensome regulations, and the high cost of compliance, I faced a life-threatening illness. If it weren't for our entire work family pulling together during that difficult time, Patriot might not have survived. Thankfully, I recovered and together we built a company that epitomizes the American dream.
▶ 0:45:16Today, in 2025, Patriot has three USA based factories totaling 140,000 square feet and we employ nearly a 100 work family team members and we pay our bills on time. While Patriot is successful today, our humble beginnings remind me of how fragile small businesses can be. The 2017 tax cuts and jobs acts was a gamecher. It reduced financial roadblocks for small businesses like ours, allowing us to reinvest, expand, and create more jobs.
▶ 0:45:42One of the most impactful provisions was a 20% deduction for small businesses, which gave pass through entities like ours the ability to grow at a faster pace and compete on a level playing field with larger corporations. Additionally, the expansion of immediate expensing laws allowed us to ride off the full cost of purchasing new equipment rather than depreciating it over decades. This change was critical for manufacturing companies like ours, which rely on high-cost machinery. Since 2017, we've invested nearly $4 million in advanced manufacturing equipment.
▶ 0:46:10If the law reverts to the old system, business expansion will slow and small companies like ours will be forced to delay investments that drive innovation and job creation. Beyond the business benefits, lowering income tax rates across the board meant that every worker kept more of their hard-earned money. The expansion of the child tax credit and the doubling of the standard deduction provided additional relief for working families, allowing them to save more and invest in their futures. If these tax cuts expire, our employees will face a direct pay cut through higher taxes, making it harder for them to afford necessities and plan for their financial security.
▶ 0:46:40Beyond immediate tax relief, another critical reason Congress must act now is to prevent the devastating impact of the estate tax, or as many call it, the death tax. Personally, I'd like to reframe it as the survivors tax since the people who actually have to pay it are the spouses and their children. Some believe the estate tax is a well-deserved tax on the rich. In reality, it punishes family-owned businesses at the exact moment the company is being passed to the next generation. At Patriot, we've spent years growing our company, reinvesting in equipment, expanding operations, and creating jobs.
▶ 0:47:11But if I were to pass away unexpectedly, the federal government could demand a 40% survivors tax on the business and our family has spent our lives building. To meet that burden, my family might be forced to lay off workers or even sell the business entirely. The real danger comes from how the estate tax applies to non-lquid assets. Patriot maintains over $10 million in inventory across 11 states to meet the needs of our customers. This inventory, along with the heavy equipment we use, is considered part of the business's valuation when calculating the estate tax.
▶ 0:47:40Unlike large corporations with massive cash reserves, small businesses like ours don't have that kind of liquid cash available. The estate tax could easily our ability to keep Patriot in the family. To plan for paying the 40% survivors tax, family businesses must divert money away from hiring, expansion, and innovation and instead use it on attorneys, consultants, and insurance policies, which will ironically be valued as part of the estate that is being taxed. Estate planning should be a part of every company's long-term strategy, not decided by a black swan event.
▶ 0:48:09I've seen firsthand the benefits of the TCJA for our family business and work family team. I urge Congress to permanently extend these provisions as well as further reforms such as the repeal of the estate tax to support family businesses like Patriot Industries which are the backbone of your of our economy. Thank you for the opportunity to share my perspective and I look forward to the discussion here today. God bless you and God bless Back right on time. I now recognize uh Mr.
▶ 0:48:34Basher for his fiveminute opening Chairman Williams, Chairwoman Ernst, Ranking Member Velasquez, Ranking Member Marky, and members of the committees. Thank you for giving me the opportunity to to testify today. My name is Preston Rashers. I'm a research fellow at the her for text policy at the Heritage Foundation in the Grover M. Herman Center for the Federal Budget. The views I express in this testimony are my own and should not be construed as representing any official position of the Heritage Foundation.
▶ 0:49:05It's fitting that the title of today's testim hearing says keeping taxes low for small businesses as opposed to cutting taxes. Some have mischaracterized what's at stake here. The small business tax provisions from the Tax Cuts and Jobs Act have been in place for nearly eight years. And if Congress allows them to lapse, then American entrepreneurs and small businesses would face a tax hike of more than a trillion dollars over the next decade. So, it's worth emphasizing that this is not about cutting taxes.
▶ 0:49:35It's about avoiding an enormous tax hike. Indeed, most small business owners would probably reject the notion that their taxes are low in the first place. TCJA included more than just tax cuts, but also structural reforms, simplifications, and base broadening revenue raisers.
▶ 0:49:53In addition to some permanent changes, TCGA temporarily suspended certain flawed elements of the tax code that had punished business owners and entrepreneurs who choose to invest in their workers and in the American economy. Those expiring provisions will be the focus of my today. TCJA addressed some of the more egregious problems that existed in the tax code until 2017.
▶ 0:50:18For example, it makes no sense to tax income from business investments before businesses actually earn that income. But that's effectively what happens when the tax system forces businesses to capitalize and depreciate such business expenses over many years or decades instead of allowing them to deduct those costs when determining their current taxable income. To address to address that problem, TCGA implemented full and immediate expensing for capital equipment and machinery.
▶ 0:50:47For five years between 2018 and 2022, the tax treatment for these formerly depreciable capital assets was corrected. But unfortunately, full and immediate expensing, also known as bonus depreciation, is now gradually sunsetting. One of Congress's top priorities should be to lock in full and immediate expensing, not just for another few years, but permanently. Similarly, Congress should address one of the unfortunate compromises of TCJA, the 5-year amortization of research and experimental costs.
▶ 0:51:16That provision is structured in a way that delays to a later year 90% of the value of deductions for expenses related to research and experimental activities, including employee compensation costs, material and supply costs, costs of obtaining a patent, and certain operations, management, and travel costs. The resulting short-term financial hit from this artificially accelerated tax liability can be severe for startup companies with limited cash flow and limited access to capital markets.
▶ 0:51:47TCJ also expanded death tax exemptions, helping to shield family farms and businesses from a devastating 40% federal tax on assets passed down to family members. allowing the death tax exemption to be cut in half, which will happen if TCJ expires, could be the death nail for some assetrich but cash poor fa small and midsize family businesses.
▶ 0:52:11Finally, no other expiring provision in TCJA had a larger impact on the amount of taxes paid by entrepreneurs and small business owners than the 20% pass through deduction known as section 199A. While some reforms or improvements to the design of 199A are certainly possible, simply letting the provision lapse would be unthinkable to millions of American business proprietors who claim the deduction.
▶ 0:52:36Collectively, the expiring TCGA provisions benefiting small businesses were an indispensable part of the 2017 legislation success. If lawmakers want to revitalize the economy and ensure that American small business owners and entrepreneurs can thrive, then extending these provisions should be a top priority. Lawmakers could multiply the economic growth associated with these small business related provisions by ensuring that they are made permanent.
▶ 0:53:01Congress also has the opportunity to build on TCJ's success for small businesses by expanding and improving on expensing provisions in the bill. For example, by mitigating the harmful phase out of the section 179 small business expensing deduction. Thank you. Gentleman yields back. I now recognize Mr. acres for his five-minute opening remarks.
▶ 0:53:26Good morning, Chair Williams and Ernst, ranking members Vquez and Marky and distinguished members of the committee. My name is Jerry Acres, and I am a franchisee business owner of Great Clips and the Joint Chiropractic. I own and operate with my wife Mickey and two daughters, Sam and Shelley, 33 Great Clips and four of the Joint Chiropractic locations in my home state of Iowa, as well as Nebraska. I am also a co-author of a best-selling book, Live It to Own It.
▶ 0:53:52It's a franchise bootstrap guide book leading to the formation of Z Dynamics, which is tasked with paving the way to success for franchise business owners. I appreciate the invitation to appear before this committee to share my story of small business ownership and discuss the views of local business owners everywhere as it relates to tax policies that support business, our workforce, and our local economies.
▶ 0:54:15I have experienced firsthand the remarkable impact that franchise businesses can have on local economies and communities, job creation, and economic growth. My wife and I have created a community of our own, employing over 250 team members that have been part of our system over the past several years. These team members are treated as an extension of our family and receive industryleading wages and Fortune 500 benefits while working for a small franchise organization.
▶ 0:54:44Much of our continued success in our business and team members is in part due to the many important provisions of the Tax Cuts and Jobs Act. Many of the individual and small business provisions are expiring at the end of this year and are critical to locallyowned franchise businesses. I appreciate the urgency with which Congress is seeking to address these as the uncertainty created by their looming expiration is giving small business pause as they make investment decisions that will allow them to grow and create jobs.
▶ 0:55:12First, much like the rest of the small business owners, the 199A tax dedu deduction for qualified businesses income has been an important lifeline. It has enabled me and almost all franchises to increase investment in business, driving growth and innovation, while the extra financial breathing room has allowed us to hire more employees and provide better benefits to existing team members.
▶ 0:55:35More importantly, this deduction has helped level the playing field, allowing businesses like mine to compete with larger corporations and provide a level of financial stability that has been valuable. The thought of these hard-earned gains being jeopardized is deeply unsettling. It's not just about numbers. It's about the livelihoods of families, the vitality of communities, and the spirit of The TCJA also allows businesses to immediately write off 100% of the cost of capital investments in qualified property.
▶ 0:56:05For our business, the influx of cash flow is crucial for reinvestment, remodeling, and expansion, and managing operational costs. Unfortunately, bonus depreciation has already begun to phase out. It stands at 40% for this year and will be phased out entirely in 2027 absent congressional action. While the bonus depreciation provision provided a substantial boost to small business, it phased its phase down creates a growing concern about increased tax burdens and potential disincentives for investment.
▶ 0:56:36Third, TCJA allowed an increase in the state tax exemption to 11 million throughout the end of this year. This provision is critical to allowing family businesses like mine to be passed down to the next generation without selling or taking on crushing debt. This is very personal to me. Our daughters are minority partners at this time in our great clips location and will eventually own 100% of that business.
▶ 0:56:58Whether or not they do and that generational transfer can happen hopefully will happen here in Congress and may well depend on what Congress does as it acts. Other provisions like the business interest deductibility has been crucial for the franchise community. Prior to 2022, business interest expense deductions were limited by section 1630J to 30% of their earnings earnings before interest tax depreciation and amateurization or IBIDA.
▶ 0:57:27Interest deductions are now limited to stricter limitation. This change combined with rising interest rates is providing is proving to make incremental investments by small businesses much more expensive. On average, a business affected by the change could see a three-fold increase in its incremental tax burden. Facing both higher interest rates and financing improvements and a very h high tax rate. The truth is that for many small business owners like me, the TCJA provisions have been a lifeline.
▶ 0:57:54It has provided a sense of stability, allowing me to reinvest in my business, hire new employees, and provide better benefits and weather economic fluctuations. The prospect of losing that feels like a rug being pulled out from under me. In the already volatile economic climate, the added layer of tax uncertainty creates a sense of anxiety, especially for those who operate on tight margins. Small business are accustomed to taking risk, but the threat of a significant higher tax burden feels like an unfair and unpredictable obstacle in franchising and all small businesses.
▶ 0:58:24I am ready to be a resource for this effort and I thank you again for the opportunity to testify. I'm happy to answer any Gentleman yields back. I now recognize Mrs. Zimmerman for her five-minute opening remarks. Chairman, ranking member, and distinguished committee members. Thank you for this opportunity to testify today.
▶ 0:58:46I'm Anne Zimmerman, president and CEO of Zimmerman and Company CPAs and co-chair of Small Business for America's Future, a national coalition of small business owners and leaders. As a tax professional serving the small business community and a small business owner myself, I bring a dual perspective to this discussion.
▶ 0:59:08I see firsthand how the tax code impacts our ability to form, grow, and compete in a marketplace increasingly dominated by large corporations. Small businesses are the backbone of our economy, representing 99.9% of all US firms, employing nearly half of private sector workers and contributing 43.5% of GDP. Today, these businesses face challenges amid mounting economic uncertainty.
▶ 0:59:37The NFIB Small Business Confidence Index shows confidence falling sharply in Q125, largely due to unpredictable tariffs and global trade tensions that have sent markets tumbling, creating fear and uncertainty for planning. A recent survey of our network shows 51% of respondents have postponed expansion and hiring until policies stabilized. At this moment of vulnerability, we need a tax code that provides stability and supports our success.
▶ 1:00:08As we approach the expiration of TCJA provisions, we must honestly evaluate whether they've delivered on their promises. The evidence clearly shows that for most small businesses, they have not. The Congressional Research Service found that section 199A's benefits are skewed. Over half the total dollars went to business owners with incomes above $500,000 who represent less than 5% of eligible taxpayers.
▶ 1:00:36I see this inequality daily in my practice. I recently prepared a return for a restaurant owner who employs 11 people. He received just $700 in savings from 199A. Hardly transformative for his business. The same day, I prepared a return for someone with over $4 million in income who receives $6,700 from the same deduction simply because of his investments in real estate partnerships. He employs no one.
▶ 1:01:05A survey of small business owners in our network confirms these aren't isolated cases. Only 6% increased business investment or raise wages and 3% hired more employees. most 43% reported no positive impact at all. So instead of simply extending TCJA provisions that helped some but left most behind, here are some solutions that Congress should implement to help Main Street.
▶ 1:01:33Exempt the first $25,000 of small business profit from federal income tax to deliver immediate relief to entrepreneurs in critical early years. Simplify the tax code to remove the financial burden that creates a competitive disadvantage. Create a small business standard deduction to reduce compliance costs for early stage businesses. Establish a tax credit for hiring first employees to help entrepreneurs make the crucial leap to employer status.
▶ 1:02:03Look for responsible ways to pay for tax reform that level the playing field for small business without slashing valuable programs like Medicare, Medicaid, and Social Security. Increasing the corporate tax rate from 21 to 28% would ensure corporations pay their fair share while generating substantial revenue. Close unfair loopholes that disadvantage small businesses.
▶ 1:02:28Eliminating just the roundtpping loophole alone would generate nearly 70 billion dollars over 10 years for deficit reduction, healthc care costs, or small business support. Continue IRS service improvement and modernization plans. This is crucial.
▶ 1:02:48The IRS was able to collect more than $1.1 billion dollar in unpaid tax debts from the top 1% in 2024, up from just 38 million a year prior. Ensuring wealthy individuals and large corporations pay their fair share generates significant revenue to help our communities.
▶ 1:03:10The expiration of the TCJA presents a rare opportunity to create a tax code that truly supports all American small businesses and we should seize it. Thank you. Gentle lady yields back and we will now move to the member questions under the five-minute rule. I recognize myself for five minutes. Mr. Click. In your testimony, you talk about the importance of reinvesting in your business with the money you saved with a small business pass through deduction.
▶ 1:03:39This critical provision, section 199A, leveled the playing field for small businesses and fueled their growth. So, question is, if this provision expired, how would it limit your ability to reinvest and grow your business? It'd be very simple. We would buy less equipment. We would grow slower. We'd still be methodical. We'd still invest in the company. But being able to expense everything in the first year makes it a lot easier to accelerate your plans. So our 10-year plan might become a seven-year plan, five-year plan. Thank you.
▶ 1:04:09Uh Mr. Basher, the 2017 Trump tax cuts allowed small businesses to immediately expense research and development costs which incentivized innovation in the defense industry tremendously. That provision expired in 2022. And here we are a few years a few years later while China and and uh other foreign adversaries taking advantage and are offering a 200% tax credit for the same research and development. So wouldn't you agree that this has put our national security at risk?
▶ 1:04:40I think the research and development amortization is is is a bad policy to have uh 90% of the deduction pushed off after the first year. Uh I think it's especially harmful uh to small businesses, but as you say to any any company that's doing research and development, uh it's going to have uh harmful effects. You know, in terms of US global competitiveness in American security, what will the future look like if Congress fails to reinstate immediate R&D expensing?
▶ 1:05:08I think I think you're certainly going to see a uh if R&D is expended is extended uh and brought back because it has expired at this point. Um, I think that will will boost uh the amount of research and development that's happening. I think it's going to be uh it's it's bang for dollar for dollar perhaps the biggest bang for the buck uh in this in this uh uh package of tax provisions.
▶ 1:05:32It's just a very high priority um for so many businesses and uh that just makes no sense for the tax code to penalize companies for uh for engaging in research and development activities that are that are going to benefit not just them but their employees and the American economy and others that are going to be able to benefit from those those innovations that they come up with. So I think it's it's critical. Uh Mr. acres. As a franchise owner, which I'm also a franchise owner, uh you know how important it is that your equipment and machinery is up to date.
▶ 1:06:02Uh you want to be able to deliver and provide the product for your customers, but this investment comes at a cost and that's why Congress included 100% bonus depreciation, which we've talked about this morning in the TCJA. However, that provision we talked has already begun to phase out. So, what uh what did this provision help you buy the tools and equipment needed to make your business a success and give customers a service? Thank you for the question. Uh the bottom line is when you're in a retail oriented business, you've got to be at the top of your game. You've got to be able to have new equipment.
▶ 1:06:31You've got to have equipment that's cutting edge. You've got to have things that make an impression. You simply cannot do that if you're if you're held back by not being able to deduct that at the right time. If it's spread over several years, we're going to delay those improvements. By the way, that also impacts our throughput, which means it hurts employment because we don't need as many employees if we can't be on top of it. Well, if you get a chance to uh write it off, it opens up more cash to buy something else with.
▶ 1:06:56And absolutely, and that many times goes back to uh employees, whether it's increased benefits or increased wages, because we've got x amount of money to spend, we've got to decide where to do it. If we're paying it in uh you know, longer deductions, it's going to be hard to spend that on the employees. Uh, I yield back and I now recognize uh Chair Erns for five minutes of her questioning. Yeah. Thank you, Chairman Williams. Uh, Mr. Acres, again, thanks for making the trip out here to Washington DC and for representing Iowa small business.
▶ 1:07:26As you know, the TCGA provided significantly higher exclusions from the estate tax for families dealing with the death of a loved one. This is an issue that impacts our farmers, business owners in capitalintensive industries, and owners like yourself who have built a successful enterprise that your family helps to operate today. Personally, I support an end to the death tax altogether.
▶ 1:07:51That said, can you discuss how important the estate tax changes from the TCJA are for you and your family, uh, your daughters and son-in-law, and what, uh, you have had to do in anticipation of losing the higher exemptions under the TCJA. Bottom line is we're stimulating the economy by hiring really smart CPAs and attorneys to try and figure out a way to do this without letting our daughters lose it. I'm very passionate about this.
▶ 1:08:19I'm a farm boy from Iowa that comes from very little and we've built up a really good business over the years with one intention and that is to have something to pass down to the next generation. That's going to happen. The only question is what will Congress do to help allow us to make that happen without the kids taking on multi-millions of dollars in unnecessary loans. Yeah. Thank you, Jerry. And uh Mr. Click as well, can you answer that? Do you have any concerns about the estate tax and how that will affect your your family? Yeah, absolutely.
▶ 1:08:49We do have a plan in place, but just removing the estate tax, the survivors tax would give me a lot more peace of mind. Yeah, thank you. We have three children just now coming into a phase of their lives where they might be interested in the business. We hope they are. Um, and Mr. Click, again, thanks for for being here today as well.
▶ 1:09:07The changes to bonus depreciation and immediate expensing in the TCJA were transformative and nearly every Iowa based manufacturer I've spoken to has made it clear how important it is uh to them in ensuring they can maintain and expand their operations. So can you give a little more detail uh to that and why bonus depreciation and immediate expensing are so important to our small businesses in capital inensive industries like manufacturing?
▶ 1:09:36Uh yeah, the equipment is very expensive. Uh it is something that is a a great asset for many many years, but it does wear out over time and you need to replace it. You need to repair it. And if you're a business like Patriot, where you're intent on expanding, new locations require a completely new set of equipment. Our most recent factory was created down in Houston, Texas. It was about a $2 million investment. Most of that's four HOS CNC machine centers at five HOS CNC machine centers and all the other support equipment that goes with that.
▶ 1:10:05Being able to deduct that immediately makes it a lot easier for us to look for the next location. Yeah, two million bucks. That's pretty hefty for a small business. So, that's a good value. It's a good value. Absolutely. Um, Mr. Acres and Mr. Click, as our small business witnesses here, I want to know how you and your staff will be affected if the TCJA is not extended. What are the one or two things you'll have to do to keep your businesses afloat? And what does that mean for your workers?
▶ 1:10:34And Jerry, we'll start with you, please. Yes, as I mentioned before, there is a limited amount of money to go around in a small business like ours. So, we have to make decisions about it. If this is if this is not put back in place, frankly, that money will end up coming from our employees at some point in time and only that it will slow down improvements in wages and it will slow down the improvements in benefits. So, again, we want to be able to do both. We want to be able to continue to modernize and grow and expand.
▶ 1:11:00Uh but and we're going to take care of our employees, but we cannot do both without the help of the TCJA. Thank you. And Mr. Click. Yeah, the tax hike on them personally is is probably the first thing that everybody's going to feel, but it will slow down the acceleration of the business. I mean, over the years, we've added benefits. When we started, we had no health insurance. We had no 401k. We have both of those now. We have funds set aside for the for the employees. We pay bonuses every year. Uh there's only one pot of money for this.
▶ 1:11:27And this is this is a component that will help make sure that we manage that pot of money appropriately and for the employees and for the work family and for the the company. And thank you both. And and Mr. Chair, I just want to note that both of them have responded that much of the return that they get from the TCJA, they are rolling right back into their employees, whether it's wages, benefits, bonuses. Um so thank you both for representing our small businesses today and I yield back. Gentle lady yields back.
▶ 1:11:57Uh I now recognize ranking member Velasquez for five minutes. Thank you, Mr. Chairman. Miss Zimmerman, the president just unilaterally enacted significant tariffs on virtually every country except Russia.
▶ 1:12:13Uh can you discuss the biggest economic policy blunder in the past century and explain how this will disproportionately harm small Thank you. Absolutely. Um the small business uncertainty index is higher than it's been. I think the second highest ever even higher than COVID right now.
▶ 1:12:42The uncertainty is killing small businesses. They can't plan. They they don't know if they're going to open a new one. I spoke just recently with a gentleman that owns coffee a coffee shop out west and he was already into $50,000 into opening his second location. And he's he's having to put that on hold simply because of the tariffs that have been enacted.
▶ 1:13:09He He's gonna pay it on everything that comes in. He can't negotiate. We as small business, truly small businesses, don't have the negotiating power that a large business has. So for his situation, Starbucks can go to their suppliers and say, "I'm 50% of what you sell." And they can negotiate that they're not going to get the whole cost of that.
▶ 1:13:36But then there's a watershed effect that comes down um that we as the small businesses are going to pay even more of it because the suppliers have to make it up. Thank you. And this is just the beginning. Without the tariff even in effect, the Atlanta Fed has dropped the realtime GDP estimate for the first quarter to 3.7%.
▶ 1:14:00Consumer sentiment has crashed to the lowest level in years and inflation expectations are higher than they ever were throughout the Biden administration. People understand this will be catastrophic. The share of consumers expecting higher unemployment over the next year is the highest since 2009. And these were all measures taken before Trump's tariff announcement.
▶ 1:14:29Miss Zimmer Mi Miss Zimmerman, so many Americans feel that the game is rigged and small businesses agree. According to your group's survey, 90% of small businesses think the tax code favors corporations. Based on your conversations with small businesses, what makes them feel this way?
▶ 1:14:53Well, they don't get they a true small business isn't really truly on a level playing field. So, yes, bonus depreciation may be great, but we already have 179 that up to a million2. You already got to write that off. So, the small businesses I know generally don't buy more than a million two in equipment each year. That's a large one.
▶ 1:15:18I mean there are some very successful business people here but 90% I believe it is or 75% of the small businesses in this country make 50 thou 75,000 or less. The million dollars is not what they're worried about surviving having an employee being a part of their community. We as the true Main Street people can't separate community from employees from our business.
▶ 1:15:48You know, I find it astonishing that my colleagues act as if the path through deduction is the be all and end all of small business tax cuts. Sure, everyone who can navigate its complexity gets a little something. But with over half of the total benefit going to the top 1%, we need to seriously consider reform before we can move forward responsively.
▶ 1:16:19Mman, on top of the tax code that favors the wealthy, Republicans are proposing steep regressive tariffs and a new tax cut for the rich paid for by gutting Medicaid by $880 billion, education by over three 200 $300 billion and nutrition programs by over $200 billion.
▶ 1:16:45The goal seems to be funneling wealth upwards from the middle class to the rich. What impacts do you think this will have on small businesses and the trust on our An absolutely devastating impact. I yield back, Mr. Chairman. Gentle lady gentle lady yields back. I now recognize ranking member Marky for five minutes. Thank you, Mr. Chairman.
▶ 1:17:13The U announcement of President Trump's new terror should be actually be called obliteration day instead of liberation day. Liberation day for Trump is taking us back to the days of Smoot Holly, Herbert Hoover, and the eve of the Great Depression. Foreign countries have already started retaliating with no endgame in sight. He's making it up as he goes along. And Trump's reckless actions will raise costs for small businesses and working families.
▶ 1:17:42We've already heard from small businesses across the country concerned about how they will weather the impacts from Trump's trade war. For example, in Massachusetts, a small business in the hospitality industry told my office that their suppliers, which include local restaurants, grocerers, and other small businesses have already raised their prices just with the threat of a tariff war. So, M. Zimmerman, how will tariffs hurt small businesses, including the ones that you work with?
▶ 1:18:14It puts them at a great disadvantage. As I said earlier, we don't have the negotiating uh ability and the negotiating power. We also don't have thinner margins and so the tariffs are harder for us the smaller businesses to take and the economic uncertainty. I mean, they're on one day, they're off one day, they're on one day. Um, you know, somebody tweets that they might be postponing them and the market jumps.
▶ 1:18:46How do you plan? 51% of our network said, "We can't we can't plan. We're going to put everything on hold." And for a small business, a truly small business, that's potentially catastrophic. Is that right? It absolutely is. And the numbers in a small business to that it would take to to put us under is so much different than the big numbers that you all have to deal with in your your work every day.
▶ 1:19:14You know, if we can save $70 billion dollar by changing the roundtpping, closing up that one loophole, how far would that go for small business? How many individual main street businesses would that keep open? So according to the urban institute in 1963 the top 1% had 36 times the wealth of the middle class.
▶ 1:19:39Since then that wealth gap has almost doubled with the aggregation of the wealth in the upper 1 Entrepreneurship can help close that gap between the ultra wealthy and everyday Americans. However, policies that grow the wealth gap will hurt entrepreneurs given that 75% of small businesses use personal savings to start their firms.
▶ 1:20:04America's tax policy should not provide small businesses with pennies while large businesses and wealthy individuals rake in millions. As I mentioned in my opening, even the so-called small business tax deduction of section 199A does not primarily help true small businesses. The top 1% of all earners take home 55% of that tax incentive. That's not a small person. You're making over a million.
▶ 1:20:34You're not in any need of a tax break right now. Mr. Zimmerman, as an accountant, you have helped countless businesses, large and small, file their taxes. In your experience, what kinds of businesses benefit most from the small so-called small business tax deduction? Well, obviously larger small businesses um is the first.
▶ 1:20:57I can tell you that 43% of our small business owners told us they couldn't even figure out if they were eligible for it because they don't have accountants. You know, if you're if you're making $75,000 a year, how much do you have for all that tax planning available? You're feeding your family. You're feeding your neighbor's family. Um the complexity is is beyond crazy.
▶ 1:21:25It it doesn't allow for certain firms. It doesn't allow for this. It's for that. Um even I spent a long time trying to weed through it. Yeah. So that's what really bothers me. I see Elon Musk now. He's saying, "Well, the deficits, it's a huge problem for our country. We've got to destroy the Department of Education, destroy NIH funding. We're going to have to go in and loot Medicaid that serves about, you know, 30% of our country.
▶ 1:21:54Grandma and grandpa are in nursing homes. 70% of people in nursing homes um are on Medicaid and half of them have Alzheimer's. He's saying loot to all that money. Give it to tax breaks. And who gets it? People who make more than a million dollars a year. Can we really afford that because we have to take the money from grandma in nursing homes, kids who need an education.
▶ 1:22:16These are just crocodile tears coming from Elon Musk and the Republicans about their concern about deficits even as they call for huge tax breaks for the wealthiest in our society. Uh next we have Congressman Stabber from the great state of Minnesota for five minutes. Thank you. Thank you very much uh Mr. Chair and I see my colleagues on the other side of the aisle. They're bringing out their old dusty playbooks again.
▶ 1:22:43Uh, I will just say when we talk about tariffs, I represent northeastern Minnesota. President Trump put the 232 steel tariffs that saved the Iron Range and they were so good that President Biden kept them on. We have to understand the opportunities that we have because the secondary positive effects in northeastern Minnesota because of those tariffs, they're still in business And remember, northeastern Minnesota uh mines uh the iron ore that makes almost
▶ 1:23:1482% of this nation's steel, which is a strategic national security issue. So the tariffs that President Trump put on the steel industry and President Biden kept on worked. They saved the Iron Range and as the Iron Range in northeastern Minnesota go, so does the state of Minnesota. Chairman Williams and Chairman, Chairwoman Nurs, thanks for holding this meeting today. In northern Minnesota, as I said, small businesses, they're not just the backbone of the economy. They're the heart of the economy.
▶ 1:23:44Whether it's a precision manufacturing facility in Duth, Minnesota, a familyrun logging operation in Grand Rapids, or a fifth generation farm in Chisum, or manufacturing facility in Forest Lake. These are the folks who create jobs, train young workers, and keep our small rural towns alive. That's why the Tax Cut and Jobs Act of 2017 was so important.
▶ 1:24:07It wasn't just a tax cut, but a signal that the government wanted our small businesses to take our economy to that next level. The 20% deduction for pass through businesses under section 199A leveled the playing field for small firms competing against large corporations.
▶ 1:24:26This provision has provision has helped thousands of Minnesota pass through businesses like S corporations and sole proprietors reinvest in their operations, raise wages, and hire new employees as many of you testified today. Mr. Click, your business has seen remarkable growth over the past 15 years.
▶ 1:24:45If the section 199A deduction sunsets at the end of this year, how would that impact your ability to ability to invest, hire, and even competitive? It's all about the equipment. Our 10-year plan, we'd like to have five more fabrication facilities around the country. And as I said earlier, each one costs about $2 million. So that 10-year plan, without the ex the section 199A coming back, um it may push off from 10 years to 12 years or longer.
▶ 1:25:15You have you have to stay competitive. We have to stay competitive. We have to keep advancing. We have the most advanced equipment in this industry. We have more advanced equipment than anyone else in the industry combined. And I'd like to keep that. Yeah. And and the way you survive is is in continuously investing in that advancement in the equipment so you can stay competitive. Absolutely. Because if you don't, you're going to be out of business. Would that be true? Uh it would be impactful. I don't think we'll be out of business.
▶ 1:25:42We basically reinvented thread and conduit and again we want to keep that title and keep growing. Yes. Capital purchases like equipment or new technology are foundational to long-term growth. Uh Mr. Aris, from your experience as a franchise owner, how did 100% bonus appre uh depreciation improve your ability to grow your business? And what risk do you see if this benefit is not made permanent?
▶ 1:26:04Bottom line is since that was put into place, we've grown our business by about 25% in the number of units which is a huge explosion for the Midwest for rural America as you said. Uh with that goes um 50 jobs or some something in that neighborhood. So being able to reinvest in that has accelerated our growth and will continue to accelerate the growth in the in the future as well as allow us to give more benefits and wages to our employees. You know, you just said the loss of 50 jobs.
▶ 1:26:31That is real in smalltown Iowa or small town Minnesota. People in this town don't understand that. We talk about small businesses being the engine of our economy. We have the opportunity right now to do that. I was a small business owner for 30 31 years. It wasn't easy.
▶ 1:26:51It wasn't easy raising four kids and and my brothers would say, "We got to come up with $7,000 a piece by next Friday because we can't meet net 90." You folks are the engine of our economy. Don't ever forget that. Don't let this town change your mind or anybody on this das change your mind. Small businesses are the engine of our economy. They are going to make America even better. your private investment.
▶ 1:27:21You got to reach in your wallet. Take that risk for the American dream and be successful and employ those people that live in our rural small towns. We are depending on you. Don't quit ever. And I yield back. Gentleman yields back. Uh, I now recognize another person from Kentucky, the great state of Kentucky, Representative McGarvey, for five minutes. Thank you, Mr. Chairman. I I did see that Mr.
▶ 1:27:51Click and and Dr. Brashers definitely went to the University of Kentucky, which I appreciate. Um, I also want to take a moment right now to just say we are really thinking about all of the small business owners in Kentucky who are dealing with the historic flooding right now in our state. It is it is really bad and it's ravaging many parts of our state and and small businesses are are are crushed right now dealing with that.
▶ 1:28:15So obviously now is not the time to be cutting back on something like FEMA uh or to hollow out an agency like the Small Business Administration which which helps the federal relief efforts for our small businesses hit with this uncertainty. Um we've talked a lot about tariffs today. You know I want to talk a little bit about tariffs as well. Tariffs are a tool. A tool is neither good nor bad. A hammer is a tool. It's pretty good for putting a nail in a wall.
▶ 1:28:44It's not so good for fixing your iPhone. How you use a tool matters. And Donald Trump is wielding this tool in a chaotic way, without any strategy, without any plans, in a way that is definitively hurting businesses, small businesses, and American workers. One of the ways he is hurting our country with his current tariff plan is just the uncertainty of it.
▶ 1:29:12We had a day a couple of weeks ago where tariffs were on on Monday, off on Tuesday, on on Wednesday, off on Thursday. Right now, people are unsure what he is doing. You read any coverage of this, conservative, liberal, whatever, they're saying, "What is the president actually going to do? Is he going through with this? How does this matter?" And the uncertainty that small businesses face every day, regardless of what the president decides to do when he wakes up in the morning, is enough already.
▶ 1:29:38But this uncertainty that he is causing by escalating these trade fights on average every 3 days since taking office is not good for business. And and the markets right now certainly reflect that. Um, so I want to ask you, Miss Zimmerman, I'm sure you've heard a lot from terrified small business owners who are grappling with this uncertainty over the last several weeks. How does this uncertainty alone harm small businesses?
▶ 1:30:08My colleague who's here with me today, a friend and colleague, has a manufacturing company in Pennsylvania, been in his family for a hundred years. barely survived COVID um with all of that going on, came out on the other end successful, and now he's being hit with this, which is much worse than what was he was hit with there. He he his supplies come in from out of the country.
▶ 1:30:38He has no negotiating power. He doesn't know how much to order for his Christmas, you know, season. Um because we have he has no idea how how do you figure that out when you have no idea and if I might say representative the the words level playing field have been used by all of us many of times today.
▶ 1:31:04How is a 40% tax cut for the biggest businesses and a mere 20% deduction, not tax cut, but deduction an even level playing field when that's what the small businesses got right and it's not that's not level it's not a level playing field and what we want for our small businesses for Main Street which remains the backbone of the American economy.
▶ 1:31:27Um, we're talking about these tariffs again and why is it, you mentioned this, but but drill into why the tariffs cause such disproportionate harm to these small businesses. Well, I I think it's the thin margins. It's the inability to negotiate, you know, how do if I'm if I have a if I'm selling a widget and I'm truly Main Street and down the block from me, that's my neighbor that's running that store.
▶ 1:31:54How does he have any negotiating ability when Walmart's already told that same supplier that you will not pass that whole tariff on to me or I'll go somewhere else because my neighbor when she does that, they don't care. Go ahead. I'm going to take care of Walmart.
▶ 1:32:14And flipping from the tariffs out of the tax uh increases which you talked about um if the House votes this week on the full extension of the Trump tax bill which will give the top uh.1% of Americans disproportionate leave not to mention the top 1% of Americans while giving the rest of us very little. Um one of the ways that they're trying to pay for that it's still going to add to the debt. really they're trying to pay for that is by cutting health care.
▶ 1:32:42That will also have an impact on small businesses, won't it? Absolutely. Um we help our employees uh negate that and it'll make it impossible. Thank you, Mr. Chairman. I yield back. Gentleman yields back. I now recognize Representative Van Dy from the great state of Texas for five minutes. Thank you very much, Mr. Chairman. I want to thank our witnesses for joining us here today.
▶ 1:33:08Time and time again, what we hear loud and clear um from businesses all across the country is they need certainty, parity, and simplicity in the tax code. And as we move through the budget reconciliation process, we must keep small businesses at front and center of our priority. I I'm I'm sitting here today listening to um members on you know colleagues on the other side of the aisle saying that the idea that under the Biden administration the economy was just fine and dandy.
▶ 1:33:38That is an absolute lie. Under the Biden administration, we saw twice the inflation that we've seen under the Trump administration. And when you look at um stats from the Bureau of Labor Statistics, that indicates that real average hourly earnings for private sector employees actually dropped 2.24%. 21 and 24. That's not a great booming economy.
▶ 1:34:03On the flip side, when you look at the TCJA results, the bottom 50% of earners paid less income tax than ever before, and the bottom 20% saw their federal tax rate dropped to the lowest level in 40 years. So, somehow the idea that working Americans did not benefit from the TCJA again is an absolute lie.
▶ 1:34:27The tax cuts also enabled businesses to raise wages, leading to a 4.9% increase in real wages between 2018 and 2019. That is the fastest wage growth that we saw in two decades. Additionally, real median household incomes in the US rose by $5,000, a larger increase than the previous eight years combined.
▶ 1:34:51and overall individuals and families received three out of every $4 from the total 2017 tax cut package, demonstrating its direct benefits to American households. So the idea that only large corporations are benefiting from this absolute lie. So earlier this year, I joined my colleague Representative Smucker in co-sponsoring the Main Street Tax Certainty Act to make the small business pass through deduction permanent.
▶ 1:35:20I've also signed on to Representative Arrington's Align Act to restore and make full bonus depreciation permanent. I've joined Representative Estes on his American Innovation and R&D Competitiveness Act to permanently allow for immediate R&D expensing. These three provisions, cornerstones of President Trump's signature tax reforms, have brought about some of the greatest investments and innovation in our nation's history. And the numbers back it up.
▶ 1:35:44According to NFIB, letting the 199A deduction expire would force 60% of small businesses to raise prices and nearly 44% to delay or cancel capital investments. On the other hand, making the deduction permanent would create 2 million jobs annually. That's more than 8,000 in just Texas 24 in my district alone. So, Mr. Click, how would your business be harmed if the section 199A deduction were to sunset?
▶ 1:36:13Again, as I've said, it would slow us down. Uh it would also slow down our plans to make more products here in the USA that unfortunately the country has stopped making. And there's a lot of talk about tariffs. I'm definitely not a tariff expert, but I can tell you from personal experience. When my wife Sarah and I put the company together, we made sure that our products were made here in the USA. And we we're the only company that guarantees all of our aluminum products are made here in the USA, mostly in Virginia. our feed stock.
▶ 1:36:40The products that we import represent less than 2% of our revenue. And again, we've been through the tariff discussion before and see minimal impact from that. But I don't want to slow down. I want to continue. I want to make those products that we have to go to other countries for right now. having an aluminum manufacturer in my district and listening to them complain about how the unfair competition with the rest of the world that the US government has placed on them. They really appreciate that and I thank you for your for your buying from American um business members.
▶ 1:37:11Um Mr. Brushers, in your research, you emphasize the role of full and immediate expensing and replacing IRS's complex rules for depreciation. Assuming that you agree that businesses have to deduct capital investment expenses over 20 years is impractical. Just how important is full and immediate expensing especially to capital intensive small businesses?
▶ 1:37:29Just to give you some idea just think about the inflation that we've just been going through where we have 8% 9% even 5% inflation and you think about that deduction and you're telling uh business owners that they're not able to actually claim that deduction for 20 years. what ends up happening is ultimately you're only potentially getting about half of the deduction uh if if for some of these 20year assets and so it's it's quite harmful. Great. Thank you very much and I yield back. Heels back.
▶ 1:37:58I now recognize Representative Simon from the great state of California for five minutes. Thank you. Thank you chairs and ranking members and thank you witnesses for coming this way and uh telling your stories and giving us a wonderful In reading the reading uh materials and the homework, it's to me clear that this hearing is not necessarily about the prosperity of Main Street.
▶ 1:38:25In fact, it's seems as if many of us are pretending that tax cuts for the wealthy will somehow trickle down to the small business owners who are being pushed to the edge right now. And yes, two years ago, six years ago, 10 years ago, 20 years ago, smalls min business owners in this country have consistently struggled in many of our communities to make ends meet.
▶ 1:38:50This hearing is actually about ignoring the fact that the real economic emergency is one that we're not talking about right now. Across the country, there are tens of thousands of workers, many of them veterans, first generation Americans, many of them disabled, running small businesses, many folks who have been fired from our federal government, also first generation Americans, many of them veterans, many of them disabled.
▶ 1:39:21These are not tech giants, but we fired folks from our own government. Small businesses can't rely on an SBA in this moment that is being dismembered in real time. We've talked to hundreds of small business owners in our office and they've said clearly they can't get through.
▶ 1:39:49No one's answering their request. And if the SBA has to manage $1.6 million in student loans, then they can't focus on the conversations that we're having today. The mom and pop vendor on Main Street, on Broadway Street. We're not investing in Main Street and having these conversations. We are ripping out the social safety net and we're calling it fiscal responsibility.
▶ 1:40:17So let's stop pretending the economy is not working for working people. It's not creating opportunity in this moment. We know that's true. It's not creating a class of folks who can and thrive in real time. In fact, we are discarding people, skilled workers, and small business owners at the same time with no support, no capital, and no road map moving forward.
▶ 1:40:41If this hearing was truly about prosperity, we would be talking about target investments, targeted investments that expand access to not only capital and real resource in real time, but also expanding access to health care, solidifying public infrastructure, and a tax system that honors work, not wealth.
▶ 1:41:05Instead, we are watching a slow collapse, a real collapse, and there's no up from here unless we change. Of course, I have a question to Mr. Zimmerman, and thank you for being here. Excuse me, Miss Zimmerman. Thank you for being here today. Miss Zimmerman, you serve real business owners, real folks, people holding together families, communities, folks who are dispersing paychecks to real everyday folk in community.
▶ 1:41:32And in this moment, as the administration disbands critical safety nets, disbands the services that are supposed to support these small business owners, disbands the SBA, SBA with no clear strategy moving forward, what are your clients afraid of most? And what would an actual true investment right now, not performative tax cuts, look like for them?
▶ 1:42:05client's risk is not surviving through this uncertainty. It's not surviving through the tariffs. We can talk about maybe tariffs being, as you said, a tool and maybe being successful coming out the other side, but they're not going to be there on the other side for this. They're going to be gone by then. and those are my neighbors.
▶ 1:42:32And by cutting Medicaid and Medicare and and all these safety nets, the SBA, even the IRS, where we're taking away tools that they're using directly, you know, my my colleagues who have larger businesses, maybe even employ a hundred or 200 people, they're not going to the SBA directly. They have lawyers and bankers and that's right and stuff.
▶ 1:42:58I'm talking about the true main street entrepreneur who relies on that. I want to thank you for your answer and I s sorry that you have such little time but I think you pinned it correctly as your clients continue to navigate entrepreneurship in this economy where the foundation that they stand on is being pulled out from under. I hope we get it right. I hope we get it right and thank you all so much for being here today. I appreciate your testimony. The gentle lady yields back. I now recognize Representative Alford from the great state of Missouri for five minutes.
▶ 1:43:28Well, thank you, Mr. Chairman, and thank you, Chairwoman Erns, for holding this important hearing today. I'd also like to thank the senators here for making the trek over to the House. Um, thank you to all of our witnesses for being here today on your own time and on dime. America experienced its greatest economy in my lifetime under President Trump. And that was no coincidence. It was thanks to the Tax Cuts and Jobs Act of 2017. The TCJA allowed Americans to take the leap.
▶ 1:43:58It allowed businesses to flourish. It allowed our country to move forward as one nation under God. It ushered in the hope and reality of the American dream as small business owners around our nation were all living their own version of it.
▶ 1:44:16Allowing the Tax Cuts and Jobs Act provision to expire and increasing taxes will not only further hurt the competitiveness of our small businesses, it will crush them. The jobs that they provide will no longer be there. The communities they serve will suffer.
▶ 1:44:36People will go out of It will chill the hope and reality of the American dream on Main Street that we all saw was possible just a few years ago. I would urge my colleagues, Republicans and Democrats, senators and representatives, to work together to make sure that the 2026 does not usher in the largest tax increase in US history. And let's get one thing straight.
▶ 1:45:05Enough of the lies and deception and gaslighting. This is not a tax cut for billionaires and millionaires. This is an extension of tax policy that is going to allow mom and pop businesses in the fourth congressional district of the great state of Missouri to stay in business, to hire people, to make rural parts of flourish. Mr.
▶ 1:45:27Brashers, many of my Democrat colleagues have painted an extension of this tax cuts and jobs act as handouts for oligarchs, tax cuts for the rich. Can you explain why they're After the Tax Cuts and Jobs Act was passed, we actually saw that the bottom 50% paid a smaller portion of the of federal taxes than they did prior to the TCGA.
▶ 1:45:53Uh the idea that the TCJ was was simply a giveaway to the the very wealthy is is just not backed up by the by by the facts. And in fact, it's going to be a a big deterrent to starting small businesses in America, will it not? Explain that. Yeah, absolutely. So, um what we're talking about right now, uh with the extension of these these provisions, keep in mind that the the corporate rates that that's been locked in.
▶ 1:46:20So, if you were to allow this to lapse, what you would actually have would be that the small businesses would be slammed with a uh a 20% tax increase in the case of of the uh 199A deduction. And all businesses would be hit with with tax increases from the the expensing and and uh and all these other provisions that we've been talking about today. Um this these would be uh pretty much across the board for for businesses.
▶ 1:46:45uh they're going to be paying significantly higher taxes and and absolutely it's going to hit the small businesses the hardest. Mr. Acres, let's dive into this just a little bit more. If this uh section 199A, the pass through business deduction is eliminated for Main Street America. What is that going to mean to business in America? 33 million small business owners. The bottom line is that money's got to come from somewhere. If we're not if we're paying more in taxes, we can't use it for other things.
▶ 1:47:14Again, I reiterate, most of that comes from increased prices to consumers. It comes from uh lower future benefits and wage increases for our employees. Our piece of the pie as a as an owner is very narrow. It's very tiny. We cannot give up any more of it. So, it's got to come from somewhere else. Thank you. I have 24 counties in my district from south of Kansas City over to Lake of the Ozarks down to Springfield. I'm in the district all the time. I talk to small business owners.
▶ 1:47:41They are deathly worried and rightfully so about us not getting this done and them not being able to compete against the big guys. We must we must renew these provisions. It is not a tax cut for the rich. It is not for the billionaires and millionaires. This is for mom and pop. This is for the people who who run the sawmills for black walnut in the state of Missouri. It's for people who have sign companies in Sidellia, Missouri.
▶ 1:48:10This is not about the rich. It's about making America wealthy again through small business. Thank you so much and I yield back. The gentleman yields back. I now recognize Senator He Rono from the great state of Hawaii for 5 minutes. Thank you. It's Hono. Um I thank the two chairs for this and I um say aloha to our witnesses. I'm glad that Miss Zimmerman is here.
▶ 1:48:37The bottom line is that who's going to benefit or who benefited from the 2017 tax changes and uh Miss Zimmerman I think you describe small businesses as a 90% of small businesses who are making what have revenues of what did you say 75% earn end up with se live off of 75,000 75,000 75 75% something like that how many of these of small businesses and there
▶ 1:49:07are thousands of small businesses that fit into that category. Oh yes. How many of them do you think benefited from the 199A tax provisions? Well, we know that it it's to the degree this is a category of the 75%. I'm not talking about the ones who have franchises and over 100 employees. Well, if you think about it, if they made 75,000, let's even say a 100 to make it simple. Okay?
▶ 1:49:37So, if they made a h 100red, then they get a deduction of 20 and their tax rate at that rate is only 12. So, they're getting $2,000, $2,400. That's their benefit. How many employees are they going to hire with $2,400 is what I'm saying. And I I'm hearing about suns setting. We can't let these sun set because it would kill small businesses. Absolutely.
▶ 1:50:06But there's other options than suns setting. Don't you have the right as our representatives and senators to improve it instead? Don't you have the right to change it? Why did we have a 40% cut for the Amazon of the world and I got a 20% deduction which actually I don't get but I won't go into the technicalities of it. Mr. Zimmerman, we are going to be confronted with extending the the 2017 tax um bill.
▶ 1:50:36So if we were to focus on the 75% of small businesses who I I think I would describe as truly small businesses, how would we change what kind of changes would we make to for example 199A or any of the other existing provisions that we're asked to simply reup? Well 199A is very complex and that's part of its problem. Yeah.
▶ 1:51:03And so perhaps some simplifying the overall code so that the truly small business benefits. Um give them a credit for their first employee. Many of those businesses it's just one person. If they want to grow they're hiring their first one, right? Give them a credit for hiring that. Give them a standard deduction ability so that they don't have to track every receipt when they're out mowing people's lawns, right?
▶ 1:51:32and they can instead take that standard deduction, close some loopholes to push money back to small businesses. So, I think that that we that the information that we have that the 2017 uh tax bill actually benefited uh the the richest people in our country and corporations. I don't think there's any amount of gaslighting that is going to change those statistics.
▶ 1:51:58So what I'm interested in again is how do we truly help the majority of small businesses as described by you Miss Zimmerman folks who are bringing in less than 75,000 a year and those are that would not be the two gentlemen who own businesses who are on this panel by the way you do not constitute small businesses uh as described by Miss Zimmerman.
▶ 1:52:21So, uh, I am going to be very interested in finding out what what provisions we can put into this Well, actually, that would presume that I actually uh that that there are provisions in the bill that actually help people. I I think not. But again, I I just want to thank you for for being real, Miss Zimmerman. Thank you for being here. Thank you, Mr. uh for both of our chairs.
▶ 1:52:51Gentle lady yields back. I now recognize Representative Weed from the great state of Wisconsin for five minutes. Every single day, my offices, both in DC and the district, receive requests from local small business owners asking me to support the extension of the 2017 Trump tax cuts. I'd like to tell them directly that I am fully committed to advocating for the extension and codification of the important tax breaks for small businesses. Those on the other side of the aisle don't support this.
▶ 1:53:18They bemoone the growing federal deficit and falsely claim that by extending the Trump Trump tax cuts will add to our federal debt. Let me be clear. The federal government does not have a revenue problem. We have a spending problem. Not to mention this may be the first time ever the American people have heard Democrats concerned about debt. Instead, they spent their time proposing one bloated federal budget after another.
▶ 1:53:44Rather than cheering on our efforts to cut discretionary spending and make sure the American people are prioritized by our own government, they spent their time claiming we are democracy. The message from Democrats is clear. They want to raise taxes on everyday Americans to pay for DEI programs in Serbia, Sesame Street, in Iraq, and transgender surgeries in Guatemala. They want to punish American small business owners by saddling them with added regulatory costs that make it harder for them to do business.
▶ 1:54:12Republicans are focused on our primary mission, helping the American people and allowing Main Street to prosper again. One of the common misconceptions about the Trump's tax cuts is that they primarily benefit the wealthy. Mr. Click.
▶ 1:54:26If we took one provision of the Trump's tax cuts, the 199A, a CRS report found that 80% of 199A claims were filed by those making under $200,000 a year and 98% of all claims were filed by those making under a million. How vital are 199A deductions for businesses making under a million dollars a year to maintain and potentially expand their small business? I think they're absolutely critical and I think all the small businesses are actually tied together.
▶ 1:54:56You know, there was a comment that we may not represent businesses that make less than $75,000, but I can tell you from personal experience of the years where I made less than $75,000 while risking everything for this company. I think we might represent what these smaller businesses would like to grow into and become. And without this, without the TCJA, it's going to go much slower. And it is going to be much harder for the smaller businesses that maybe are designed to be a lifestyle business instead of something that's much larger. Very good. I would agree.
▶ 1:55:26In my business, we could have lost 100,000 or maybe made 50,000 or maybe we made 200,000 and and sometimes you don't have control over it. It's a very difficult thing. Mr. Acres, as a former small business owner, I know the benefits of section 168k bonus depreciation for small businesses to replace equipment and machinery. In my district, we have over 1,000 manufacturing firms employing almost one quarter of our working population with 89% of those manufacturing firms in my district are classified as small businesses.
▶ 1:55:55With Republicans working to return manufacturing back to the United States right now, how important would raising the bonus depreciation back to 100% be for small manufacturers looking to expand their business? Well, I I would add that it's it's important for every small business, not just manufacturers. But thank you for the question. The bottom line is we want to grow. Um I agree with Mr. Click.
▶ 1:56:17You know, we're being characterized as being not small business, but the fact is each and every one of us started out with one unit, losing money, risking millions of dollars of our own money, and sometimes not getting a paycheck. So, it is critical that we have the opportunity to continue to grow and expand because once again, most small businesses want to grow into more than one unit or two units or three units and they cannot do that without these benefits. Thank you. I yield back. Gentleman yields back.
▶ 1:56:47I now recognize Representative Scolton from the great state of Michigan for 5 minutes. Thank you, Mr. Chairman, and thank you so much for holding this critical hearing today. uh we are seeing unprecedented attacks on our small businesses across the country and they are struggling to keep place in uh a market that increasingly does not work for them.
▶ 1:57:15Here in the great state of Michigan uh where we are at the center of the attacks on uh businesses across the country where tariffs are reaching an all-time high. you know, we know it all too well. We're facing uh budget uh before the the the Congress this week. Uh that will add uh additional burdens if we are not careful.
▶ 1:57:41Um studies from organizations like the International Monetary Fund and the Tax Policy Center have found that foreign investors retained more earnings as a result of the TCJ's reduction in effective tax rates. Let's be clear about who benefits from an extension of these tax rates.
▶ 1:58:02My colleagues on the other side of the aisle are essentially proposing that we cut critical services like Medicaid and SNAP to pay for tax cuts that benefit not only the wealthiest in our nation, but also those who don't even live in this country.
▶ 1:58:16Miss Zimmerman, do you agree that the federal government should ensure that large companies, both here and abroad, pay their fair share of taxes before we allow poor and middle-class workers to foot the bill of a plan they do not stand to benefit from? I do. Thank you for the question. And let me clarify, I am not an adversary of my colleagues here on the panel. I app commend them and applaud them for their success in business.
▶ 1:58:44and I think their continued success is just instrumental in in our company. So I don't in our country growing I I don't want to make that split but what I'm saying is we don't need to make a we don't have to fix this with that proverbial hammer. Can't you stop the fact? I mean, yeah, there's statistics all over.
▶ 1:59:10Half of the 199 pool, half of it went to people, the top 5%. Okay, so throw statistics around. Yeah, we got some more. Maybe we paid a little more. My my daughter and and son-in-law, they're union teacher and firefighter, and I I thank them for for what they do. I thank them for what they do as well. Um, and when the TCJA came through, I've started many a business.
▶ 1:59:41I own my own business. I um got a much bigger savings than they did as they raised their four children. And to me, that's where we need a little finesse. Surely we can do something to change this so that we're not shoving all this money to the higher income levels or to foreign investors as you say and the social safety net is so very important for the smaller
▶ 2:00:11businesses. They can't survive if their community is not healthy. Bottom line, we are one with our community. It's it's essential. Thank you. Um, one message that I consistently hear from business owners back home is the need for more workers. We we are experiencing a shortage across industries. Um, small businesses in particular.
▶ 2:00:34Um, we feel that and and see in practice that the current administration's practices are exacerbating some of those conditions. Um, want to stay with you just just for one second. You suggest in your testimony that a tax credit for entrepreneurs who are hiring employees for the first time may be a good idea.
▶ 2:00:55Can you expand a little bit on that idea and tell us how some policies like these which give targeted support to businesses in early stages could help us address some of these larger workforce issues? Right? Because that's not using the hammer, right? Let's make those small changes. All of these millions of businesses that are making below 100,000, they're getting ready to hire their first employee or they've just hired their first employee. That's right.
▶ 2:01:22That everybody on this panel will tell you that's a scary leap of faith going off the cliff when you hire that first person. And yes, we're putting our own money in to hire them. And yes, we're putting our own money in to make payday. So, a credit for that first employee that comes back immediately through the payroll credit system. We have that in place. That would be very helpful.
▶ 2:01:45Um, ironically, funding the IRS, and I know I'm a CPA and I have to deal with them, but it helps small businesses who have to work with them more as a um it shouldn't be adversarial. We're trying to be compliant, and we can't if you close the offices all down. Thank you. yield back. Gen gentle lady yields back. I now recognize Senator Houston from the great state of Ohio for five minutes. Thank you, Mr. Chairman.
▶ 2:02:15Thank you for inviting us to join you today for this hearing. Thank all of you for being here and what you contribute uh to the world through your work. Uh I have uh my wife is a small business owner, but she's like most small business owners. Uh 81% of small business owners in America are sole proprietorships. They don't have any employees.
▶ 2:02:42Uh I would like to focus my my conversation on those businesses that have employees. the other 19% uh the ones who uh beyond themselves create jobs for others. And I I want you to think about the TCJA in that Um if it were to go away versus if we it, how would that impact your employees? How does that impact I'll start with you, Mr. Click.
▶ 2:03:11uh how does the structure of how we assemble the tax uh across the board and everything that's been discussed today, how does that impact your employees and your ability to to take care of them? Thank you. Great question. You know, I've said several times that it slows down the businesses, but it's also that the business is also very interconnected and the equipment and the employees. Uh, as a work family, we all kind of work together.
▶ 2:03:39To keep growing the company, to keep investing in equipment means that I've got new skills that my employees are going to get to to learn. they're going to get paid a higher wage as we go away from the very basic manual operations to more advanced CNC operations or even driving trucks, something more u more valuable to the company. Um, taking away the TCJA slows that down tremendously. We'll keep going, but it makes it much easier when everyone's on the same page and pushing in the same direction.
▶ 2:04:08And and I presume that that not only in improving their skills improving their skills and improving their wages. I'm sorry. I improving their wages improving their productivity direct one to one as soon as they get more you can earn more. All they get paid more benefits wages all benefits bonuses annual bonuses midyear bonuses the turkeys that we give out for Thanksgiving. All that's impacted by this. It's all tied. So So in the end it's good for small businesses but it's good for your employees.
▶ 2:04:35It's great for the employees and it's great for the smaller businesses that are the sole proprietors that provide services to companies like Patriot. Uh Mr. Acres, would you like to uh share some thoughts on reflect on that question? Yeah, thank you very much. Um our employees are a part of our family to be very honest with you. I know it's trit but the bottom line is that we uh we can't do any of the business we do without our employees. So, uh, we pay higher than, uh, normal ind industry standard wages already.
▶ 2:05:03Uh, when, uh, the f the tax cuts came through the first time, we increased the wages by about 20%. They've gone up another 10 or 15% since then. We'll continue to raise them. Our benefits are by and large huge over most of our competition. So, we can only do that when we've got extra money that we can do something with. One other thing, the communities we're in, they're dramatically impacted by the money we give back to them. And that comes from this same fund, the ability to have that money back so that we can redistribute it.
▶ 2:05:30So, so let me just I have a contention that if you look at history, those nations that are the most economically and militarily successful are the ones that are the most innovative, the ones where technology allows them to be successful.
▶ 2:05:48In the context of your business and think of your employees, how much does the investment in new technologies and job training mean to your productivity levels which allow you to compete against foreign competition uh and and improve the overall quality of the work environment for your employees? Mr. Click, that's a great question and I'm so glad that you asked it.
▶ 2:06:13the the technology that we brought into our industry had never crossed over. We're in a hundred-y old industry that was essentially unchanged up until 15 years ago when we came in. This advanced manufacturing is the reason that Patriot exists today. And when we take the bankers through and other people through the company, I show them this bank of 16 CNC machines. First shift, we'll run all 16 of them with four employees. Second shift, we'll run 10 or 12 of them with two or three employees. And on third shift, we'll run seven or eight with zero employees.
▶ 2:06:43And you know what beats offshore wages? Zero wages on that machine overnight. It runs automatic. It produces the best quality products on the planet. And that allows you to do made in America. Absolutely it does. And it allows you to continue to make investments to continue to compete and to have a thriving business where you can employ people. Yes, sir. And so you would say that the renewal of this is essential to American success and prosperity. Absolutely it is. It's critical. Thank you. I yield back.
▶ 2:07:14Gentleman yields back. I now recognize recognize Representative Tran from the great state of California for five Thank you, Mr. Chairman. M. Zimmerman. Just last week, former President Trump, I'm sorry, President Trump and his administration proposed one of the largest tariff tax increase on American people since the 1960s. And already, we're seeing the economic ripple effects. The US market had its f worst week since the start of COVID and families are feeling it.
▶ 2:07:43These tariffs are taxes on consumers, raising prices on everyday goods, groceries, cars, appliances, housing materials. These are the these are the essentials for working families and they simply can't afford to pay more at a time when household budgets are already stretched thin. Let's be clear, no one voted for more expensive groceries, more expensive children clothing, more expensive cars, and more expensive household goods. No one voted for President Trump to tank the stock market and the economy.
▶ 2:08:10And yet, this is what Donald Trump's economic approach is delivering. He is creating a recession. In fact, just yesterday, JP Morgan said Trump's tariffs will send the US into a recession. At the same time, small businesses are facing uncertainty. Supply chains are being disrupted and many Americans could soon see job losses as a result. Miss Zimmerman, the United States is currently experiencing a cost living crisis. Everything from rent to groceries to energy are being squeezed uh by the consumers.
▶ 2:08:40How do you expect tariffs to affect the cost of living Well, what it really does is it creates a dangerous negative feedback loop. Um it creates higher prices which reduces spending, right? which causes business decline, which causes job losses, which future spending reduction.
▶ 2:09:06I mean, there's no question if it's going to cost the average family $3,800 more just to buy what they're buying now. They're not going to have as much to spend at their local businesses, period. Some of those businesses are going to go out of Thank you for that.
▶ 2:09:25A a proud small business owner myself before coming to Congress, I know that health care is one of the biggest challenges facing small employers, not just for themselves, but also for attracting and retaining workers. Large corporations often have the resources to offer group health insurance plans, but small businesses are frequently left to navigate the individual market. That's where the enhanced premium tax credit have made a real difference by lowering the cost of health insurance through the affordable care act marketplace.
▶ 2:09:54especially for people who are self-employed or working in small shops. These tax credits have helped level the playing field and save thousands of dollars a year for small businesses. Miss Zimmerman, my Republican colleagues are more interested in providing tax cuts for millionaires and billionaires than extending a tax credit that helps small business owners buy health coverage. Considering this, can you speak to how these enhanced tax credits have impacted uh our your ability to afford quality co coverage for yourself, your family, or your employees?
▶ 2:10:23And if these tax credits were to expire at the end of the year, what would that mean for your business? One of the biggest competitive disadvantages we all have here and certainly small true smaller businesses have is health insurance. We can't get a reasonable policy for our employees. And so when on the marketplace, what we do is we help our employees each well actually we don't now. I should change that. We did when it came out.
▶ 2:10:52we would help our employees go out and find some and we set up a HR, you know, one night plan and um paid back some of the premiums as we were allowed tax-free. Without that marketplace, a lot of people are going to go uninsured again.
▶ 2:11:15And small businesses are going to lose their employees to the PGs and GES of the world, which are the big companies in Cincinnati that can give them stellar benefits that we just can't afford. I agree with that. Thank you, Mr. Chairman. I yield back. Gentleman yields back. I now recognize Representative Muer from the great state of Pennsylvania for five minutes. Mr. Chairman, I thank you very much and certainly thank you to our witnesses.
▶ 2:11:42Uh the so-called TCGA of 2017 led to years of record low employment, GDP growth, real wage growth, and record high tax revenues. Families saw their medium household incomes increase. Uh real wages grew. 6 million people were lifted out of poverty and main street businesses saw 66 billion in tax revenues. All the while, tax revenues, federal tax revenues grew dramatically. That's a record. That's that's a fact.
▶ 2:12:11Now, Congress is working to deliver on the American first agenda in the so-called one big beautiful bill, reconciliation bill, which will re in the plan is for it to rain in in uh wasteful spending and reignite our economic growth. So last week in our small business committee hearing, uh we um we heard from uh some testimony from witnesses that that brought out that only 1% of small businesses make a profit of over $1 million.
▶ 2:12:40So one out of every hundred business makes less than in in net income of $1 million. That being said, do you do any of you believe that the TCGA was a handout to billionaires as is often stated? Uh uh Mr. Click. Uh no, definitely not. Just by the sheer math of it, the uh the amount that goes out to uh to the owners of the company um was fractionally impacted.
▶ 2:13:10Appreciate that. No, I don't agree with that statement at all. I think the as Mr. Click was saying, it's the exact opposite was true. It was designed very specifically to avoid uh just being a a giveaway to the the very rich and they if anything targeted uh the the bottom half of the income distribution more. Thank you, Mr. Rers. Not at all.
▶ 2:13:33It dramatically impacted us and anything that impacts us in a positive way creates more revenue which creates more taxes which is the big cycle sending more money back to uh DC. So, it's positive for everybody the way that I see it. Right. And something tells me that added revenue that you gained went back not into your pocket but into the business which is pretty much what a 100% of small businesses tell us. Absolutely true. The majority of it goes back to either growing the business or funding more benefits for our staff. Thank you. M Zimmerman, would you like to answer that?
▶ 2:14:05Let me let me be clear. I think you misunderstand me. I don't want you to raise taxes on small businesses. I think that would be a mistake. But it's not a black or white yes or no question here. You know, renewing the TCJA small business deduction does nothing nothing at all to fix the problem that we gave. Thank you. I just really just wanted a yes or no if it was a tax cut for billionaires. Thank you.
▶ 2:14:32Uh the R&D expensing, uh how important, Mr. click is that to your business as well as the bonus depreciation that would expire should we not pass TCGA. Yeah, the the R&D will be more valuable as we go forward in time. We had already done the development before that was allowed. Um but the uh the bonus depreciation that is that is absolutely critical to the business plans. It makes it a lot easier and if it's permanent, it makes it a lot easier to uh to make that 10-year plan into a 20-year plan.
▶ 2:15:01Couldn't agree more from my business experience as well as my time in the field working with small businesses to our time on our small business committee. U Mr. Brashers, same Yeah, I think absolut the so many small businesses have very thin margins and so if you're talking about taking a a a deduction away from them, um if you started with a 2% margin and then all of a sudden you take away this this deduction for your workers that are in R&D that are
▶ 2:15:31all the supplies and materials that are going into R&D, you take that away and you push it back five years, uh at least a portion of it. Um especially for small businesses with limited access to capital, it's it can be devastating. Thank you. Um, Mr. Vaker, same question. Yes, that leads to growth. Uh, and money from anywhere leads to growth for us and that leads to added benefits for everybody up and down the system. So, when that money is sent back to us, that extra depreciation, we reinvest it right back into the business. I have 40 seconds left.
▶ 2:16:01I'm just going to ask uh each one of you your thoughts on the president's plan. uh the so-called America first agenda uh the taxes the regulations the uh making energy that much more competitive and as we move along with this uh tariff issue would you rather see an increase on let's call them taxes on foreign manufacturers or would you rather see an increase on taxes on American manufacturers?
▶ 2:16:29That's a really tough qu that's a really tough question. You know, I I I'm not uh going to advocate for more taxes on foreign companies. Um but I think if you set the stage for American companies to be successful, we will. Great. Thank you. I yield back, Mr. Chairman. Gentleman yields back. Uh I now recognize Representative Oshelski from the great state of Maryland for 5 Thank you very much. Uh Mr.
▶ 2:16:54chairman and to uh fellow members of both the House and Senate committees here, uh I just want to open by saying as we've highlighted within this committee and throughout this Congress, we know that small businesses are in fact the backbone of America. So, thank you all for the work that you do. Thank you for being our job generators. Um thank you for supporting our economy as being fabrics of the community. Um even doing things like sponsoring local sports teams and offering those unique goods and services that are so critical.
▶ 2:17:20Um, two observations that I have uh today, you know, first of all is as we're talking about this idea of of keeping taxes lower on our small businesses and our producers, the the silence on these tariffs, this Trump tax is absolutely deafening.
▶ 2:17:38We're talking about how do we lower taxes for our businesses at a time when we have just seen the single largest tax increase enacted in peacetime history of the United States. So, let that sink in. We're having a hearing about how do we keep taxes low for our small businesses when we are not talking at all or not pushing back at all against the fact we just saw the largest tax increase in peacetime history in the United States.
▶ 2:18:08Um, I I want to say, you know, as we need as we should come together in a bipartisan way to push back against those tax increases, um, I come to this work and welcome the opportunity to to sustain uh, some of these strategic investments in our small businesses so that we can keep things moving. But, you know, the facts of the matter are that these tax um, changes in this law probably should be done more thoughtfully and comprehensively out than an outright extension.
▶ 2:18:35Uh the data shows that the imp implementation of the current tax policy skews incredibly high to the risks the the the wealthy the ultra wealthy. And so while perhaps not just for billionaires, uh the income of the top 1% of Americans are seeing the average tax cut of $60,000 a year under these provisions, which is fine until you compare it to the bottom 60% of Americans who saw a mere $500 tax
▶ 2:19:05cut. Um you know, we also know that this is failing to deliver the promised economic benefit. Uh the Trump administration promised that um by a conservative estimate we'd see a $4,000 boost in income. Uh but new research is showing that workers who make $114,000 or less in fact have seen no boost.
▶ 2:19:23And so um I think I just wanted to to share for the record that we welcome the opportunity to continue the investments we've heard uh today, but I think we can do that without just writ large embracing this wholesale extension um that does not benefit all Americans.
▶ 2:19:39Um, so I guess with that in mind, um, if we were to be more thoughtful about that, Miss Zimmerman, um, could you just talk a little bit about what in your view the kinds of impacts we might see on a small business, uh, if instead of just merely extending, um, and seeing this completely inequitable distribution of tax benefits that we were instead to sort of incentivize work and expand and invest more in things like the earned income tax credit, the child tax credit, other things that incentivize work, but
▶ 2:20:09also support businesses and business owners putting money back in the pockets of hardworking Americans. I would say exactly. Um I I would I would say that's what this is all about. Again, I don't want you to increase our taxes. I don't want you to increase any one of our small business taxes. We're doing a lot of good work here on the ground and we're good for the economy. And coming out of the 2008 recession, we led with the new jobs being created. we being small businesses.
▶ 2:20:39So, we're going to need that again because it looks like we're going to have to come out of something again, right? But to forget the fact that the TCJA gave absolutely twice the tax savings to the large corporations in this country than they did to any one of us on this panel. Misrepresents the whole concept of, oh, you don't want us to extend this? Well, it's not that I don't that I want you to raise the tax. I want you to do it smarter.
▶ 2:21:10Do it better. Don't not it. Thank you for that. And we welcome the opportunity again to sustain the investments that do benefit our small businesses while not giving those incredible benefits uh to large corporations and the ultra wealthy. So, uh, Mr. Chairman, I'll yield back with that and say I welcome the opportunity to really dig in and do this right as opposed to a wholesale extension uh that only grows our deficit and and misses the mark on some of these important investments. Thank you. Okay, gentlemen yields back.
▶ 2:21:38Uh now recognize Representative Downing from the great state of Montana for 5 minutes. Thank you, Mr. Chairman. I greatly appreciate the House and Senate Small Business Committees hosting this joint hearing today on such a critical issue. The 2017 tax cuts and jobs act was a tremendous lifeline for small businesses across the nation and especially in my home district of central and eastern Montana in particular the estate tax provisions.
▶ 2:22:05And I think there's been a false narrative that's been played here that this is uh unduly affecting you know millionaires and billionaires. But the the reality of it is in my district I have a lot of small businesses that are farms and ranches that uh you know can be you know land rich and cash poor. And the estate tax provisions of the TCJA have been vital for these small farmers and ranchers across my district. And by doubling the estate tax threshold for individuals and married couples.
▶ 2:22:31The Trump tax cuts have ensured that farmers and ranchers can focus on their work and livelihoods rather than preparing for the eventual tax punishments that will be inflicted on their grieving families. I'm going to start with uh Mr. Brashers. In your testimony, you accurately point out that the t estate taxes disproportionately impact small farmers and ranchers who are quote land rich but cash poor.
▶ 2:22:56If the TCGAA uh estate tax provisions were to go away, you know, what impact would this have on the continuation the productivity of agricultural land across our nation? And something I worry about is production agricultural land, you know, coming out of production.
▶ 2:23:14Well, thank you so much for the the Um the reason that it matters so much for uh for ranchers and farmers is that you have this uh this tax that's imposed on assets uh beyond a certain level. And think about valuing that those assets. Think about uh the estate planning that has to go into that. It's it's it's very uh as opposed to someone that just has a large amount of cash.
▶ 2:23:42It's it's easier to uh to think about estate planning when you're just talking about cash. But when you're talking about an a a a uh cash poor but assetri. Thank you for that. Just going to move on a little bit here. Uh to what degree would you say our small farms and ranches are forced to divert their resources away from farming and into liquid assets attorneys and accountants. Yeah. I mean what you're going to end up having is is these family businesses, family farms. They have to break up in in a lot of cases.
▶ 2:24:12I I can't give you a specific statistic. I can look into uh trying to find that those numbers for you. Um but but it's uh especially for for what you're doing with this, we're talking about a tax that accounts for 0.6% of the federal budget. Um so it's it's quite small and there was no meaningful impact from expanding that exemption. With this negative uh potential negative impact on agricultural production, uh how do you believe that may or may not jeopardize our national security and interests uh and increase our reliance on foreign uh products?
▶ 2:24:41Yeah, I mean we're moving away from kind of the uh small business model of Americans passing on their their businesses, their their farms, their ranches to to themselves and they may choose to sell that to foreign investors. It's absolutely a possibility. So beyond agriculture, are there any other small businesses uh or industries critical to national security that would be impacted disproportionately by the expiration of these tax cuts? The tax cuts broadly.
▶ 2:25:08Um, so yeah, any anyone in involved in research and development is going to be a critical one. Anyone that's investing heavily, especially we're trying to get uh companies to invest here in America, invest in new equipment and machinery, these expensing provisions are critical for that. Thank you. Uh, Mr. Click, you uh rightfully labeled the estate tax as the uh quote survivors tax. Given the impact that estate taxes have on grieving families, shouldn't we get rid of them all together? Yeah, absolutely.
▶ 2:25:38It makes no sense. You've already paid taxes on all the money that you've um you've earned, all the assets that you've got, and as a company like the farmers with the an illlquid asset in our inventory around the country, you can't just um generate the cash to be able to pay it.
▶ 2:25:55So, how would you have to adjust the operations of your small business, Patriot Aluminum Products, if the TCJA estate uh tax provision uh for the for the company at large, it just means more time on planning and money spent on consultants and attorneys instead of on inventory and employees. Appreciate that. Uh Mr. Acres, you importantly highlight in your testimony the small businesses are deeply involved in illquid assets that are difficult to pay off like real estate and machinery.
▶ 2:26:22So, can you talk more about how expansions to the estate tax could result in a liquidity crisis as you mentioned in your testimony? Yeah. uh similar just like farmers. I've come from the Iowa, we have the same issue there. When you're investing in all of those things, you can't turn that into cash overnight. So, if you end up having a death in the family that leads to one of those estate planning issues, that money's got to come from somewhere. You cannot do that. You don't have the liquidity to do that because your money's invested in time in uh land and materials, equipment, and that type of thing.
▶ 2:26:52So, it's critical, and you will lose farms and businesses by doing that. Thank you uh for your answers. I've run out of time, so Mr. Chairman, I yield. gentleman yields back. I now recognize Representative Conway from the great state of New Jersey for five minutes. Uh thank you, Mr. Chairman, and thank you for holding this hearing today. I um I've been uh listening to a lot of the commentary and questions and answers. And uh I just want to make a few comments.
▶ 2:27:20Uh the tax cut and jobs act in 2017 uh resulted in the deficit growing by $2 trillion. Now, that uh deficit is something that's going to have to be dealt with and paid by average people all over this country. While the benefits of that tax cut, as we know, and has been documented, went to the wealthiest people in the country, to the billionaires and millionaires, and God bless them, uh it'd be great to have that kind of money.
▶ 2:27:47it' be even greater as they do uh to often pay zero income taxes which uh many people in this room including yours truly uh has has to pay their taxes and as Warren Buffett and others have pointed out what's the fairness of that when you look at these policies uh I think and I hope the American people will ask the question uh does it seem fair to you uh are the benefits of the policy thato that we're bringing forward uh being distributed in a way that makes sense when you look at our entire population where
▶ 2:28:17one nation after all and uh this uh uh tax cut and job acts act certainly didn't meet uh that test was a test for me and uh this next round of uh this or the renewal of this uh we're hearing now that we want need to raise the debt ceiling by another $2 trillion.
▶ 2:28:39uh and um we're going to see the same kind of dist malistribution of the benefits of this and historically uh people ought to know that none in a developed economy such as ours with the with even robust growth rates uh that this tax cut just as the last one will never be paid for by the growth uh that is touted never happened. Now, if you're an emerging economy where you can grow along at a clip of 7 8%, yeah, you can pay for a tax cut like that.
▶ 2:29:06But in developed uh economies such as ours, United States, Europe, um that's that kind of growth from what I'm told by experts uh just uh will not materialize. And so, um the American people need to understand that that historical fact as they contemplate uh this next round of these cuts.
▶ 2:29:26Um, in my state of New Jersey, if these cuts uh to pay for these cuts, the kind of cuts that need to be made uh to Medicaid, as an example, uh $14 billion comes to the state of New Jersey uh to help pay for insurance and a safety net that keeps a nursing home open for that sand sandwich generations that's taking care of their kids, trying to get them off to college, and dealing with an elderly parent or other relative in a nursing home that will close if if these Medicaid dollars do not uh come back to our state.
▶ 2:29:56We're a donor state after all. Can we make up uh for these to keep these institutions open, hospitals, nursing homes by raising um the um tax revenue in New Jersey? I think New Jersey will be like many other states will find they won't be able to do that. And the expansion and access to health insurance under the ACA. Um if these uh supports go away, as the other side wants to do, we'll see a 10% increase in in insurance uh that people have to pay or people will go without.
▶ 2:30:25and the uh number of uninsured in our society uh certainly at large but in New Jersey will uh increase significantly. Um we've had uh and the tariffs when we talk about tax inc tax tax increases uh the tariff represents nothing but a tax increase on average people. We had an income tax in the mid 1800s.
▶ 2:30:48uh we had uh tariffs as well and they decided to rebalance it because the tariffs are being paid for by uh the poorest people, the low-income people in the country. And so they decided, let's change this around. We'll reinstitute uh an income tax and then 1% and three to $5,000. That'd be great. Um but uh we reduce the burden on regular people. That's what happened. Here we are uh I guess claiming that that era should be revisited upon the American people yet again.
▶ 2:31:18Um even after uh the experience that we ought to have with the depression and what uh and the worldwide um devastation that that caused driven by tariffs. Now we have uh Mr. Man, I know you deal with the IRS and I've got to get this question out really quickly. Um you deal with them all the time. Uh it's been starved of resources. If you have a complicated tax uh u situation, you might get away without paying any taxes at all. Small businesses have to deal with them to get their work done.
▶ 2:31:48Can you comment on the starvation um that's occurred uh to the IRS and what that means for your ability to run your business and comply with the laws most people want to do. Well, I have a few seconds. So, I will say that we're losing about $700 billion dollar in revenue by cutting back on the IRS's ability to enforce. Okay. Thank you. Gentleman yields back.
▶ 2:32:16I now recognize Representative Macyver from the great state of New Jersey for 5 minutes. Thank you, uh, chairman and ranking member for convening this very important, uh, hearing today and thank you to each of our witnesses for being here today with us. Um, as mentioned over and over today and even in previous hearings, the small businesses are the backbone to our economy and we must ensure that our tax policies support their growth.
▶ 2:32:41Tax policy can often decide whether a small business entrepreneur can hire workers, invest in themselves, their communities, or even expand. For too long, the tax code has favored large corporations while small businesses are less. This is especially true now as we see the continued gutting of the small business administration by the current administration in the face of a severe e economic uncertainty.
▶ 2:33:06We must work toward a tax code that is fair and responsive to the needs of small business owners and ensure the government is meaningfully here to provide real assistance to businesses in need. To Mr. Bashers, you would you were a contributor to project 2025, which the president began implementing on day one, despite previously saying he didn't know anything about it.
▶ 2:33:32Since then, he has followed its directives to the tea, gutting the Small Business Administration with mass layoffs, implementing tariffs, and supporting a budget that would destroy Medicaid and SNAP benefits. all to create a tax code that punishes the middle and lower class while only benefiting the wealthy. Do you agree, Mr. Bashers, that your project 2025 has been a failure for small businesses? Uh, I appreciate the question.
▶ 2:34:01Um, I'm primarily here to talk about uh the expiring provisions of the Tax Cuts and Jobs Act. Is it a yes or no? I I would disagree with that statement. Of course you would. Then why have small business entrepreneurs lost millions in wealth this week alone as our economy heads towards a recession? Why do you think that's happening?
▶ 2:34:25Um so sorry the the project 2025 was a collaborative effort from uh many conservative institutions. Um we I was a contributor to that. Uh it had a menu of options for a lot of different parts of the government. Some of those are are being adopted, some of them are not being adopted. It's something that the Heritage Foundation has been a part of for many years, many decades going back to the 1980s.
▶ 2:34:50Uh so um so I I think uh I think scapegoating project 2025 in this is is not accurate. Going back to the question, in your opinion, as a contributor to 2020 to project 2025, what what is your in your opinion, why has many small business entrepreneurs lost millions this week? And why are people predicting that we're on our way to a recession?
▶ 2:35:15I mean, right now, obviously, we're looking at there's some uncertainty because of the tariffs and that was uh that was a a conscious decision of the of the administration that they understand that um that they're trying to make deals and they're trying to negotiate on this. And so, um I'm I'm not I'm personally not involved in the tariff discussions. I don't have any insights into that. And a lot of people uh there's a lot of conversations presumably happening behind closed doors that I'm not aware of. So I'm not going to I'm not going to speculate as to where this all ends.
▶ 2:35:44And I think ultimately that's the the most important thing for for businesses is what the final outcome of all this is. However, was tariffs mentioned in project 2025 plan. As as a matter of fact, there were two ideas there were on on the tariff uh point. There was there was a section that was written that was protariff and there was also a section that was written that was anti-tariff.
▶ 2:36:04So, thank you for acknowledging a point that yes, there's a lot of uncertainty around tariffs and that is why we're seeing many small uh entrepreneurs, small businesses lose money this week and many predicting we'll be into a recession. I will say this and ending in my comments, women lie, men lie, but the numbers in the data don't. With that, I yield back. Lady yields back. Now, recognize Representative Morrison from the great state of Minnesota for five minutes. Thank you, Mr.
▶ 2:36:33chairman and ranking member for holding the hearing and thank you to the witnesses uh for taking the time to testify today. Uh I just want to start by saying I I think we all agreed that we want a tax system that benefits small businesses. Um small businesses as we've all said are the backbone of our economy uh keep jobs in our communities. Uh, but I believe a tax code that benefits our small businesses is a tax code that pays also for the essential services that small businesses rely on.
▶ 2:37:04Millions of small business employees rely on Medicaid. For example, uh, thanks to the Affordable Care Act, Medicaid expansion has been crucial to decreasing the number of uninsured business employees. Between 2013 and 2022, an additional 2 and a.5 million small business employees received health insurance through Medicaid. and the uninsured rate of small business workers dropped by 9%.
▶ 2:37:26The Republican budget that the Senate passed last week and that the House will consider this week uh will require an $88 billion spending cut from the Energy and Commerce Committee, which by definition will have to target Medicaid. Additionally, the ACA uh premium tax credits that help cover the cost of premiums for health insurance and make health insurance more affordable for small businesses are set to expire at the end of this year.
▶ 2:37:50If we fail to extend these tax credits, nearly four million Americans will become uninsured and the average premium payment will increase by 93%. 90% of small business owners report healthc care related tax credits are very important to their ability to afford health insurance for themselves and for their employees.
▶ 2:38:11Um, so Miss Zimmerman, C could could you help explain how cuts to Medicaid and the expiration of the ACA tax credits will impact small businesses? Yes, thank you. It will definitely impact small businesses. It will force small businesses to drop coverage and lose employees. Um, to larger businesses will definitely lose that competitor competitive edge.
▶ 2:38:39um we'll have to absorb more cost cutting into already thin margins um or eliminating our ability to invest in growth in our companies. Um and you know wages are going to go down to compensate for the extra cost in the in the benefit that I think the smaller the business the more impact it's going to have on them for sure. Um it's really going to hurt Main Street. Thank you.
▶ 2:39:07Uh, and you also during your testimony mentioned, I know we've had a lot of tariff questions, but I I have to have a turn, too. Um, that the tariffs announced last Wednesday have created uncertainty and unpredictably unpredictability for small businesses. Uh, small businesses are particularly dependent on imports and rely heavily on trade for components used in manufacturing.
▶ 2:39:31They lack the negotiating power that larger corporations have and operate with tighter margins than big businesses. Can you speak to what you're hearing from small businesses about how most recent tariffs will affect them and what steps we in Congress can take to help insulate small businesses from the worst of these effects?
▶ 2:39:52Well, Congress could take back the power of the purse to the legislative branch um and consider um small businesses in doing so. It's always been my understanding. I'm not a history major, but I thought that was uh your job. Um it's trying to figure out what to buy now for the Christmas season so we can sell then. impossible right now.
▶ 2:40:22Impossible. Um, knowing that costs are going to go up, knowing that small business owners, knowing they can't compete with the big businesses of the world, we're going to very possibly get even more of a price increase than the tariffs because we're going to have to compensate for all the um strangle holds the big businesses put on suppliers and they're going to have to make it up somewhere.
▶ 2:40:49And you know, threatening to uh quit with the supplier doesn't make a huge difference when you're a small business. It doesn't move the needle. Thank you so much for your testimony, and I appreciate your reminder to Congress that we should take back the power of the purse. Thank you, Mr. Chair, and thanks again to the witnesses. I yield back. Gentle lady yields back. I now recognize uh Senator Justice and Baby Dog from the great state of West Virginia for five minutes.
▶ 2:41:19I've got baby dog with me here too, you know, but she's outside. But uh I'll uh I'll I'll just hold her right there for just a few minutes. Okay. Uh I had the luxury and the honor of being the governor of West Virginia the last eight years. And I can tell you just this and I can tell you just as point blank as point blank can be.
▶ 2:41:46Our small businesses in West Virginia are the backbone of us. Period. And with all that, our small businesses are the backbone of this entire country. Period. That's all there is to it. Now, I'm a plain spoken guy. I challenge the media all the time. You find something that knowingly I've told you is not true, and they can't do it because I'm not going to do that.
▶ 2:42:11You know, I was brought up in a a way with my father that uh absolutely I was expected to tell the truth and that's what I'm going to do. With that being said, we have got to extend these tax breaks and these tax cuts. If we don't, absolutely, we're going to get in real trouble. Absolutely. Our small businesses depend on this in every way. And if we don't watch out, you know, bad things could happen and bad things could happen really soon.
▶ 2:42:42Now, with that, I have tried in the state of West Virginia to do anything and everything I could to provide additional tax breaks or tax cuts. You know, I'm really proud that when we were there, you know, over the eight years, we cut taxes, I think, 26 different times for all kinds of different things and all a lot of different agencies.
▶ 2:43:06But the one thing we never lost focus with was just how important our small businesses really truly are. And the fact that we've got to keep them going and keep them going in a way that is absolutely moving the ball and moving the ball forward.
▶ 2:43:22Now in addition to all that you know from a standpoint of a pass through you know by making it a accessible that really and truly we could pass through to the individual absolutely it is so so important.
▶ 2:43:43And so with that being said, we have got to continue to do exactly what we're doing or try to find it even in ways to make it even better. Now, and in regard to the estate tax, I've got a real quick story to tell you, and this is as true as true could ever be. You know, you see, I don't speak from a bunch of notes. I speak, you know, from experience and from the heart.
▶ 2:44:12Now, the other thing is I didn't come here as a 40-year-old looking to be a committee chair, you know, or or or what whatever it may be. I came here to try to do one thing, and that is in my own way shake up the world. You see, we've got so much that we've got to do here, and there is so much that's screwed up about this town.
▶ 2:44:38And absolutely from the standpoint of all the goodness that can be done if we all focused on getting off of our soap boxes and getting off of the cameras and really trying to do the job that we're supposed to do. You see, I never took anything anything as the governor. I don't want anything now. I don't want the next hot tip. I don't want a thing for me. I want to do what our forefathers did.
▶ 2:45:07And I'm the real deal on that. You know, our forefathers stood up. Many of them lost their farms. Many of them lost everything they had for this unbelievable nation. And so with all that being said, that's what we all need to be doing. Now, I'm not going to go on and on about that. I just want to tell you just a story real quick. My dad died in 1993. He was an only child. He lived in a little cold camp house.
▶ 2:45:35And if if you were there, if you went there today, you know that house has one bedroom, one bathroom. My mom where she she was one of 10 kids and they never ever my grandparents every time I ever visited them, they never had indoor plumbing.
▶ 2:45:52Now, so with all that being said, all of a sudden, my dad worked really hard with my mom and then he built a level of riches that for all practical purposes we thought my dad was a wealthy guy, you know, and all of a sudden he died and he he had done all kinds of estate planning and everything else.
▶ 2:46:14And literally, literally in 1993, I absolutely worked through all the wickets and tried to someway keep our small family business. And with all that being said, through all that, we worked and we owned about probably about 60% between he and I together of our small family business. through all that.
▶ 2:46:41Literally, I sold every single thing he had. Every single thing he had. And at the end of the day, Jim Justice, Jimmy Justice at the time, took care of my sister and literally did all paid all the obligations and it took about three years to be able to do it. And what money flowed to me was zero. Gentleman's time. Zero.
▶ 2:47:07So, I would tell you just this that the estate planning for our small farms and whatever it may be, we got to do that, too. So, uh, I'm with you. I'm with you a thousand%. I thank you so much for letting me speak. Thank you. Gentleman yields back. I now recognize Representative Cisneros from the great state of California for five minutes. Thank you, Mr. Chairman. Thank you to our witnesses for being here Um, Miss Zimmerman, the the Trump administration claims it wants to restore US manufacturing.
▶ 2:47:37Uh, the SBA even announced a made in America manufacturing initiative. Uh, but in your testimony, you mentioned corporate tax loopholes. Does our does our tax code incentivize large corporations to move production back to the United Um, not not so much. Uh if you if you've got enough planners in place, you can save a lot of money by moving it in, moving it out, and bringing it back.
▶ 2:48:06Um you can cut your tax rate to 10.5% if you do what they call roundtpping. And and of course, I don't think any of us are doing that, but but the big companies certainly are because it's costing, I believe, $70 billion dollar that would be available for other programs. Mhm. And do uh these corporate tax loopholes put domestic small businesses that manufacture in the United States at a disadvantage in your opinion?
▶ 2:48:33Well, certainly because they don't have the same skills and uh finesse available to them that the large companies do and a lot of them being part of their community, they may not take advantage of them anyway because they, you know, are employees, as has been said here by by my colleague next to me, they're our family. um we're not going to send those jobs overseas. So, so yes, a definite right?
▶ 2:49:01And just um you know, the tax code, I would say, for small businesses, it's already complex and it it's burdensome. Um did Elon Musk indouge cutting IRS debt, how is that going to help small businesses at all? It it's going to entirely make things worse. Um, I've advocated for a long time that we go back to having a small business hotline where a small business who's trying to be compliant can call in and get some information.
▶ 2:49:30Um, there they were getting to a point where they could answer some questions. At least they could answer our calls and that's all gone again with the the cut in staffing. Yeah. So right now you would say I guess again in your opinion that they're just with the cuts they're they're not going to be more efficient and definitely they're not going to be more responsive. Well they're definitely not going to be more responsive and and they're not going to collect the dollars that we need.
▶ 2:49:59It ironically they're the one agency that pays for itself if you let them in force. Um and uh so it's just never been very logical to me why we would cut that back. I I think we're probably going to lose uh the number is huge. $700 billion I believe is the number by cutting back all that enforcement that we just added for the IRS.
▶ 2:50:24And that is that enforcement wasn't aimed at small businesses. It was coming from the top 1%. Yeah. And and look, while my colleagues claim they want small tax or tax cuts for small businesses, they they're also defending the Trump tariffs. And I'm sure you answered this question numerous times and I am going to ask you to to answer it one more time just to give it a little emphasis there. But how are these tariffs?
▶ 2:50:49How are the which really taxes um how are they going to impact small businesses? They're having huge impact on small businesses. They're causing to lose an competitive advantage against big businesses who have negotiating power with their suppliers that small businesses don't have. They're causing them not to be able to plan how much inventory should I have in to meet the Christmas rush.
▶ 2:51:16Well, we have no idea because we don't know what the prices will be because we don't know what the tariffs will be because we don't know anything from day to day. Yeah. With that, I I thank you for your answers. And with that, I yield back. Gentleman yields back. We're almost ready to close our hearing. I want to thank everybody. Does anybody if I give you one minute you you have any closing arguments that you'd like to say m Mr.
▶ 2:51:46Well, this is not a batting order. I mean, you Yes, ma'am. I very important to me. Um, you know, I work with small business for America's future and we support all small businesses. I am not by any means. Some of the the representatives and senators here made it sound like we were adversaries. We're not. We're in this for the same thing. We're helping our communities. We really are.
▶ 2:52:16Um, but how we can say that just extending the TCJA is the best thing is what gets me. I certainly don't want tax increases. I want an explanation of why the large companies in this country got twice the tax cut that I got and my clients got when the law went in.
▶ 2:52:39And I would like that to be rebalanced so that we all can really use the field the level playing field without smirking as a phrase. Next. Thank you for having me. Yes, we all have different opinions and different viewpoints on how to make this happen. But this is if if small business is truly the backbone of America, which has been expressed here by both sides of the aisle, we have no choice. We have to figure out how to get through this.
▶ 2:53:04Uh I can speak as my small business and as most of our friends uh we have seen a huge impact by the tax cuts that we've been able to get. Uh so we're going to continue to reinvest that as long as we continue to have that benefit. Secondly, I'm going to pass my business down. The fact that I can do it either easy or hard and how much money it's going to cost is going to be directly impacted by what happens in this forum. Thank you. I'm actually going to agree with Miss Anne Zimmerman on something.
▶ 2:53:35I think we can improve on on the TCGA. I think there are things that can be done uh better. And so I don't think it's necessarily uh something that should just be rubber stamped exactly as it is. So I think I think this committee and and and Congress has a very important job ahead to to find ways to to make it better. And I think it can. But but with that said, I do think that the Tax Cuts and Jobs Act as it was passed was a tremendous success. Some of the statistics out that we haven't had a chance to mention. Unemployment rate hit a 50-year low.
▶ 2:54:04Uh labor force participation rate was growing at the fastest pace in 20 years. Real median household income rose 7.8% in 2019, a record dating back to 1954. Home ownership was growing at the fastest rate in 15 years. US stocks were were booming. Uh and as I as I've mentioned earlier, the net wealth of the bottom 50% was actually uh it was at the highest level since pre Great recession. Okay. Poverty rate was down. So, it was a tremendous success and I think we can actually improve on it. Thank you, Mr. Click. You're our fourth place hitter, cleanup hitter.
▶ 2:54:34Thank you, sir. Thank you. Uh, yeah, I think there's a lot we can agree on. I think there's there's definitely opportunities to improve. I do think it's critical though to extend the existing TCJA right now. Keep those in place. Give some certainty to these businesses. Keep in mind that, you know, small businesses are the backbone of of of America's economy. We create the jobs that pay the taxes. We create the we are the engine of growth that's going to keep growing the country and and the uh the growth of the innovation. Okay. Thank you.
▶ 2:55:04And uh our our last uh uh person to be heard from is uh Congresswoman Goodlander from the great state of New Hampshire for 5 minutes. Thank you so much, Mr. Chairman, and thank you to our witnesses for being here today. There is a lot that we agree on. Um I want to start by asking each of you um do you agree that our tax code is too complicated and the compliance burdens are too great? Yes. Yes. Yes.
▶ 2:55:38Miss Zimmerman I I can I get a yes? Okay. Thank you. Um I want to ask you Mr. Click. How much time and energy, what by way of resources does your small business have to dedicate to tax Uh yeah, it it's a lot. Um I mean, we have a professional CPA firm and uh we have professional staff.
▶ 2:56:04Um uh absolutely fantastic person in the company who uh had years in public accounting to uh to help us grow and and without her, I don't think we we would be where we are here today. Well, Miss Zimmerman, you you shared with us in your written testimony that the section uh 199A deduction is so complex that the vast majority of small business owners actually cannot um determine if they qualify. Many far too many can't determine if they qualify and far too many can't take advantage of this.
▶ 2:56:34Can you speak to from your perspective uh what you believe Congress should be doing in the days ahead to to address these disparities which really hurt small businesses overwhelmingly? Balance the tax cuts between big business and small business. Simplify the code.
▶ 2:56:54give some first employee credits to uh give some immediate relief to people trying to enter the employer Um staff the IRS. Uh those are a number of them. I appreciate that. You you also testified to the need to close a series of loopholes in our tax code.
▶ 2:57:21Um, what what top three loopholes would you advise Congress to take a hard look at closing? Oh, or maybe just your top loophole. I'm I I come from the live free or die state. We're we're not we're not big on loopholes. Yeah. If I had to pick the the top one, I'd probably say roundtpping. I think that which allows corporations to pay actually a 10 and a half% tax instead of 21.
▶ 2:57:48So they're lower than even our lowest rate or right down there with it. And that costs us about $70 billion a year. Thank you for that. Can we all agree that tariffs are Yes. I don't think so. No. Okay. Well, I'll ask you, Miss Zimmerman.
▶ 2:58:10Um because I'm you noted in your testimony that the rates the the pervasive feeling of uncertainty that small businesses are feeling I hear it every single day from small businesses all across my state. The uncertainty is crippling. The uncertainty is bad for the bottom line. Can you speak to what you are hearing from small businesses about what threats of trade wars and tariffs that are being imposed have had on our small businesses around the country?
▶ 2:58:40Yeah, they're they're absolutely afraid that it's going to cut into the small business uh share of business in this country because they're going to get hit the worst by tariffs, increasing prices from the tariffs because they aren't able to negotiate like the big companies. They they just don't have a um the same ability to do that.
▶ 2:59:05their suppliers when you are 0.1% of your supplier instead of 50% of your supplier. Guess what? They don't listen to you. They don't negotiate with you. And so that's going to make a huge difference to Main Street. Huge. Well, thank you for that. I'd like to enter into the record an article um from the Conquered Monitor about the Viking House, which is a small business in conquered New Hampshire in my district.
▶ 2:59:30It shares the story of Emily Glavin who runs this small business for she's been doing so over for over a decade. She weathered the CO 19 pandemic. She put her heart and soul into this business and what she sees what she sees is clear and I think it's clear to to many of us in this room today that the costs from these tariffs as she put it will be passed on to us. And I think she's right.
▶ 2:59:56Simply put, these tariffs are taxes on hardworking people and on small businesses, on consumers and on American families who are going to be paying the cost for trade wars, senseless trade wars, and it's going to put some of the small businesses out of business. It sure will. Well, I thank you for your testimony today. And with that, I yield back, Mr. Chairman. Gentle lady yields back. And uh I want to thank our witnesses for the testimony. I want to make sure nobody runs over each other trying to get to that bathroom.
▶ 3:00:25now we when we leave, but I want to thank you for appearing before both the House and the Senate uh uh committees today. Now, so without objection, members have five House legislative days uh until April 30 to submit additional materials and written questions for the witnesses to the chair. Those questions will be forwarded to the witnesses. I ask the witnesses to please respond promptly. And again, thank you for being here. We appreciate it very much. If there's no further business, without objection, the joint committee hearing is adjourned.