▶ 0:19:24>> good morning to everyone. I will get started with a prayer and then the pledge of allegiance, so can you stand please? Bow your heads. Heavenly father, god of all people, thank you for today. We have done as good a job as we can do and appreciate the opportunity to serve you and to serve this great institution. In your name, we pray.
▶ 0:19:53>> please remain standing and recite the pledge. >> I pledge allegiance to the flag of the united states of america into the republic for which it stands, one nation, under god, indivisible, with liberty and justice for all. >> good morning everyone.
▶ 0:20:20I ask unanimous consent to hold today's joint hearing before the house committee on small business and the senate committee of small business and entrepreneurship. Without objection, so moved. I now call a joint hearing to order. Without objection, the chair is authorized to call a recess at any time. I now recognize myself for an opening statement. I want to thank our witnesses for being here today. Many of you have traveled a long way to share your experiences. We value your time and voice.
▶ 0:20:51I would like to take a moment to welcome our colleagues from the senate. Both chambers of congress coming together underscores the importance of today's topic, keeping taxes low for small businesses, extending small business help. To continue to enable mainstreet to thrive by provided much-needed tax breaks.
▶ 0:21:18As 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 to businesses instead of forking it over to the american government. This is especially true when those tax dollars funded anti-small business government like that of joe biden.
▶ 0:21:43Over and over again, this committee heard how the biden administration policies negatively impacted. There was a testimony on how it ruined their financial. Imagine the tax dollars going to the salaries of bureaucrats only for them to tell you they want you to lose your life's work. We reelected president trump thanks to the small business owners across the nation.
▶ 0:22:15The nation is more hopeful than ever. Tcja was the most significant tech system overhaul since 1986. These tax cuts brought rapid growth and job creation, U.S. gdp, and domestic investment. Many of the tax cuts are set to expire at the end of this year. This would devastate small business and the U.S. economy at large.
▶ 0:22:39Making the provisions permanent is critical to sustain economic growth and foster an environment where small businesses can succeed. Just last week, a small business owner testified before the house committee that the t cja saved his business $11,000 last year, allowing him to reinvest his funds into his business. This is one exhibit why we need to extend the president trump's 2017 tax cut.
▶ 0:23:07In turn, we will see the job creation, innovation, and economic growth that when mainstreet america succeeds, america succeeds. Now I recognize chair ernst for her opening remarks.
▶ 0:23:21Chair Ernst: Thank you. I appreciate your friendship and our ability to work together on behalf of america's small business. I am glad we can hold this joint hearing of our two committees today to examine at issue that impacts every small business in america. Eight years ago, working alongside president trump, congress passed the most significant simplification of our tax code in decades.
▶ 0:23:49Chair Ernst: The tax cuts and jobs act of 2017 otherwise known as the tcja. It provided relief to every american, simplifying and reducing personal income tax, and expanding important deductions used by small businesses across the country.
▶ 0:24:06Chair Ernst: These 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.
▶ 0:24:36Chair Ernst: But the reality is these gaains are in jeopardy -- these gains are in jeopardy if congress allows the tcja to expire in americans would suffer the largest tax increase in history. Small business owners will be hit particularly hard if the tcja expires. 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.
▶ 0:25:05Chair Ernst: The tcja empowered small business owners to invest in themselves through provisions like bonus depreciation, enhance business expensing, and the rnd deduction. More important leak, the tcja enable small businesses to invest more in their employees. I 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.
▶ 0:25:36Chair Ernst: I 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 iowans back home, the message is clear, they cannot handle a tax hike. Workers are also concerned if employees have to give more of their revenues 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.
▶ 0:26:06Chair Ernst: The consequences are real to workers and their families. I also want to address a tax policy issue of particular concern to iowans. 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 had been theirs for generations.
▶ 0:26:37Chair Ernst: The bottom line is 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. I 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.
▶ 0:27:06Chair Ernst: I would like to thank our witnesses for being here today, and I look forward to your testimony. I yield back.
▶ 0:27:12Chair Williams: The lady yields back, and I now recognize ranking member velasquez for her opening remarks.
▶ 0:27:21Rep. Velasquez: Thank you, Mr. chairman. Our tax code has been repeatedly adjusted to favor the wealthy of the largest corporations. Built the largest middle-class in history. This time is no different. Americans largely feel the tax code is built in favor of the wealthy.
▶ 0:27:49Rep. Velasquez: According to a recent survey, 90% of small businesses agree in the belief that the tax system favors large corporations. Now, republicans and trump administration are trickling down. Not only are they proposing to permanently infringe the inequality of the tcja into our tax code, but the president just last week unilaterally enacted one of the largest middle-class tax hikes in history.
▶ 0:28:20Rep. Velasquez: This will have devastating effects on the economy, particularly for small businesses who operate on thin margins and who do not have sophisticated supply chain management skills to navigate this complex tariffs. The tariffs will raise prices in the midst of the cost-of-living crisis and caused layoffs and business closures across the economy.
▶ 0:28:49Rep. Velasquez: When president biden left office, the U.S. economy was in a goldilocks zone, low unemployment, falling inflation, falling interest rates, record business creation, and stocks at all-time high. Many investments we make an infrastructure, clean energy, and reassuring the domestic mini factory were just beginning to work their way through the economy. It was the envy of the world.
▶ 0:29:21Rep. Velasquez: Yet in less than three months, president trump has squandered that progress. In the first quarter, american stocks posted the 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 an interest rate costs are. This is president trump's economy.
▶ 0:29:51Rep. Velasquez: 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 putting taxes for the top 1% and adding to the deficit. But what about fiscal responsibility and the deficit?
▶ 0:30:18Rep. Velasquez: Despite projections that extending the tcja over the next that it will cost up to $4 trillion, they are using 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.
▶ 0:30:48Rep. Velasquez: From $880 billion in cuts to the medicaid program which provides health care for our nation's poor, to hundreds of billions of dollars in cuts to nutrition assistance programs that help families put food on the table. To the extent that they have tax cuts for the working class and seniors through no tax on tips, overtime, and social security.
▶ 0:31:13Rep. Velasquez: I ask, what good is no test 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 distributing benefits? The republican budget and the economic policies of president trump are a disaster for our country.
▶ 0:31:42Rep. Velasquez: These policies are the exact opposite of what we need right now. They will raise costs significantly for the working class and because mainstream businesses to lay off staff were close altogether. They are spiraling our economy into a recession as we speak. We can still work together to deliver genuine relief for main street.
▶ 0:32:06Rep. Velasquez: We could extend 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 would 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.
▶ 0:32:31Rep. Velasquez: But 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 choices and 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.
▶ 0:32:57Rep. Velasquez: I 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.
▶ 0:33:13Chair Williams: The lady yields back. I now recognize ranking member markey for his opening remarks.
▶ 0:33:20Sen. Markey: Thank you, chairman williams. Less than 100 days, and this administration has only delivered pain for main street. Since trump's tariff financement asked me, the stock market has lost trillions of dollars. Analysts at j.p. Morgan say it is likely the united states will enter a recession this year.
▶ 0:33:44Sen. Markey: Cover secretary hubbard that nick said going through a recession would be "worth it." small business administrator said the tariffs are a 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 terms tariffs salt -- calling trump's tariffs salt in the wound that is just beginning to heal.
▶ 0:34:13Sen. Markey: As a result of tariffs, small businesses like one in spencer, massachusetts, is having to consider hiring freezes while scaling back the store's selections. These reckless tariffs and the impending with allegation will ruin many small businesses. 97% of exporters and importers in the united states are small or medium-sized businesses.
▶ 0:34:41Sen. Markey: They do not have the ability to absorb the increased supply chain costs leading to thinner profit margins, forced closures, mass layoffs, increased costs for customers. Small businesses are having pepto-bismol moments in the marketplace. They are just holding their stomachs every single day as they see all of this turmoil, uncertainty be introduced into the marketplace.
▶ 0:35:12Sen. Markey: And it is estimated that american households will pay an additional $3400 in costs. Small businesses in their communities cannot afford this. It is clear who this administration serves. And it is not small businesses or working people.
▶ 0:35:28Sen. Markey: 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, all at the expense of essential programs like medicaid and snap and investments in nih to find a cure for alzheimer's and cancer and diabetes that millions of
▶ 0:36:00Sen. Markey: Hard-working americans are looking to protect their families. That is unacceptable. The wealthy do not need another tax giveaway. The top 1% of the wealthiest households hold one third 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 of those three people is equal to the bottom 50% of our entire population combined.
▶ 0:36:30Sen. Markey: They are going to get massive tax breaks under this legislation. That is just crazy. These three people are absolutely not deserving of another tax break. That is what the republicans are doing. Their proposed tax policies would supercharge wealth inequality in our society.
▶ 0:36:53Sen. Markey: Even the republican so-called small business tax deduction section 199a does not primarily help true small businesses. Instead, the vast majority of these tax breaks of 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.
▶ 0:37:18Sen. Markey: In fact, according to a 2023 report by the nonpartisan joint committee of taxation, 55% of the section 199a benefits go to the top 1% in our country. Those are not small business people. The top 1% by definition are not small businesses. They get 55% of the tax breaks that republicans want extended into this whole process.
▶ 0:37:51Sen. Markey: We 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 continuing and putting on the books. We need tech specs for working families. We need childcare tax breaks. We need medicaid.
▶ 0:38:15Sen. Markey: We need real tax reform in this country that will propel our economy, not this drain on the limited revenues we have in this country to send to the upper 1%. I look forward to this hearing, and it feels great to be back here in the house of representatives where I served for 36 years. I just love this institution.
▶ 0:38:40Chair Williams: The gentleman yields back. I now will introduce our witnesses. Our first witness with us today is Mr. tom click. Mr. click is the president and chief executive officer and cofounder of patriot industries in luouisa, virginia. They founded the company in 2010. Before that, he served in the metals industry.
▶ 0:39:12Chair Williams: Previous he was vice president of marketing and product development for a company. Before entering the metals industry, Mr. click managed a department for the amrock division of rubbermaid. Click Mr. is an advisory board -- Mr. click is an advisory board member. Mr. click holds a masters of business administration and a bachelor of business administration from the university of kentucky. We appreciate you being here today.
▶ 0:39:43Chair Williams: Our next witness with us today is Mr. preston brashers. Mr. brashers is a research fellow at the heritage foundation in washington, D.C. prior to that, Mr. brashers was a tax policy specialist in the washington state department of revenue.
▶ 0:40:09Chair Williams: He also contributed to the analysis of the heritage foundation's budget blueprint for fiscal year 2023 and the budget blueprint for fiscal year 2022. Mr. brashers holds a phd and masters in science and economics from the university of kentucky. And earned a bachelors of science and economics from the university of washington. I want to thank you for joining with us today. Now it is my honor to yield to chair ernst to introduce our next witnesses.
▶ 0:40:38Chair Ernst: Thank you, Mr. chairman good I am pleased to have a fellow ottoman with us today. Mr. jerry akers is the president of sharpness inc a of sharpness inc . And moca inc. He started 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.
▶ 0:41:09Chair Ernst: He holds a bachelors degree from upper iowa university. The peacocks, right? That is right, the fighting peacocks. Again, thank you for taking the time and making the trip to washington, D.C., to share with this committee or perspective on the tax cuts and jobs act. Thanks to your family as well. Mr. akers has a fantastic family, and I hope to hear about their experience with your business as well. Thank you and I yield back, Mr. chairman.
▶ 0:41:37Chair Williams: I now recognize the ranking member from new york to introduce our last witness before us today.
▶ 0:41:45Rep. Velazquez: Thank you, Mr. chairman. Our final witness today is anne zimmerman, the founder and owner of zimmerman and co cpa's inc. Look at -- public accounting firm. Since the mid-1980's, she has provided small business tax services and acts as the cfo for many businesses.
▶ 0:42:13Rep. Velazquez: She also cofounded and sold a number of businesses, including a large I.t. Cloud company in 2017. She is currently a cochair of small business for america's future. The small business advocacy organization that helps to ensure policymakers prioritize main street by advancing just and equitable economic framework that works for small business owners with their employees, and their communities.
▶ 0:42:42Rep. Velazquez: She holds degrees in both business management and accounting from the university of cincinnati and northern kentucky university. Thank you for being here.
▶ 0:42:52Chair Williams: The gentlelady yields back. I want to thank all of you myself for being here today. Before we recognize the witnesses, I would like to remind them their oral testimony is restricted to five minutes in length. If you see the light in front of you turn red, it means you are five minutes are up and you should wrap up your testimony. If you get around five minutes and you hear this, it means stop. Ok? With that, I now recognize Mr.
▶ 0:43:21Chair Williams: Click for his five-minute opening remarks.
▶ 0:43:28Mr. Click: Chairwoman ernst, chairman williams, thank 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 their employees. Since the passage of the 2017 tax cuts and jobs act, it has fueled economic growth.
▶ 0:43:57Mr. Click: If congress does not act, our business and employees will be hit with a massive tax hike. Without the extension of section 199a, as this is like patriot will fall victim to the ongoing consolidation of economic power and shifting control away from america's main street and further into the hands of a few dominant and often times foreign corporations. My wife sarah who is with me here today and I started patriot in 2010 with a thousand square feet of space.
▶ 0:44:27Mr. Click: Like so many small businesses in america, we encountered triumphs and setbacks along the way. In addition to never getting complex tax policies, burdensome regulations, and the high cost of compliance, I faced a life-threatening illness. If it were not for our entire work-family pulling together during that time, patriot may not have survived. Thankfully I recovered and we are a company that epitomizes the american dream. Today, patriot has three usa based factories totaling 400,000 square feet.
▶ 0:44:56Mr. Click: We employee 100 family team members and pay our bills on time. Our humble beginnings remind me how fragile small businesses can be. The tcja was a game changer. It allowed us to reinvest, expand, and create more jobs. One of the most impactful provisions was the 20% deduction for small businesses which gave pass-through entities like ours the ability to grow at a faster pace and compete with larger corporations.
▶ 0:45:27Mr. Click: The expansion of expensing laws allowed us to write off purchasing 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 have invested nearly $4 million in advanced manufacturing equipment. If the lot reverts to the old system, business expansion will slow and small cumin is like I will be forced to delay investments. Lowering income tax rates across the board meant that every worker kept their hard earned when -- hard earned money.
▶ 0:46:00Mr. Click: It will provide additional relief for families, allowing them to save more and invest in their futures. If these tax cuts expire, our employees will face higher taxes. Another critical reason congress must act now is to eliminate the death tax. The people who have to pay it are the spouses and children.
▶ 0:46:28Mr. Click: Some believe the estate tax is a well-deserved tax on the ranch but in reality, it punishes families. At patriot, we expanded operations, creating jobs, and reinvested in equipment. If I were to pass away unexpectedly, the government could demand a 40% survivors tax . To meet that burden, my family might be forced to lay off workers or sell the business off entirely.
▶ 0:46:58Mr. Click: The danger comes in how it defines non-that with assets. -- nonliquid assets. Unlike large corporations with massive cash reserves, small businesses like ours don't have that kind of liquid cash available. The estate tax could easily cripple our ability to keep patriot in the family.
▶ 0:47:23Mr. Click: The plan for paying the survivors tax, we must get away from innovation and instead use it on attorneys and consultants and insurance policies. Estate planning should be a part of every company's long-term strategy, not decided by a black swan event. I have seen firsthand the benefits of the tcja for our family business and family team.
▶ 0:47:48Mr. Click: I urge congress to further extend the provisions to support family businesses like patriot industries, which are the backbone of our economy. Thank you for the opportunity to share my perspective, and I look forward to the discussion today. God bless you, and god bless america.
▶ 0:48:03Chair Williams: The gentleman yields back. I now recognize Mr. brashers for his five-minute opening remarks.
▶ 0:48:09Mr. Brashers: Chairman williams, chairwoman ernst, ranking member velazquez, ranking member markey, and numbers of the committees, thank you for giving me the opportunity to testify today. I am a research fellow for tax policy at the heritage foundation for the federal budget. The views I expressed in this testimony are my own and should not be construed as representing any official position of the heritage foundation.
▶ 0:48:37Mr. Brashers: It is fitting that the title of today's hearing says keeping taxes low for small businesses as opposed to cutting taxes. The small business tax provisions for the tax cuts and jobs act have been in place for nearly eight years and if congress allows them to lapse, american entrepreneurs and small businesses would face a tax hike of more than $1 trillion over the next decade. So it is worth emphasizing this is not about cutting taxes.
▶ 0:49:08Mr. Brashers: It is about avoiding an enormous tax hike. Indeed, most mochas this others would probably reject the notion that there taxes are low in the first place. Tcja concluded more than just tax cuts but also structural reforms, simplifications, and base broadening revenue. In addition to some permanent changes, tcja temporarily suspended certain flawed elements of the tax code that had published business owners and entrepreneurs who choose to invest in their workers and the american economy.
▶ 0:49:39Mr. Brashers: Those expiring provisions will be the focus of my testimony today. Tcja addressed some of the work egregious problems that existed in the tax code until 2017. For example, it makes no sense to tax income from business investments before businesses actually earn that income.
▶ 0:49:56Mr. Brashers: But that is effectively what happens when the tax system forces businesses to capitalize and appreciate such expenses over the years instead of allowing them to deduct those costs when determining their current taxable income. To address that problem, tcja implement a full and immediate expensing for capital equipment and machinery. For five years between 2018 and 2022, the tax treatment for these assets was corrected.
▶ 0:50:28Mr. Brashers: Unfortunately, full and immediate expensing also known as bonus depreciation is now gradually sunsetting. One of congress's top priority 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 the tcja, the research and experiments of costs.
▶ 0:50:48Mr. Brashers: That provision is structured in a way that delays to a later year 90% of the valley of deductions for expenses related to research and experimental activities including employee compensation costs, material and supply costs, cost of obtaining a patent, and certain operations, management, and travel costs. The resulting short-term financial hit from this tax liability could be severe for startup companies with limited cash flow and limited access to capital markets.
▶ 0:51:17Mr. Brashers: Tcja 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 exception to become and have, which will happen if tcja expires, it could be the deathknell for some asset rich but cash poor small and midsize family businesses.
▶ 0:51:44Mr. Brashers: Finally, no other expiring provision in tcja had a large impact on the amount of taxes paid by entre nous's and small business owners that the 20% pass-through deduction known as section 199a. While some improvements to it are possible, simply letting the provision lapse would be unthinkable to millions of american business proprietors who claim the deduction.
▶ 0:52:08Mr. Brashers: Luckily, the expiring tcja provisions were a part of the 2017 legislation success. If lawmakers want to revitalize the economy and ensure small business owners and entrepreneurs can thrive, extending these provisions should be a priority. Lawmakers can multiply the economic growth associated with the small business related provisions by ensuring they are made permanent.
▶ 0:52:34Mr. Brashers: Congress also has the opportunity to build on tcja's success for small businesses by expanding and improving on expensive provisions in the bill, for example by mitigating the harmful things out of the small business expensing deduction. Thank you.
▶ 0:52:48Chair Williams: The gentleman yields back. I now recognize Mr. akers for his five-minute opening remarks.
▶ 0:52:56Mr. Akers: Good morning, chair williams and ernst, ranking member's, and distinguished members of the committee. My name is jerry akers, and I am a franchisee business owner of great clips and the joint chiropractic. I operate it with my wife and two daughters 33 great clips and four of the joint chiropractic locations in iowa and nebraska.
▶ 0:53:22Mr. Akers: I am also a co-author of a best-selling book, live it to own it, which is tasked with paving the way for small business owners that paving the way to success for small business owners. I appreciate the ability to discuss small business views that support business, our workforce, and local economies.
▶ 0:53:49Mr. Akers: I have experienced firsthand the remarkable impact small businesses can have on job creation and economic growth. My wife and I created a community of our own employing 250 team members. These team members are treated as an extension of our family and receive industry-leading wages and fortune 500 benefits while working for a small franchise organization.
▶ 0:54:16Mr. Akers: Much 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 look at leone franchise businesses. I appreciate the urgency with which congress is seeking to address these as the uncertainty created by the looming expiration is giving small business pause as they make investment decisions that will allow them to grow and create jobs.
▶ 0:54:43Mr. Akers: First, much like small business owners, the 199a tax deduction for qualified businesses income has been an important lifeline. It has enabled me and almost all franchisees 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.
▶ 0:55:06Mr. Akers: More importantly, this deduction has helped to 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 being jeopardized is unsettling. It is not just about numbers. It is about the livelihood of families, the vitality of communities, and the spirit of entrepreneurship.
▶ 0:55:29Mr. Akers: The tcja also allows businesses to immediately write off 100% of the cost of capital investments on qualified property. For our business 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.
▶ 0:55:56Mr. Akers: While the bonus depreciation provision provided a substantial boost to small business, its face down creates growing concern about increased tax burdens and potential disincentives for investment. Third, tcja allowed an increase in the estate tax exemption 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.
▶ 0:56:24Mr. Akers: Our daughters are minority partners at this time at the great clips location and will eventually own 100% of that business. Whether or not they do and the generational transfer can happen, hopefully it will happen here in congress. And it will depend on what congress does as it acts. Other provisions like the business interest deductibility has been crucial for the franchise community.
▶ 0:56:47Mr. Akers: Prior to 2022, business expense deductions were limited by section 1630j to 30% of their earnings before interest tax depreciation. Interest deductions are now with stricter limitation. Combined with rising interest rates, it is proven to make incremental investments by small businesses much more expensive.
▶ 0:57:10Mr. Akers: On average, a business affected by the change could see a threefold increase in its incremental tax burden, facing higher interest rates and a very high tax rate. The truth is for many small business owners tcja like me, the tcja provisions have been a lifeline -- business owners like me, the tcja provisions have been a lifeline. It has allowed me to hire new employees and whether the economic fluctuations. The prospect of losing that feels like a road being pulled out from under me.
▶ 0:57:41Mr. Akers: It creates a sense of anxiety, especially for those who operate on tight margins. Small businesses are accustomed to taking risk but the threat feels like an unfair and unpredictable obstacle for franchises and all small businesses. I am ready to be a resource for this effort and thank you again for the opportunity to testify and I'm happy to answer any questions.
▶ 0:58:03Chair Williams: The gentleman yields back. I now recognize Mr. zimmerman for her five-minute opening -- miss zimmerman for her five-minute opening remarks.
▶ 0:58:12Ms. Zimmerman: Chairman, raking members, and distinguished committee members, thank you for this opportunity to testify today. I am the president and ceo of zimmerman and company cpa's and cochair of small business for america's future, a national coupler should of small business owners and leaders. As a tax professional, serving this small business -- the small business community and a small business owner myself, I bring a dual perspective to this discussion.
▶ 0:58:41Ms. Zimmerman: I see firsthand how the tax code impacts our ability to grow and compete in the marketplace increasingly dominated by large corporations. Small businesses are the backbone of our economy. Representing 99.9% of all U.S. businesses and could meeting 43.5% gp. Today, these businesses face challenges amid mounting economic uncertainty.
▶ 0:59:11Ms. Zimmerman: These small business confidence index shows confidence falling sharply in q1 25 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 stabilize. At this moment, we need a tax code that provides stability and supports our success.
▶ 0:59:39Ms. Zimmerman: As we approach the expiration of tcja provisions, we must honestly evaluate whether they have delivered on their promises. The evidence clearly shows that for most small businesses, they have not. The congressional research service found section 199a's benefits are skewed. Over half of the total dollars went to business owners with incomes above $500,000 who represent less than 5% of eligible taxpayers.
▶ 1:00:08Ms. Zimmerman: I see this inequality daily in my practice. I easily prepared a return for a restaurant owner who employs 11 people. He received just $700 in savings from 199a, hardly transformative for his business. Same day, I prepared a return with someone -- for someone with over $4 million in income. He employs no one.
▶ 1:00:37Ms. Zimmerman: A survey of small business owners at our network confirms these are not isolated cases. Only 6% increased wages at only 3% hired employees. Most telling, 40 3% reported no positive impact at all. So instead of simply extending tcja provisions that help some but leftmost behind, here are some solutions that congress should implement to help main street.
▶ 1:01:06Ms. Zimmerman: Exempt the first $25,000 of small business profit from federal income tax to deliver immediate relief to entrepreneurs and critical early years. Simplify the tax code to revisit the financial burden that create a competitive disadvantage. Create a small business standard deduction to reduce compliance cost for early-stage businesses.
▶ 1:01:27Ms. Zimmerman: Establisha tax credit for hiring first-time employees to allow entrepreneurs to make the crucial leap to employer status. Look 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.
▶ 1:01:58Ms. Zimmerman: Close unfair loopholes that disadvantage small businesses, eliminating just the round tripping loophole alone would generate just $70 billion over 10 years for deficit reduction, health-care costs, or small business support. Continue irs service improvement and modernization plans. This is crucial.
▶ 1:02:21Ms. Zimmerman: The irs was able to collect more than $1.1 billion in unpaid tax debts from the top 1% in 2024, up from just $38 million the year prior. Insuring wealthy individuals and large corporations pay their fair share generate significant revenue to help our communities.
▶ 1:02:41Ms. Zimmerman: The 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.
▶ 1:02:54Chair Williams: The gentlelady yields back. We will now move to the member questions under the five-minute rule. I recognize myself for five minutes. Mr. click, and your testimony you talk about the import of reinvesting in your business with the money you saved with the small business pass-through deduction. 199a leveled the playing field for small businesses and fueled growth. If this provision expired, how would it impact your ability to grow your business?
▶ 1:03:24Mr. Click: Mr. click: very simple, we would buy less equipment. We would still be methodical and still invest in the company but it makes it a lot easier to accelerate the plan. A 10 year plan might become a seven-year plan or five-year plan.
▶ 1:03:40Chair Williams: Thank you. The 2017, tax cuts allowed small businesses to immediately expense research and development costs, which incentivized innovation. That provision expired in 2022. Here we are a few years later while china and other foreign adversaries take advantage offering a 200% tax break for the same research and development. Wouldn't you agree this has put our national security at risk?
▶ 1:04:10Mr. Brashers: I think the research and development is a bad policy to have 90% of the deduction pushed off after the first year. I think it is especially harmful to small businesses but as you say to any company that is doing research and development, it will have harmful effects.
▶ 1:04:30Chair Williams: In terms of U.S. global competitiveness, what would the future look like without the rmd expense -- &d expense?
▶ 1:04:49Mr. Brashers: I think it will boost the amount of research happening. Dollar for dollar perhaps the biggest bang for the buck in this tech this t package of tax revisions. It is a high priority for many businesses. It makes no sense for the tax code to penalize companies for engaging.
▶ 1:05:17Mr. Brashers: It would benefit not just them but their employees and the american economy and others that will be able to benefit from those innovations as they come up. I think it is critical.
▶ 1:05:25Chair Williams: As a franchise owner, which I am also a franchise owner, you know how important it is that your equipment machinery is up-to-date. You want to be able to deliver and provide the product for customers, but this investment comes at a cost. The provision in the tcja has already begun to phase out.
▶ 1:05:49Chair Williams: What did this provision help you do to buy the tools and things you needed to help your business?
▶ 1:05:57Mr. Akers: The bottom line is when you are in a retail business, you have to be at the top of your game. You have to have new equipment, equipment that is cutting edge. You said we cannot do that if you are held back by not being able to deduct that at the right time. If it is spread over several years, we are going to delay those improvements. By the way, that also impacts our throughput, which means it hurts employment because we don't get as many employees.
▶ 1:06:21Chair Williams: If you get a chance to write it off, it opens up more cash to buy something else.
▶ 1:06:27Mr. Akers: Absolutely. That many times goes back to employees of the weather in his increased benefits are increased wages, because we have x amount of money to spend, we have to decide where to do it. If we are paying it in longer deductions come and will be hard to spend it on employees.
▶ 1:06:42Chair Williams: I yield back. I now recognize chair ernst for five minutes of her questioning.
▶ 1:06:49Chair Ernst: Thank you, chairman williams. Mr. akers, thank you for making the trip out here to washington, D.C., and representing iowa small business. As you know, the tcja provided significantly higher exclusions from the estate tax for families dealing with the death of a loved one.
▶ 1:07:07Chair Ernst: This is an issue that impact our farmers, business owners, and capital-intensive industries and owners like yourself, who have built a successful enterprise that your family hopes to operate -- helps to operate today. Personally I support an end to the death tax altogether.
▶ 1:07:25Chair Ernst: That said, can you discuss how important the tax changes from the tcja are for you and your family, your daughters and your son-in-law, and what you have had to do in anticipation of losing the higher exemptions under the tcja ?
▶ 1:07:40Mr. Akers: Bottom line is we are stimulating the economy by hiring really smart cpas and attorneys to try to figure out a way to do this without letting our daughters lose it. I am very passionate about this. I am a farmboy from iowa that comes from very little. We both have a good business over the years with one intention, to have something to pass down to the next generation. That is going to happen. The only question is what will congress do to allow us to help that happen without the kids picking on multimillions of dollars in unnecessary loans.
▶ 1:08:09Chair Ernst: Thank you, jerry. Mr. click as well, can you answer that? Do you have any concerns about the estate tax and how that will affect your family?
▶ 1:08:20Mr. Click: Yeah, absolutely. We do have a plan in place. Just removing the estate tax and survivors tax would help the consumer. We have three children who might be interested in the business.
▶ 1:08:33Chair Ernst: We hope they are.
▶ 1:08:35Mr. Click: I do.
▶ 1:08:36Chair Ernst: Mr. click, thanks for being here today as well. The changes to bonus depreciation and immediate expensing in the tcja were transformative, and nearly every iowa based manufacturer I have spoken to has made it clear how important it is to them in ensuring they can maintain and expand their operations.
▶ 1:08:56Chair Ernst: So can you give a little more detail to that and why bonus depreciation and immediate expensing are so important to our small businesses and capital-intensive industries like manufacturing?
▶ 1:09:09Mr. Click: Yeah, the equipment is very expensive. Some of that is a great asset for years but it does wear out until you need to replace it or repair it. If you are a business patriot where you are expanding, new locations require a completely new set of equipping. A recent factory in texas was about a $2 million investment. Most of that is machine centers and all the other support equipping that goes along with that.
▶ 1:09:38Mr. Click: Being able to deduct that immediately makes it a lot easier for us to look for the next location.
▶ 1:09:42Chair Ernst: $2 million is pretty hefty for a small business. Absolutely. Mr. akers 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 will have to do to keep their businesses afloat? And what does that mean for your workers? Jerry, we will start with you, please.
▶ 1:10:08Mr. Akers: 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 not put back in place, frankly that money will end up coming from our employees at some point in time. It will slow down improvements in wages and slow down the improvements in benefits. Again, we want to be able to do both. We want to be able to continue to modernize and grow and expand and take care of our employees, but we cannot do both without the help of the tcja.
▶ 1:10:36Chair Ernst: Thank you. Mr. click?
▶ 1:10:39Mr. Click: The tax hike personally is probably the first thing everybody will feel but it will slow down the acceleration. Over the years, we added benefits. When we started, we had no health insurance or 401(k). We have both of those now. We pay bonuses every year. There is only one part of money. This is a component that will help make sure we manage that pot of money better.
▶ 1:11:06Chair Ernst: Thank you both. Mr. chair, I just want to note that both of them have responded that much of the return they get from the tcja, they are rolling right back into their employees whether it is wages, benefits, bonuses. So thank you both for representing our small businesses today. And I yield back.
▶ 1:11:25Chair Williams: The gentlelady yields back. I now recognize ranking member velazquez for five minutes.
▶ 1:11:33Rep. Velazquez: Thank you, Mr. chairman. Ms. zimmerman, the president just enacted significant tariffs on virtually every country except russia. Can you discuss the biggest economic policy blunder in the past century and explain how this will disproportionately harm small businesses?
▶ 1:12:00Ms. Zimmerman: Thank you. Absolutely. The small business uncertainty is higher than it has been, I think the second highest ever, even higher than covid right now. The uncertainty is killing small businesses. They can't plan.
▶ 1:12:20Ms. Zimmerman: They don't know if they are going to open a new -- and I spoke recently with a gentleman that opens a -- owns a coffee shop out west. He was already $50,000 into opening his second location and is having to put that on hold simply because of the tariffs that have been enacted. He is going to pay on everything that comes in. He cannot negotiate.
▶ 1:12:49Ms. Zimmerman: We as small business, truly small businesses, do not have the negotiating power a large business has. For his situation, starbucks can go to their suppliers and say, I am 50% of what you sell and they can negotiate. They will not get the whole cost of that. But then there is a watershed effect that comes down. That we as the small businesses are going to pay even more of it because the suppliers have to make it up.
▶ 1:13:18Rep. Velazquez: Thank you. This is just the beginning. Without the tariffs in effect, the real-time gdp estimate has been dropped for the first quarter to -3.7%. Consumer 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.
▶ 1:13:49Rep. Velazquez: The share of consumers expecting higher unemployment over the next years is the highest since 2009. And these were all measures taken before trump's tariffs announcement. Ms. 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 that tax code favors large corporations.
▶ 1:14:21Rep. Velazquez: -- based on your conversations with small businesses, what makes them feel this way?
▶ 1:14:26Ms. Zimmerman: Well, a true small business isn't really truly on a level playing field. Yes, bonus depreciation may be great, but we already have 170 nine, up to 1.2 million you get to write it off. The small businesses that I know generally don't buy more than 1.2 million in equipment each year. That's a large one. There are some very successful business people here.
▶ 1:14:55Ms. Zimmerman: 90%, I believe it is, 75% of the small businesses in this country make 75 thousand dollars or less. The million dollars is not what they are worried about. Surviving, having an employee, being a part of their community. The true main street people, we cannot separate community from employees from our business.
▶ 1:15:19Rep. Velazquez: I find it astonishing that my colleagues act as if the pass-through deduction is the be-all and end-all of small business tax cuts. Sure, everyone who can navigate these complexities gets a little something.
▶ 1:15:40Rep. Velazquez: But with over half of the total benefit going to the top 1%, we need to seriously consider reform before we can move forward responsibly -- responsibly. On top of the tax code that favors the wealthy, republicans are proposing steep, regressive tariffs and a new tax code for the rich paid for by getting medicaid by 880 billion dollars, education by over $300 billion.
▶ 1:16:14Rep. Velazquez: Nutrition programs by over $200 billion. The goal seems to be funneling wealth upwards from the middle class to the rich. What impact do you think this will have on small businesses and the trust on our institutions?
▶ 1:16:30Ms. Zimmerman: An absolutely devastating impact.
▶ 1:16:35Rep. Velazquez: I yield back, Mr. chairman.
▶ 1:16:38Chair Ernst: The gentlelady yields back. I know recognize ranking member markey for five minutes.
▶ 1:16:48Senator Markey: The announcement of the trump tariffs should be called obliteration day instead of liberation day. Liberation day for trump is taking us back to the days of smooth holly, herbert hoover, and the eve of the great depression. Other countries have started retaliating with no end game in sight. He's making it up as he goes along. Trump's reckless actions will raise costs for small businesses and working families.
▶ 1:17:16Senator Markey: We have already heard from small businesses across the country concerned about how they will weather the impact of the trump trade war. For example, in massachusetts, a small business in the hospitality industry told my office that their suppliers, including local restaurants, grocers, and other small businesses, have already raised their prices just with the threat of a tariff war. Miss zimmerman, how will tariffs hurt small businesses, including the ones you work with?
▶ 1:17:46Ms. Zimmerman: It puts them at a great disadvantage. As I said earlier, we don't have the negotiating ability and the negotiating power. We also have thinner margins. So, the tariffs are harder for the smaller businesses to take. The economic uncertainty. On monday, off one day, on one day.
▶ 1:18:13Ms. Zimmerman: Somebody tweets that they might be postponing them in the market jumps. How do you plan? 51% of our network said we can't, we can't plan, we are putting everything on hold.
▶ 1:18:25Sen. Markey: And for a small business, a truly small business , that's potentially catastrophic, is that right?
▶ 1:18:34Ms. Zimmerman: Absolutely. The numbers in a small business that it would take to put us under is so much different than the big numbers you all have to deal with in your work every day . You know? If we can save $70 billion by changing the round trip and a closing that one loophole, how far up with for small businesses ? How many individual main street businesses with that keep open?
▶ 1:19:03Sen. Markey: According to the urban institute, in 1963 the top 1% had 36 times the wealth of the middle class. Since then, the wealth gap has almost doubled with the aggregation of the wealth into the upper 1%.
▶ 1:19:22Sen. Markey: Entrepreneurship can help close that gap between the ultra-wealthy and the everyday american, however policies that grow the wealth gap will hurt entrepreneurs, given that 75% of small businesses use personal savings to start their firms. America's tax policy should not provide small businesses with pennies while large businesses and wealthy individuals rake in millions.
▶ 1:19:47Sen. Markey: As I mentioned in my opening, even the so-called small business sacks -- tax deduction does not primarily help true small businesses. The top 1% of all learners take home 55% of that tax incentive. That's not a small person. You are making over one million. You are not in any need of a tax break right now. Miss zimmerman, as an accountant you have helped countless businesses large and small file their taxes.
▶ 1:20:18Sen. Markey: In your experience, what kind of businesses benefit the most from the so-called small business tax deduction?
▶ 1:20:24Ms. Zimmerman: Obviously, large or small businesses. I can tell you, 40 3% 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 are making $75,000 per year, how much do you have for all of that tax planning available? You are feeding your family. You are feeding your neighbor's family.
▶ 1:20:55Ms. Zimmerman: The complexity is beyond crazy. It doesn't allow for certain firms. It doesn't allow for this, for that. Even I spend a long time trudging my way through it.
▶ 1:21:07Sen. Markey: That's what really bothers me. I see elon musk saying -- well, the deficit is a huge problem for our country. We have to destroy the department of education. Destroy nih funding. We will have to go in and loot medicaid, which serves about 30% of our country. Grandma and grandpa are in nursing homes. 70% of people in nursing homes are on medicaid. He saying loot that money, give it to tax breaks. Who gets it?
▶ 1:21:39Sen. Markey: People who make more than $1 million per year. Can we really afford that? If you have to take the money from grandma in nursing homes? Kids who need an education? These are crocodile tears coming from elon musk and the republicans about their -- over concerns on deficit even as they call for huge tax breaks on the wealthiest in society.
▶ 1:22:01Chair Ernst: Next we have congressman stolberg, from the state of minnesota. Five minutes.
▶ 1:22:13Representative Stolberg: The colleagues and the other side are burning up dusty playbooks. Tariffs, I represent northeastern minnesota. Trump put the 232 steel tariffs that were so good that biden kept them on. We have to understand the opportunities we have. The secondary positive effects of northeast minnesota because of those tariffs are still in business today.
▶ 1:22:49Representative Stolberg: Northeast minnesota minds the steel that is a strategic national security issue. The tariffs that trump put on the steel industry and that biden kept on and as the iron range goes, so does the state of minnesota. Thank you for holding this meeting today. Northern minnesota, small business is not just the backbone of the economy, they are the heart of the economy.
▶ 1:23:19Representative Stolberg: Whether it is a precision manufacturing facility in duluth, family-run logging operation in grand rapids, chisholm, or manufacturing in forest lake. These are the folks who create jobs, train young workers, and keep our small towns alive. That's why the tax cut jobs act of 2017 was so important. It wasn't just a tax cut, but a signal that the government wanted our small businesses to take our economy to the next level.
▶ 1:23:49Representative Stolberg: The 20% deduction for pass-through businesses leveled the playing field for small firms competing against large corporations. This provision has helped thousands of minnesota pass-through businesses. Reinvest in their operations, raise wages, hire new employees, as many of you testify to today. Mr.
▶ 1:24:18Representative Stolberg: Click, your business has seen remarkable growth. If this sun sets at the end of the year, how would that impact your ability to invest, higher, and even stay competitive?
▶ 1:24:29Mr. Click: It's all about the equipment. In our 10 year plan, we would like to have five more fabrication facilities around the country and each one costs about two million dollars. The 10 year plan without the section 199 a coming back might push it off 10 years to 12 years.
▶ 1:24:48Rep. Stauber: You have to stay competitive.
▶ 1:24:51Mr. Click: We do. We have the most advanced equipment, more advanced than anyone else combined and I would like to keep it.
▶ 1:24:58Rep. Stauber: The way that you survive is by continuously investing in that equipment so that you can stay competitive.
▶ 1:25:05Mr. Click: Rep. stauber: absolutely.
▶ 1:25:09Rep. Stauber: If you don't, you will be out of business. True?
▶ 1:25:11Mr. Click: It would be impactful. Not out of business. We reinvented betting conduit.
▶ 1:25:19Rep. Stauber: Capital purchases on equipment for new technology are the foundation of long-term growth. Mr. akers, how did one hundred percent bonus depreciation improve your ability to grow your business and what rest -- wrist you see if the bennis -- benefit is not made part of it?
▶ 1:25:37Mr. Brashers: -- Mr. akers: we have grown our business by 25%, huge explosion for the midwest. With that goes 50 jobs, something in that neighborhood. Being able to reinvest in that has accelerated our growth and will continue to accelerate our growth in the future, allowing us to give more benefits and wages to our employees.
▶ 1:26:02Rep. Stauber: You said the loss of 50 jobs. That is real and small town iowa and minnesota. People here don't understand that. We talk about small businesses as the engine of the economy. We have the opportunity right now to do that. I was a small business owner for 31 years. It wasn't easy.
▶ 1:26:23Rep. Stauber: It wasn't easy raising four kids and my brother says we have to come up with $7,000 apiece 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 day us. Small businesses -- dais. Small businesses are the engine of the economy and they will make america even better.
▶ 1:26:54Rep. Stauber: Your private investment, reach into your wallet, take that risk for the american dream and be successful. Employ those people that live in our rural small towns. We are depending on you. Don't quit ever. I yelled back.
▶ 1:27:09Chair Ernst: The gentleman yields back. I now recognize another person from kentucky. Great state. Representative mcgarvey, five minutes.
▶ 1:27:26Representative Mcgarvey: I did see that you both went to the university of kentucky, which I appreciate. I want to take a moment right now to say we are thinking about the small business owners in kentucky dealing with the historic flooding for our state. It is really bad. It is ravaging many parts of our state small businesses are crushed right now because of that.
▶ 1:27:49Representative Mcgarvey: Now is obviously not the time to cut back on something like fema or hollow out an agency like the small business administration, which helps the federal relief efforts for our small businesses hit with this uncertainty. We talked a lot about tariffs today. 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 the wall.
▶ 1:28:18Representative Mcgarvey: It's not something for fixing your iphone. How you use a tool matters. Donald trump is wielding this tool in a chaotic way without any strategy or 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 to the uncertainty of it.
▶ 1:28:44Representative Mcgarvey: We had a day a couple of weeks ago where tariffs were on monday, off tuesday, on wednesday, off thursday. Right now people are not sure what he's doing. Read any coverage of it, conservative or liberal, they're all saying -- what is he doing, how does this matter?
▶ 1:29:05Representative Mcgarvey: The uncertainty faced by small businesses every day regardless of what the president decides to do when he wakes up in the morning is enough already, but the uncertainty he is causing by escalating these trade fights on average every three days since taking office is not good for business. The markets right now certainly reflect that.
▶ 1:29:26Representative Mcgarvey: So, miss zimmerman, I want to ask you, I am sure that you have heard a lot from terrified small business owners grappling with this uncertainty of the last few weeks. How does this uncertainty harm small businesses?
▶ 1:29:41Ms. Zimmerman: My colleague who is here with me today, friend and colleague, has a manufacturing company in pennsylvania. It's been in his family for 100 years. Barely survived covid. With all of that going on, came out on the other end successful. Now he's being hit with this, which is much worse than what he was hit with then. His supplies come in from out of the country.
▶ 1:30:11Ms. Zimmerman: He has no negotiating power. He doesn't know how much to order for his christmas, you know, season. Because he has no idea. How do you figure that out when you have no idea? If I might say, representative, the words level playing field have been used by all of us many times today.
▶ 1:30:37Ms. Zimmerman: How is a 40% tax cut for the business -- biggest businesses and a mere 20% deduction, not -- not tax cut, and even level playing field?
▶ 1:30:50Rep. Mcgarvey: It's not.
▶ 1:30:52Ms. Zimmerman: That's not level.
▶ 1:30:54Rep. Mcgarvey: What we want for our small businesses, for the main street that remain the backbone of the american economy , can you drill into why the tariffs deal such a disproportionate harm to the small businesses?
▶ 1:31:12Ms. Zimmerman: Thin margins. The inability to negotiate. If I'm selling a widget and I'm truly main street, down the block from me that is my neighbor that's running that store. How does he have any negotiating ability when walmart has already told that same supplier that you will not pass that tariff on to me, or I will go somewhere else?
▶ 1:31:39Ms. Zimmerman: Because my neighbor, when she does that, they don't care, go ahead, I'm going to take care of walmart.
▶ 1:31:45Rep. Mcgarvey: From the terrace to the tax increases, which you talked about, the house is moving this week on the full extension of the trump tax bill, giving the top point -- top .1% of americans, not to mention the top 1%, disproportionately, while giving the rest of us very little.
▶ 1:32:10Rep. Mcgarvey: One of the ways they are trying to pay for it, it's by cutting health care. That will also impact small businesses, won't it?
▶ 1:32:18Ms. Zimmerman: Absolutely. We help our employees navigate that middle making possible.
▶ 1:32:26Rep. Mcgarvey: Thank you, you -- I go back.
▶ 1:32:33Chair Ernst: Representative mann dine?
▶ 1:32:37Representative Mann Dine: Time and time again what we hear loud and clear from businesses across the country is they need certainty, parity, and simplicity in the tax code. Moving through the budget reconciliation process, we must keep small businesses at the front and center of our priorities.
▶ 1:33:01Representative Mann Dine: I'm here listening to colleagues on the other side of the aisle saying that the idea that the economy was fine and dandy under the biden administration, it's an absolute live. Under the biden administration we saw twice the administration -- twice the inflation as under trump.
▶ 1:33:21Representative Mann Dine: Looking at stats from the bureau of labor statistics it, average private sector two point 4% between 21 and 24. That's not a great, booming economy.
▶ 1:33:39Representative Mann Dine: On the flipside, the bottom 50% of earners under the t cja paid less income tax than ever before and bottom 20% solid federal tax rate drop to their lowest level in 40 years. Somehow, the idea that working americans did not benefit from the tc ga is an absolute lie.
▶ 1:34:00Representative Mann Dine: The tax cuts also enable businesses to raise wages, leading to a 4.9% increase in real wages between 2018 and 2019, the fastest wage growth we saw in two decades. Additionally, real median household incomes in the U.S. rose by $5,000, a larger increase than in the previous eight years combined.
▶ 1:34:27Representative Mann Dine: Overall, individuals and families received three out of every four dollars from the total 2017 tax-cut package, demonstrating their direct benefit to american households. So, the idea that only large corporations are benefiting from this is an absolute lie. Earlier this year I joined my colleague, representative smucker, for an act to make the pass-through deduction permanent.
▶ 1:34:53Representative Mann Dine: I signed that under the representative's bonus appreciation. I worked on the american innovation r&d competitiveness act to permanently allow for immediate r&d expense sing. These three provisions are cornerstones of the trump tax reforms and have brought about some of the greatest investments in innovation in national history and numbers back it up.
▶ 1:35:19Representative Mann Dine: According to nf id, letting that expire would force 60% of small businesses to raise prices by 44% and delay and cancel capital investments. Making it permanent would create 2 million jobs annually, more than 8000 in just texas, my district alone. Mr. click, how would your business will -- be harmed if it were to sunset?
▶ 1:35:45Mr. Click: If it slows down, it would slow down our plans to make more products in the usa that, unfortunately, the country has stopped making. There was a lot of talk about tariffs and I'm no expert but I can tell you from personal experience when my wife and I put the company together, we made sure that our products were made in the usa and we are the only company that guarantees all aluminum products are made here in the usa, mostly in virginia.
▶ 1:36:13Mr. Click: Our products represent less than 2% of our revenue. We have been through the tariff discussion before. We have seen minimal impact from that. I don't want to slow down. I want to continue. I want to make those products we have to go to other countries four.
▶ 1:36:29Rep. Van Duyne: Listening to the aluminum manufacturers in my district complain about the unfair competition that the rest of the world places on them, they appreciate that and I thank you for your business members. Mr. brashers, you emphasize the role of full and immediate expensing and replacing complex rules for depreciation.
▶ 1:36:53Rep. Van Duyne: Assuming you agree that capital deductions must be made over 20 years being impractical, how important is full intermediate expensing to small businesses?
▶ 1:37:02Mr. Brashers: Think about the inflation we have just been going through. 8%, 9%, even 5%. Think about that deduction. You are telling business owners they are not able to actually claim it for 20 years. What ends up happening is you are ultimately only getting about half of the deduction for some of these twenty-year assets. It's quite harmful.
▶ 1:37:25Rep. Van Duyne: Thank you. I yelled back.
▶ 1:37:28Chair Ernst: Yields back. I now recognize representative simon from the great state of california for five minutes.
▶ 1:37:37Representative Simon: Thank you chairs, ranking members, and for the witnesses who are coming this way to tell her stories and giving us their wonderful perspective. In reading the reading materials and the homework, to me it's clear that the hearing is not necessarily about the prosperity of main street.
▶ 1:37:59Representative Simon: It is in fact, 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. Yes, two years ago, six years ago, 10 years ago, 20 years ago, small business owners in this country have consistently struggled in many of our communities to make ends meet.
▶ 1:38:23Representative Simon: This hearing is actually about ignoring the fact that the real economic emergency is one that we are 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. These are not tech giants.
▶ 1:38:57Representative Simon: But we fired folks from our own government. Small businesses cannot safely rely on an sba in this moment that is being dismembered in real time. We have talked to hundreds of small business owners in our office. They have said, clearly, they cannot get through. No one is answering their request.
▶ 1:39:24Representative Simon: If the sba has to manage 1.6 million dollars in student loans , they cannot focus on the conversations we are having today. The mom and pop vendor on main street, on broadway street. We are not investing in main street by having these conversations. We are ripping out the social safety net and calling it fiscal responsibility. So, let's stop pretending.
▶ 1:39:53Representative Simon: 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 moat -- folks who can thrive in real time. We are in fact discarding people at the same time, skilled people, business owners, no support, no roadmap moving forward.
▶ 1:40:16Representative Simon: If this hearing was truly about prosperity, we would be talking about targeted investments that expand access to not only capital and real resources in real time, but also expanding access to health care. Solidifying public infrastructure. A tax system that honors work, not wealth. Instead, we are watching a slow collapse. A real collapse. There is no up from here unless we change course.
▶ 1:40:47Representative Simon: I have a question for Mr. zimmerman. -- miss zimmerman, thank you for being here. You serve real business owners. Real folks. People holding together families, communities, folks who are dispersing paychecks to real everyday folks in their community.
▶ 1:41:06Representative Simon: In this moment as the administration bans critical safety nets, disbands services that are supposed to sort -- support these small business owners, dismantles the sba with no clear strategy moving forward , what are your clients afraid of most? What would an actual true investment right now, not performative tax cuts, look like for them?
▶ 1:41:34Ms. Zimmerman: My clients risk is not surviving through this uncertainty. It's not surviving through the tariffs. We can talk about maybe tariffs being, as you said,, maybe being successful coming out of the other side. But they won't be there on the other side for this. They are going to be gone by then. Those are my neighbors.
▶ 1:42:05Ms. Zimmerman: By cutting medicaid and medicare , all of these safety nets, the sba, even the irs, we are taking away tools that they are using directly. You know, my colleagues who have larger businesses, maybe even employ 100 or 200 people, they are not going to the sba directly. They have lawyers and bankers and stuff.
▶ 1:42:32Ms. Zimmerman: I'm talking about the true main street entrepreneur who relies on that.
▶ 1:42:36Rep. Simon: Thank you for your answer, sorry you have such little time, but I think that you pinned it correctly. As your clients continue to navigate entrepreneurship in this economy where the foundation is being pulled out from beneath them, I hope we get it right. I appreciate your testimony, thank you for being here today.
▶ 1:42:55Chair Ernst: The gentlelady yields back. I now rep -- recognize the representative from the great state of missouri.
▶ 1:43:04Representative: I would like to thank the senators here for making the trek over from the house. Thank you to all of our for being here today in your own time and all -- on your own time. President trump ushered the greatest economy. No coincidence.
▶ 1:43:25Representative: It was thanks to the tax cuts and job act of 2017 that allowed businesses to flourish, take the lead, and 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 living their own version of it.
▶ 1:43:56Representative: It will not only hurt the competitiveness of small businesses, allowing this to expire, it will crush them. The jobs that they require will no longer be there. Communities -- communities they serve will suffer. It will chill the hope and the reality of the american dream on main street that we all saw was pat -- possible just a few years ago.
▶ 1:44:21Representative: 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 U.S. history. Let's get one thing straight. Enough of the gas lighting. This is not a tax cut for billionaires and millionaires.
▶ 1:44:45Representative: 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 real parts of america flourish. Mr. brashers, my democratic colleagues have painted the extension of this tax cut jobs act as handouts for oligarchs, tax cuts for the rich. Can you explain why they are wrong?
▶ 1:45:13Mr. Brashers: After the tax cuts jobs act was passed, we saw a lot of 50% paid a smaller portion of federal taxes than they did prior to the t cja. The idea that the tc ja was a giveaway to the wealthy is not backed up by the facts.
▶ 1:45:34Rep. Alford: It is in fact going to be a big deterrent to starting small businesses in america. Will it not?
▶ 1:45:41Mr. Brashers: Absolutely. What we are talking about right now, with the extension of these provisions, keep in mind that the corporate rates, those have been locked in. If this lapsed, you would have the small businesses slammed with a 20% tax increase in the case of the 199 a deduction.
▶ 1:46:05Mr. Brashers: All businesses would be had with tax increases, from the expensing and all of these other provisions we have talked about today. These would be pretty much across the board for businesses. They will be paying significantly higher taxes and it will hit the smaller businesses the hardest.
▶ 1:46:25Rep. Alford: If this section 190 nine a, the pass-through business deduction is eliminated from main street america, what will it mean to business in america? 33 million small business owners?
▶ 1:46:41Mr. Click: -- Mr. akers: that money has to come from somewhere. I reiterate, most of that comes from increased prices to consumers, it comes from lower future benefits and wage increases for employees. Our piece of the pie as an owner is narrow, tiny. We can't give up more. It has to come from somewhere else. Thank you.
▶ 1:47:10Rep. Alford: I have 24 counties in my district. Small business owners are deathly worried, and rightly so, about us not getting this done and then 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's not for the billionaires and millionaires. This is for mom and pop. For the people who run the sawmills for black walnut in the state of missouri.
▶ 1:47:39Rep. Alford: It is for people with sign companies in sedalia. This is not about the rich. It's about making america wealthy again through small business. Thank you so much. I yelled back.
▶ 1:47:51Chair Ernst: The gentleman yields back. I now recognize senator hirono from the great state of hawaii for five minutes.
▶ 1:48:01Senator Hirono: Below to our witnesses, think you two are two chairs -- aloha to our witnesses. Thank you to our two chairs. The bottom line is who benefits from these tax changes. Mr. zimmerman, you described 90% of small businesses are making, what, have revenues of what did you say?
▶ 1:48:27Ms. Zimmerman: 75% -- $75,000, they live off that.
▶ 1:48:37Sen. Hirono: How many of these small businesses, these thousands of small businesses that fit into that category --
▶ 1:48:44Ms. Zimmerman: Millions.
▶ 1:48:46Sen. Hirono: How many of them do you think benefited from the 1099-a tax provisions? This is the category of that 75%. Not talking about the ones who have franchises in over 100 employees.
▶ 1:49:02Ms. Zimmerman: If you think about it, if they made $75,000, let's say $100,000 to make it simple, if they made that, they get a deduction of 20 on their tax rate at that rate, it's only 12, so they are getting $2000. $2400. That's the benefit. How many employees will they hire with $2400? I'm hearing about sunsetting.
▶ 1:49:34Ms. Zimmerman: We can't let these sunset because it would kill small businesses. Absolutely. But there are other options than sunsetting. 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 amazons of the world and I got a 20% deduction that I don't get, but I won't go into the technicalities of it.
▶ 1:50:02Sen. Hirono: We are going to be confronted with extending this tax bill. If we were to focus on the 75% of small businesses that I would describe it is truly small businesses, how would we change? What kinds of changes would we make to, for example, 1099-a, or any of the other existing provisions that we are asked to simply re-up?
▶ 1:50:31Ms. Zimmerman: Is very -- 1099-a is very complex, that's part of its problem. Perhaps simplifying the overall code so that the truly small business benefits. Give them a credit for their first employee. Many of those businesses, they are just one person. If they want to grow, they are hiring their first one, right? Give them a credit for that.
▶ 1:50:57Ms. Zimmerman: Give them a standard deduction ability so they don't have to track every receipt when they are out mowing people's lawns, right? They could instead take the standard deduction. Close some loopholes to push the money back to small businesses.
▶ 1:51:14Sen. Hirono: The information that we have that the 2017 tax bill actually benefited the richest people in our country, corporations, I don't think there's any amount of gas lighting that is going to change those statistics.
▶ 1:51:33Sen. Hirono: But I'm interested in again is how do we truly help the majority of small businesses as described by you, folks who are bringing in less than 100,000 dollars per year? That would not be the two gentlemen who own businesses on this panel, by the way, you do not constitute small businesses as described by Mr. zimmerman.
▶ 1:51:55Sen. Hirono: I would be very interested in finding out what provisions we can put into this bill -- well, actually that would presume that there are provisions in the bill that help people, so I think not. Again, I want to thank you for being real, miss zimmerman, thank you for being here. Thank you to both of our chairs.
▶ 1:52:21Chair Ernst: The gentlelady yields back. I now record set -- recognize representative lee from wisconsin for five minutes.
▶ 1:52:33Representative Lee: Every day my office receives requests from local small business owners asking me to support the extension of the trump tax cuts. I would like to tell them directly that I'm fully advocating for the extension of that important tax break for small businesses. Those on the other side of the aisle who don't support this falsely claimed that by extending the tax cuts, it will add to the federal debt.
▶ 1:53:02Representative Lee: Let me be clear, we don't have a revenue problem, we have a spending problem. It's the first time ever that democrats have been concerned about that. They instead spend their time proposing one increase after another. Instead of making sure that the american people are prioritized by our own government, they spend their time claiming they are attacking democracy.
▶ 1:53:31Representative Lee: They want to raise taxes to pay for d.e.I. In serbia, sesame street interact, transgender surgery in guatemala. They want to punish business owners by saddling them with regulatory costs that make it harder to do business. Republicans are focused on the primary mission of helping the american people and allowing the main street to prosper again. One of the common misconceptions about the trump tax cuts is they primarily benefit the wealthy. Mr.
▶ 1:54:00Representative Lee: Click, if we took the 1099-a , crs found that 1% were filed by those making under $200,000 per year and 98% of all claims were filed by those making under $1 million. How vital are these deductions for businesses making under $1 billion per year to maintain and potentially expand their small business?
▶ 1:54:25Mr. Click: Critical. All small businesses I think are tied together. There was a common that we may not represent businesses that make less than $75,000 but I can tell you that from personal experience in those years, while risking everything for those -- this company, we might represent what these businesses would like to grow into and become.
▶ 1:54:47Mr. Click: Without the tcja, it will go much slower and be much harder for those smaller businesses that are designed to maybe be a lifestyle business rather than something else much larger.
▶ 1:55:00Representative: I agree. We could have lost or made 200 thousand. Sometimes you don't have control over it. It's a very difficult thing. I know that the benefits of the 168 small k replacement for machinery in my district, where we have 1000 manufacturing firms employing one quarter of the working population with 89% of those firms in my district being classified as small businesses.
▶ 1:55:29Representative: With republicans looking to return manufacturing back to the U.S. right now, how important would raising that depreciation back to 100% b for small manufacturers looking to expand their business?
▶ 1:55:40Mr. Brashers: It's important --
▶ 1:55:42Mr. Akers: It's important for everyone, not just manufacturers. The bottom line is we want to grow. I agree, we are being characterized as being not small business, but each and every one of us starting up -- started off with one unit losing money and sometimes not getting a paycheck. So it is critical that we have the opportunity to continue to grow and expand. Once again, most small businesses want to grow into that and they can't without these benefits.
▶ 1:56:14Representative: I yield back.
▶ 1:56:16Chair Ernst: The gentleman yields back. I now recognize representatives colton from the great state of michigan for five minutes.
▶ 1:56:27Representative: Thank you for holding this critical hearing today, chairman. We are seeing unprecedented attacks on small businesses across the country. They are struggling to keep place in a market that increasingly does not work for them.
▶ 1:56:48Representative: In the great state of michigan, where we are at the center of the attacks on businesses across the country, where tariffs are reaching an all-time high, we know all too well that we are facing budget -- before the congress this week the budget that will add additional burdens , if we are not careful.
▶ 1:57:16Representative: Studies from organizations like the international monetary fund and the tax policy center found that foreign investors retain more earnings as a result of the tcja's reduction in effective tax rates. Let's be clear about who benefits from an extension of these tax rates.
▶ 1:57:35Representative: My colleagues on the other side of the aisle are essentially proposing 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. Miss zimmerman, do you agree that the federal government should ensure that large companies 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?
▶ 1:58:06I Do Ms. Zimmerman: -- Ms.
▶ 1:58:09Zimmerman: I do. Thank you for the question. Let me clarify, I'm not an adversary of my colleagues on the panel. I commend them and applaud them for their success in business and I think that their continued success is instrumental in our company. In our country growing. I don't want to make that split. What I'm saying is we don't need to make -- we don't have to fix this with a proverbial hammer.
▶ 1:58:39Zimmerman: Can't you stop the fact that -- I mean the other statistics all over, half of the 1099-a pool went to the top 5%. Ok? Throw statistics around. Yeah, we got some more. Maybe we paid a little more. My daughter, my son-in-law, they are a teacher and a firefighter. I thank them for what they do.
▶ 1:59:06Rep. Scholten: As do I.
▶ 1:59:08Ms. Zimmerman: And when the 1099-a -- tcja came through, I started a business, I got a much bigger savings and they did as they raised their four children. To me, that's where we need a little finesse. Surely, we can do something to change this so that we are not shoving all this money to the higher income levels or to foreign investors, as you say.
▶ 1:59:40Ms. Zimmerman: The social safety net is so very important for the smaller businesses. They cannot survive if their community is not healthy, bottom line. We are one with our community.
▶ 1:59:52Rep. Scholten: It's essential. Thank you. One message that I consistently hear from business owners back home is the need for more workers. Experiencing a shortage across industries. Small businesses in particular. We feel that. We see in practice that the current administration practices are exacerbating some of those conditions.
▶ 2:00:18Rep. Scholten: Staying with you just for one second, you suggested in your testimony that a tax credit for entrepreneurs hiring employees for the first time might be a good idea. Can you expand a little bit on that idea and tell us how some policies like these that give targeted support to businesses in early stages could help us to address these larger workforce issues?
▶ 2:00:39Ms. Zimmerman: Not using the hammer, right? Make those small changes. These millions of businesses making below 100,000, they are getting ready to hire their first employee. They just hired their first employee. Everybody on this panel will tell you that is a scary leap of faith going off the cliff.
▶ 2:01:04Ms. Zimmerman: Yes, we are putting in our own money to hire them and make payday. A credit for the first employee that comes back immediately through the payroll credit system. We have that in place. That would be very helpful. Ironically, funding the irs. I know, I'm a cpa that has to deal with them, but help small businesses that have to work with them. More as a -- it shouldn't be adversarial.
▶ 2:01:33Ms. Zimmerman: We are trying to be compliant and we cannot if you close the offices.
▶ 2:01:35Rep. Scholten: Thank you.
▶ 2:01:38Chair Ernst: The gentlelady yields back. I now recognize senator husted from the great state of ohio for five minutes.
▶ 2:01:49Senator Husted: Thank you for inviting us to join in on this hearing. Thank you all for being here and for what you contribute to the world through your work. My wife is a small business owner. Like most small business owners, she's 81% of small business owners in america who are sole proprietorship's. They don't have any employees.
▶ 2:02:16Senator Husted: I would like to focus my conversation on those businesses that have employees, the other 19%. The ones who beyond themselves create jobs for others. I want you to think about the tcja in that context. If it were to go away, versus if we renew it, how would that impact your employees? I will start with Mr. click.
▶ 2:02:46Senator Husted: How does the structure of how we assemble the tax code across the board and everything that's been discussed today, how does that impact your employees in your ability to take care of them?
▶ 2:02:58Mr. Click: Great question. I have set it several times, it slows down the businesses. The businesses are also very interconnected. The equipment, the employees, as a work family we all kind of work together. To keep growing the company, to keep investing in it, it means I've got new skills that my employees get to learn.
▶ 2:03:20Mr. Click: They will be paid a wage as we go away from the basic manual operations to more advanced operations like driving trucks, something more valuable to the company. Taking away the tcja slows it down tremendously. We will keep going, but it makes it much easier when everyone is on the same page and pushing in the same direction.
▶ 2:03:42Sen. Husted: I presume that not only improves their skills?
▶ 2:03:46Mr. Click: Their wages. Absolutely. It's a direct one. They get paid more.
▶ 2:03:53Sen. Husted: Benefits, wages.
▶ 2:03:56Mr. Click: Bonuses, midyear bonuses. The turkeys that we give out for thanksgiving, it's all impacted.
▶ 2:04:05Sen. Husted: In the end, it's good for your employees.
▶ 2:04:09Mr. Click: And for those small businesses who are the sole proprietor's.
▶ 2:04:15Sen. Husted: Mr. akers, would you like to share some thoughts?
▶ 2:04:20Mr. Akers: Thank you very much. Our employees are a part of our family, to be honest with you. It's trite but the bottom line. We can't do any of the business we do without our employees. We pay higher than normal industry-standard wages already. When the tax cuts came through the first time we increase to the wages by 20%. They've gone up since then. We will continue to raise them. The benefits are by and large huge over our competition.
▶ 2:04:49Mr. Akers: We can only do that when we have got extra money that we can do something with. One other thing, the communities we are injured are dramatically impacted by the money that comes back to them and that comes from our ability to have the money to redistribute.
▶ 2:05:04Sen. Husted: In the contention that if you look at history, those nations who are the most economically and militarily successful are the ones who are the most innovative? The ones where technology allows them to be successful.
▶ 2:05:21Sen. Husted: In the context of your business and 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 and improve the overall quality of the work environment for your employees?
▶ 2:05:41Mr. Click: That's a great question. I'm so glad you asked it. The technology that we brought into our industry had never crossed over. We are a 100-year-old industry that is essentially unchanged up until 15 years ago. Advanced manufacturing is the reason that patriot exists today. When we tank the bankers and others through the country I show them this bank of 16 machines. First shift, we will run all 16.
▶ 2:06:11Mr. Click: Second shift, 10 or 12. Third shift, seven or eight, zero employees. You know what meets offshore wages? Zero wages on that machine overnight. It runs automatic and produces the best quality products on the planet.
▶ 2:06:25Sen. Husted: Allow you to do made in america. Allowing you to continue to make investments, to continue to compete and have a thriving business where you can employ people. You could say that the renewal of this is essential to american success and prosperity?
▶ 2:06:43Mr. Click: Absolutely.
▶ 2:06:45Sen. Husted: Thank you. I go back.
▶ 2:06:48Chair Williams: I now recognize representative tran from the great state of california.
▶ 2:06:55Representative Tran: Thank you. Miss zimmerman, last week president trump and his administration proposed one of the largest tear of tax increases on the american people since the 1960's. Already we are seeing economic ripple effects. The U.S. market had its worst week since the start of covid and families are feeling it. These are taxes on consumers raising prices on goods, groceries, cars, appliances, housing materials.
▶ 2:07:25Representative Tran: These are the essentials for working families who cannot afford to pay more at a time when household budgets are already stretched thin. No one voted for more expensive groceries, clothing, cars, or household goods. No one voted for trump to take the -- tank the stock market in the economy. Yet this is what his economic approach delivers, creating a recession. Yesterday j.p. Morgan said the trump terrace would send the U.S. into recession.
▶ 2:07:55Representative Tran: At the same time, small businesses are facing uncertainty, supply chains are disrupted and americans could see job losses as a result. The united states is currently experience a cough -- experiencing a cost-of-living crisis. Rent, groceries, energies, squeezed by consumers. How do you expect tariffs to a affect the cost-of-living crisis?
▶ 2:08:18Ms. Zimmerman: What it really does is it creates a dangerous negative feedback loop. It creates higher prices that reduce spending, right? Which causes business decline. Which causes job losses. Which causes future spending reduction.
▶ 2:08:40Ms. Zimmerman: I mean, no question, if it's going to cause to the average family $3800 more based on what they are buying now, they won't have as much to spend at their local businesses. Some of those businesses will go out of business.
▶ 2:08:55Rep. Tran: Thank you for that. A proud small business owner myself before coming to congress, I know health care is one of the biggest challenges facing small employers, not just for themselves but for attracting and retaining workers. Large corporations offer group health insurance plans put small businesses are frequently left to navigate the individual market.
▶ 2:09:20Rep. Tran: That is where the enhanced premium tax credit made a real difference, lowering the costs of health insurance through the affordable care act marketplace for people who are self-employed or working in the small shops. These credits have helped to level the playing field in save thousands per year for small businesses. My republican colleagues are more interested in tax cuts for millionaires and billionaires rather than extending the tax credit for small businesses with health coverage.
▶ 2:09:49Rep. Tran: Can you speak to how this has impacted nobody to inform quality coverage for yourself, family, or your employees, and if these tax credits expired at the end of the year, what would it mean for your business?
▶ 2:10:00Ms. Zimmerman: One of the biggest competitive disadvantage is that we all have here, certainly smaller businesses have, is health insurance. We can't get a reasonable policy for our employees.
▶ 2:10:21Ms. Zimmerman: We help our employees -- I don't now, we did when it came out -- we would help our employees go out and find some, we set up the hr plan paying back the premiums we were allowed tax free. Without that marketplace, a lot of people are going to go uninsured, again.
▶ 2:10:50Ms. Zimmerman: Small businesses will lose their employees to the ge and p&g of the world, the big companies in cincinnati that can give them stellar benefits that we just can afford.
▶ 2:11:01Rep. Tran: I agree. Thank you. I go back.
▶ 2:11:05Chair Williams: I now recognize representative user from the state of pennsylvania for five minutes.
▶ 2:11:11Representative: Thank you very much and thank you to our witnesses. The so-called tcja of 2017 led to years of record low employment. Record high tax records as families some median household income increase. Real wages grew. Millions if it out of poverty. All the while, federal tax revenues grew dramatically.
▶ 2:11:42Representative: It's a record. That's a fact. Now congress wants to deliberate the first agenda in the so-called one big beautiful bill, reconciliation bill, with a plan for it to rain in last weekend we heard from the testimony from witnesses that brought it out that 1% of small
▶ 2:12:14Representative: Businesses makes less than in net income of $1 million. That being said, do any of you believe that the tcja was a hand up to billionaires, as is often stated?
▶ 2:12:29Mr. Click: Definitely not. By the sheer math of it, the amount that goes out to the owners of the company, fractional.
▶ 2:12:44Rep. Tran: Appreciate that.
▶ 2:12:49Mr. Brashers: The exact opposite was true. It was specifically designed to avoid. About a map of the income distribution more.
▶ 2:13:06Mr. Akers: If anything, it created more revenue, creating more taxes, the cycle sending things back to D.C.
▶ 2:13:19Rep. Tran: Something tells me that the added revenue went back into the business, not your pocket, 100% of small businesses.
▶ 2:13:27Mr. Akers: Absolutely. It funds benefits for the staff or grows the business.
▶ 2:13:36Representative: Would you like to answer, miss zimmerman?
▶ 2:13:39Ms. Zimmerman: Let me be clear, I don't want you to raise taxes on small businesses. That would be a mistake. It's not a black or white yes or no question here. Renewing the tcja small business deduction does nothing, nothing at all to fix the problem.
▶ 2:14:00Representative: I want a yes or no. Thank you. R&d expensing, how important is that your business, Mr. click, as well as the bonus depreciation that expires should we not pass tcja?
▶ 2:14:18Mr. Click: The r&d would be more valuable. We already did the development. The bonus depreciation, that is absolutely critical and makes it easier. If it is permanent, that makes it easier to make that 10 year plan into a 20 year plan.
▶ 2:14:34Representative: Couldn't agree more for my business experience and from my time in the field working with small businesses to our time on our small business committee. Mr. brasher?
▶ 2:14:46Mr. Brashers: So many small businesses have very thin margins. If you are talking about taking a deduction away from them, if you started with a 2% margin and all of a sudden take away the deduction for your workers in r&d for all the supplies and materials are going in if you take it away and push it back five years, a portion of it, especially for small businesses with limited access to capital, it would be devastating.
▶ 2:15:18Mr. Akers: Yes, it leads to growth. Money from anywhere leads to growth. That's added benefits for anyone up and down the system. We reinvest right back into the business.
▶ 2:15:31Representative: I have 40 seconds left. I'm going to ask each one of your thoughts on the presidential plan, the so-calledc americah first agenda. Agenda. Making energy that much more competitive.
▶ 2:15:58Representative: -- would you rather see attacks on foreign manufacturers or americans? >> that is a reallybut you could >> that is a reallybut you coult >> that is a reallybut you coule >> that is a reallybut you coulr american companies to be successful. >> thank you. >> gentleman yields back. >> thank you Mr.
▶ 2:16:22Representative: Chairman and fellow members of both the house and senate committees. I want to open by saying, as we have highlighted throughout this committee and congress, small businesses are in fact the backbone of america.
▶ 2:16:42Representative: Thank you for being our job generators, thank you for supporting our economy and doing things like sponsoring local sports teams and offering unique goods and services that are critical. Two observations I have today. First of all, we are talking about this idea of keeping taxes lower on small businesses and producers. The silence on these tariffs, this trump tax is absolutely deafening.
▶ 2:17:10Representative: We are talking about how do we lowered taxes for 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 are having a hearing about how to keep taxes low for all -- for our small businesses and not pushing back at all against the fact we just saw the largest tax increase in peacetime history in the united states.
▶ 2:17:43Representative: As we come together in a bipartisan way to push back against those tax increases, I come to this work and welcome the opportunity to sustain strategic investments in our small businesses so we can keep things moving, but the facts of the matter are, these tax changes emma's law probably should be done more thoughtfully and comprehensively than an outright extension.
▶ 2:18:11Representative: Implementation of the current tax policies skews high to the ultra-wealthy. While perhaps not just for billionaires the income, 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 cut.
▶ 2:18:39Representative: This is failing to deliver the promised economic and if it. The trump administration promised by conservative estimate we would see a $4000 boost in income but researchers showing workers who make $11 4,000 or less may -- or less have seen no boost. We welcome the opportunity to continue investments we have heard today but I think we can do that without embracing this wholesale extension that does not benefit all americans.
▶ 2:19:13Representative: With that in mind if we were to be more thoughtful about that, could you talk a little that about the type of impacts we might see on a small business if instead of extending and seeing this completely inequitable distribution of tax benefit if we were to incentivize work and expand and invest more on the income -- earned income tax credit, the child tax credit, which incentivize business
▶ 2:19:44Representative: Owners putting money back into the pockets of hard-working americans.
▶ 2:19:46Ms. Zimmerman: I would say, exactly. I would say that is what this is about. I do not want you to increase our taxes, any one of our small business taxes. We are doing good work and we are good for the economy. Coming out of the 2008 recession we lead with new jobs being created, we being small businesses. It looks like we have to come out of something.
▶ 2:20:21Ms. Zimmerman: To forget the fact the tcja gave twice the tax savings to the large corporations in this country than to anyone of us on this panel misrepresents the concept of, you don't want us to extend this? It is not that I don't want you to raise the tax, I want you to do it smarter, better, don't not do it.
▶ 2:20:47Dr. Olszewski: Thank you for that. We welcome the opportunity to sustain investments that benefit small businesses while not giving incredible benefits to large corporations and the ultra-wealthy. Mr. chairman I yield back and welcome the opportunity to dig in and do this right as opposed to a wholesale extension that only grows our deficit and misses the mark on important investments.
▶ 2:21:10Chair Williams: We recognize representative downing for five minutes. >> thank you, I appreciate the small business committee with this joint hearing 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 provisions.
▶ 2:21:41Chair Williams: They are saying this is affecting millionaires and billionaires but I have a lot of farms and ranches that could be land rich and cash poor. The estate tax provisions of the tcja have been vital for small farmers and ranchers across my districts.
▶ 2:21:59Chair Williams: By doubling estate tax threshold for individuals and married couples, the trump tax cuts have insured farmers and ranchers can focus on work and livelihoods rather than preparing for the eventual tax punishments that will be inflicted on their grieving families. I will start with Mr. brashers. In your testimony you accurately point out estate taxes disproportionately affect small farmers and ranchers who are land rich but cash poor.
▶ 2:22:28Chair Williams: If the tcja state tax provisions were to go away, what impact would this have on the continuation and productivity of agricultural land across our nation? I worry about production agricultural land coming out of that production.
▶ 2:22:45Mr. Brashers: Thanks for the question. The reason it matters so much for ranchers and farmers is, you have this tax imposed on assets beyond a certain level. Think about valuing those assets, the estate planning that goes into that. As opposed to someone who just has a large amount of cash.
▶ 2:23:16Mr. Brashers: It is easier to think about estate planning when you talk about cash. But when talking about a cash poor but asset rich --
▶ 2:23:27Mr. Brashers: Thank you for that -- Dr. olszewski: thank you for that. I will move on. To what extent are farmers and ranchers required to divert earnings into attorneys?
▶ 2:23:43Mr. Brashers: I can't give you a specific statistic, but especially for what you're doing with this, we are talking about attacks that accounts for 0.6% of the federal budget so it is quite small and there was no meaningful impact for expanding that exemption.
▶ 2:24:02Dr. Olszewski: With the potential negative impact on agricultural production, how may that jeopardize in -- international and our reliance on international products?
▶ 2:24:16Mr. Brashers: We are moving away from the small business model of americans passing on their farms and ranches to themselves and they may choose to sell that to foreign investors. It is a possibility.
▶ 2:24:28Dr. Olszewski: Beyond agriculture, any other small businesses or industries critical to national security that would be impacted disproportionately by the expiration of these tax cuts?
▶ 2:24:40Mr. Brashers: Anyone involved in research and development will be a critical one. Anyone investing heavily, especially when we are getting companies to invest in america, new equipment and machinery. These are critical for that.
▶ 2:24:57Dr. Olszewski: Mr. clicky rightfully labeled the estate tax as the survivors tax. Given the impact estate taxes have on gripping -- grieving families it shouldn't we get rid of them altogether?
▶ 2:25:10Mr. Click: Absolutely. It makes no sense. You already paid taxes on all that you earned, all the assets you got. Like the farmers, in liquid assets, you can't generate the cash.
▶ 2:25:26Dr. Olszewski: How would you adjust operations of your small business, aluminum products, if the tcja estate tax provision expires?
▶ 2:25:35Mr. Click: For the company at large it means more time planning and money spent on consultants and attorneys instead of on inventory and employees.
▶ 2:25:45Dr. Olszewski: Mr. akers, you highlighted that small businesses are involved in illiquid assets that are difficult to payoff like real estate machinery. Can you explain how this could real -- involve a liquidity crisis?
▶ 2:26:04Mr. Akers: Farmers in iowa have the same issue. You can't turn it into cash overnight. If you have a death in the family that leads to one of those estate planning issues the money has to come from somewhere. You do not have the liquidity to do that because your money is invested in lands, materials, equipment. It is critical and you will lose funds in businesses by doing it.
▶ 2:26:27Dr. Olszewski: Thank you. Mr. chairman, I yield.
▶ 2:26:32Chair Williams: I now recognize representative conway from the great state of new jersey for five minutes.
▶ 2:26:41Rep. Conaway: Thank you for holding this hearing today. I've been listening to a lot of the commentary, questions and answers and want to make a few comments. The tax cut in jobs act of 2017 resulted in the deficit growing by $2 trillion.
▶ 2:27:01Rep. Conaway: That deficit is something that will have to be dealt with and paid for by average people all over this country, while the benefits of the tax cut, as has been documented, went to the wealthiest people in the country, billionaires and millionaires,. God bless them it would be great to have that kind of money. But would be even greater as they do to often pay zero income taxes, which many in this room including yours truly, has paid their taxes.
▶ 2:27:32Rep. Conaway: As warren buffett pointed out, what is the fairness? When you look at these policies, I hope the american people ask, does it seem fair to you? Are the benefits of the policy we are bringing forward being distributed in a way that makes sense when you look at our entire population, one nation?
▶ 2:27:54Rep. Conaway: This tax cut and job act was a test for me and this next round, the renewal of this, we need to raise the debt ceiling another $2 trillion and we are going to see the same amount of distribution of benefits and historically people want to know in a developed economy as ours even with robust growth rates,
▶ 2:28:27Rep. Conaway: This tax cut as the last one, will never be paid for by the growth that is touted. Will never happen. If you are in an emerging economy, you could pay for a tax cut like that but developed economies such as ours, united states and europe, that kind of growth will not materialize.
▶ 2:28:50Rep. Conaway: The american people need to understand that historical fact as they contemplate this next round of these cuts. In my state of new jersey to pay for the kind of cuts that need to be made to medicaid, $14 million to new jersey to help pay for an insurance safety net that keeps a nursing home open, getting their kids to college and dealing with an elderly
▶ 2:29:21Rep. Conaway: Parent or other relative in a nursing home that will close if these medicaid dollars do not come back to our state. We are a donor state. Can we make up for this, keep these institutions open by raising tax revenue in new jersey?
▶ 2:29:41Rep. Conaway: I think new jersey will find they will not be able to do that and expansion and access to health insurance under the aca, if these supports go away as the other side wants to do, we'll see a 10% increase in insurance that people have to pay or they will go without and the number of uninsured in our society in new jersey will increase significantly. We have had -- and tariffs. We talk about tax increases.
▶ 2:30:12Rep. Conaway: The tariff represents nothing but a tax increase on average people. We had an income tax in the mid-1800s, we had tariffs as well. They decided to rebalance it because tariffs were being paid for by the poorest people, the low income people.
▶ 2:30:31Rep. Conaway: They decided, let's change this, reinstituting income tax, 1%, $5,000, that would be great, but reduce the burden on regular people. Here we are claiming that era should be revisited upon the american people yet again. Even after the experience we had with the depression and worldwide devastation that caused, driven by tariffs.
▶ 2:31:04Rep. Conaway: Ms. zimmerman I know you deal with the irs all the time. It has been starved of resources. If you have a complicated tax situation you might get away without paying any taxes at all. Small businesses have to deal with them to get their work done. Can you comment on the starvation that has occurred to the irs and what that means for your ability to run your business and comply with laws most people want?
▶ 2:31:30Ms. Zimmerman: We are losing about $700 billion in revenue by cutting back on the irs' ability to enforce.
▶ 2:31:45Chair Williams: Thank you. Gentleman yields back. I rep -- recognized representative from new jersey. >> thank you for convening this important hearing today. Thank you to each of our witnesses for being here today with us. As mentioned over and over today and even in previous hearings, small businesses are the back owns our economy and we must ensure our tax policies support their growth.
▶ 2:32:15Chair Williams: Tax policy can often decide if a small business entrepreneur can hire workers, invest in themselves, their communities or expand. For too long the tax code favored large corporations while small businesses are left carrying the brunt of tax burdens without help. This is especially true now as we see the continued gutting of the small business administration by the current administration in the face of severe economic uncertainty.
▶ 2:32:44Chair Williams: We must work toward a tax code that is fair and responsive to small business owners and ensure the government is meaningfully here to provide real assistance to businesses in need. To Mr. brasher. You are a contributor to project 2025, which the president began implement in on day one, despite previously saying he did not know anything about it here it since then he has followed its directives to the t, gutting the small business administration with mass layoffs, implement and
▶ 2:33:17Chair Williams: 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 that your project 2025 has been a failure for small businesses?
▶ 2:33:34Mr. Brashers: I appreciate the question. I'm primarily here to talk about the expiring provisions of the tax cuts and jobs act. >> is that a yes or no?
▶ 2:33:45Mr. Brashers: I would disagree. >> of course you would. Then why have small business on spinners lost aliens as our economy heads toward a recession? Why do you think that is happening?
▶ 2:34:00Mr. Brashers: So, sorry. Project 2025 was a collaborative effort from many conservative institutions. I was a contributor to that. It had a menu of options for a lot of different parts of the governments, some being adopted, some not being adopted. That is something the heritage donation has been part of for many decades, going back to the 1980's.
▶ 2:34:30Mr. Brashers: I think scapegoating project 2025 is not accurate. >> in your opinion as a contributor to project 2025, what is in your opinion, why have so many small business entrepreneurs lost millions this week and wire people predicting we are on our way to a recession?
▶ 2:34:49Mr. Brashers: Right now there is uncertainty because of the tariffs and that was a conscious decision of the administration. They understand they are trying to make deals and negotiate on those. I'm personally not involved in the tariff discussions. I don't have any insights into that. There are a lot of conversations happening behind closed doors I'm not aware of.
▶ 2:35:19Mr. Brashers: I will not speculate as to where this ends. That is the most important thing for businesses, is what the final outcome is. >> were tariffs mentioned in the 2025 plan?
▶ 2:35:32Mr. Brashers: There were two ideas. There was a section written that was pro terra and one that was antiterrorist. >> thank you for acknowledging there is a lot of uncertainty around tariffs and that is why we are seeing small businesses lose money this week and many predicting we will be into a recession. I will say this, women lie, men lie, but the numbers in the data don't. With that I yield back.
▶ 2:36:02Chair Williams: The lady yields back. Now recognizing rep resented of from minnesota. -- representative from minnesota. >> I think we all agree we want a tax system that benefits small businesses.
▶ 2:36:26Chair Williams: They are the backbone of our economy, keep jobs in our communities, but I believe a tax cut that benefits our small businesses is a tax code that pays also for essential services small businesses rely on. Millions of small business employees rely on medicaid for example. Thanks to the affordable care act, medicaid expansion has been crucial to decreasing the number of uninsured business employees.
▶ 2:36:51Chair Williams: In 2013 and 2022, between then, millions received health insurance from medicaid, and the unemployed rate of small business workers dropped by 9%. Considering this week, requires an $88 billion spending cut from the energy and commerce committee, which will have to target medicaid.
▶ 2:37:16Chair Williams: Additionally the aca premium tax credits, which help make health insurance more affordable, are set to expire at the end of this year. If we fail to extend tax credits nearly 4 million americans will become uninsured and the average premium payment will increase 93%.
▶ 2:37:37Chair Williams: 90% of small business owners report health-care care related tax credits are very important to their ability to afford health insurance for themselves and their employees. Ms. zimmerman could you help explain how cuts to medicaid and the expiration of the aca tax credits will impact small businesses?
▶ 2:38:00Ms. Zimmerman: It will definitely impact small businesses and force them to drop coverage and lose employees to larger businesses, they will lose the competitive edge. We have to absorb more costs cutting into already thin margins or eliminate our ability to invest new growth in our companies. Wages will go down to compensate for the extra cost.
▶ 2:38:35Ms. Zimmerman: I think the smaller the business the more impact it will have for sure. It is really going to hurt main street.
▶ 2:38:46Rep. Morrison: Thank you. You also mentioned the tariffs announced last wednesday have crated uncertainty and unpredictability for small businesses. Small businesses are relying heavily on trade. They lack the negotiating power larger corporations have and operate with tighter margins.
▶ 2:39:16Rep. Morrison: Can you speak to what you're hearing from small businesses about how tariffs will affect them and what steps we can take in congress to insulate small businesses from the worst of these effects?
▶ 2:39:29Ms. Zimmerman: Congress could take back the power of the purse to the legislative branch and consider small businesses in doing so. It has always been my understanding, I'm not a history major, but I thought that was your job, trying to figure out what to buy now for the christmas season to sell then, impossible right now.
▶ 2:40:01Ms. Zimmerman: Knowing costs will go up and that small business owners, knowing they can't compete with big businesses of the world, very possibly we could get even more of a price increase than the tariffs. Because we have to compensate for all the stranglehold's big businesses put on suppliers and they have to make it up somewhere.
▶ 2:40:31Ms. Zimmerman: Threatening to quit with the supplier does not make a huge difference when you are a small business. It does not move the needle.
▶ 2:40:37Rep. Morrison: Thank you for your testimony and I appreciate your reminder to congress that we should take back the purse. Thank you Mr. chair and witnesses.
▶ 2:40:46Chair Williams: I now recognize senator justice and babydog.
▶ 2:41:01Sen. Justice: She is outside, but I will hold her for a few minutes. I had the luxury and the honor of being the governor of west virginia the last eight years and I can tell you as point-blank as can be, our small businesses in west virginia are the backbone of us, period.
▶ 2:41:28Sen. Justice: With all that our small business es are the backbone of this entire country, period. That is all there is to it. I'm a plainspoken guy. I challenge the media all the time. You find something I have knowingly told you is not true and they can't do it because I won't do that. I was brought up in a way with my father that absolutely I was expected to tell the truth and that is what I'm going to do.
▶ 2:41:58Sen. Justice: That said, we have to extend these tax breaks and tax cuts. If we don't, we will get in real trouble. Our small businesses depend on this in every way. If we don't watch out, bad things could happen and really soon.
▶ 2:42:20Sen. Justice: 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. I'm proud that when we were there over they ears we cut taxes I think 26 different times for all kinds of different things and a lot of different agencies but the one thing we never lost focus with with just how important our small businesses truly are and the
▶ 2:42:51Sen. Justice: Fact we have to keep them going in a way that is moving the ball forward. In addition to all that, from a standpoint of a pass-through, by making it accessible, truly we could pass through to the individual. Absolutely it is so important. That said we have.
▶ 2:43:19Sen. Justice: -- we have got to continue to find ways to make it better. In regard to the estate tax I have a quick story to tell you. This is as true as true could be. I don't speak from a bunch of notes. I speak from experience and from the heart.
▶ 2:43:48Sen. Justice: The other thing is, I did not come here as a 40-year-old looking to be a committee chair or whatever it may be. I came here to try to do one thing and that is, in my own way, shake up the world. We have so much we have to do here. There is so much that is screwed up about this town.
▶ 2:44:17Sen. Justice: From the standpoint of all the goodness that can be done, if we all focused on getting off of our soapboxes and cameras and trying to do the job we are supposed to do. I never took anything as the governor. I don't want anything now. I don't want the next hot tip. I don't want to think for me. I want to do what our forefathers did and I have the real deal on that.
▶ 2:44:47Sen. Justice: Our forefathers stood up, many lost their farms and everything they had for this unbelievable nation. With all that said, that is what we all need to be doing. I'm not going to go on and on about that but want to tell you a story real quick. My dad died in 1993. He was an only child. He lived in a coal camp house. If you went there today, that house has one bedroom, one bathroom.
▶ 2:45:18Sen. Justice: My mom, she was one of 10 kids, and never -- my grandparents every, visited, they never had indoor plumbing. With all that said, all of a sudden my dad worked really hard with my mom. Then he built a level of riches, for all practical purposes, we thought my dad was a wealthy guy. All of a sudden he died.
▶ 2:45:48Sen. Justice: He had done all kinds of estate planning and literally in 1993, I worked through all the wickets and tried to some way keep our small family business. With all that being said, through all that we worked, and we owned about 60% between he and I together of our small family business.
▶ 2:46:16Sen. Justice: Through all that, literally, I sold every single thing he had. Every single thing he had. At the end of the day, jim justice, took care of my sister and literally paid all the obligations. It took about three years to be able to do it. What money flowed to me? Zero.
▶ 2:46:41Chair Williams: The gentlemen's time is up.
▶ 2:46:44Sen. Justice: I would tell you this, estate planning for small farms and whatever it might be, we have to do better. I'm with you 1000%. Thank you so much for letting me speak.
▶ 2:46:56Chair Williams: The gentleman yields back. We now recognize representative cisneros.
▶ 2:47:05Rep. Cisneros: Thank you for being here. Ms. zimmerman the trump administration claims they want to restore manufacturing and the sba announced a made in america initiative but you mentioned corporate tax loopholes. Does our tax code incentivize large corporations to move production back to the U.S.?
▶ 2:47:28Ms. Zimmerman: Not so much. If you have got enough planners in place, you can save a lot of money by moving it in, out and back. You can cut the tax rate to 10.5% if you do what they call round tripping.
▶ 2:47:51Ms. Zimmerman: I don't think any of us are doing that, but big companies are because it is costing $70 billion that would be available for other programs.
▶ 2:48:00Rep. Cisneros: Disease corporate tax loopholes put domestic small businesses that manufacture in the U.S. at a disadvantage, in your opinion?
▶ 2:48:11Rep. Cisneros: Certainly because they do not have the same skills and finesse available to them that large companies do. A lot of them being part of their community may not take advantage of them anyway. Our employees, this has been said by my colleague next to me, they are family. We are not sending those jobs overseas. So yes, a definite disadvantage.
▶ 2:48:37Rep. Cisneros: The tax code for small businesses is already complex and burdensome. Did elon musk and doge cutting irs staff, how will that help small businesses at all?
▶ 2:48:53Ms. Zimmerman: It will entirely make things worse. I have advocated for a long time we go back to having a small business hotline where a small business who is trying to be compliant can call in and get information. They were getting to a point where they could answer some questions, at least our calls, but that is gone again with the cut in staffing.
▶ 2:49:19Rep. Cisneros: So you would say in your opinion, with the cuts they will not be more efficient and definitely not more responsive?
▶ 2:49:29Rep. Cisneros: Definitely not --
▶ 2:49:31Ms. Zimmerman: Definitely not more responsive and they will not collect the dollars we need. Ironically they are the one agency that pays for itself if you let them. It has never been very logical to me why we would cut that back. I think we are probably going to lose -- the number is huge, $700 billion, by cutting back all that enforcement we just added for the irs.
▶ 2:50:02Ms. Zimmerman: That enforcement was not aimed at small businesses. It was coming from the top 1%.
▶ 2:50:09Rep. Cisneros: When my colleagues claimed they want tax cuts for small businesses, they are also defending the trump tariffs. I'm sure you have answered this numerous times and I will ask you to answer one more time, to give emphasis. How are these tariffs, really, taxes, how are they going to impact small businesses?
▶ 2:50:31Ms. Zimmerman: They are having huge impacts on small businesses, causing them to lose a competitive advantage against big businesses who have negotiating power with their suppliers that small businesses do not have. They are causing them to not be able to plan how much inventory they should have to meet the christmas rush. 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.
▶ 2:51:01Rep. Cisneros: With that I think you for your answers and yields back.
▶ 2:51:07Chair Williams: The gentleman yields back. We're almost ready to close our hearing. I want to thank everybody. If I give you one minute, do you have any closing arguments? It is not a batting order. Yes, ma'am.
▶ 2:51:28Ms. Zimmerman: Very important to me. I work with small businesses and we support all small businesses. Some of the representatives and senators made it sound like we were adversaries. We are not. We are in this for the same thing, helping our communities. We really are.
▶ 2:51:55Ms. Zimmerman: 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.
▶ 2:52:17Ms. Zimmerman: I would like that to be rebalanced so we all can use the level playing field without smirking, as a phrase.
▶ 2:52:26Chair Williams: Thank you. >> we all have different opinions and viewpoints on how to make this happen, but a small business is truly the backbone of america, which has been expressed by both sides of the aisle, we have no choice but to figure out how to get this through. I can speak as my small business and most of our friends, we have seen a huge impact by tax cuts we have been able to get. We will continue to reinvest of that as long as we have the benefit.
▶ 2:52:55Chair Williams: Secondly I will pass my business down. The fact I can do it easy or hard and what it will cost will be directly impacted by what happens in this form. Thank you -- forum. Thank you. >> I will agree with Ms. zimmerman. I think we can improve on the tcja, things can be done better. It is not necessarily something that should be rubberstamped exactly as it is.
▶ 2:53:22Chair Williams: I think this committee and congress have an important job ahead to find ways to make it better. And I think it can. That said, the tax cuts and jobs act was a tremendous success. Some of the statistics we have not had a chance to mention, unemployment hit a 50 year low, labor force per dissipation at the fastest pace in 20 years, real and median household income rose 20% in 2018, compared to 1954.
▶ 2:53:53Chair Williams: U.S. stocks were booming. As I mentioned earlier the net wealth of the bottom 50% was at the highest level since pre-great recession. The poverty rate was down. It was a tremendous success and I think we can improve that.
▶ 2:54:09Chair Williams: You are in fourth place, cleanup hitter.
▶ 2:54:13Mr. Akers: There is a lot we can improve. I think it is critical to extend the existing tcja, keep those in place, give certainty to these businesses. Keep in mind to small businesses are the backbone of america's economy. We create the jobs that pay the taxes. We are the engine of growth that will keep growing the country.
▶ 2:54:38Chair Williams: Thank you. Our last person to be heard from is congressman good lander from new hampshire. >> thank you to our witnesses. There is a lot we agree on. I want to start by asking each of you, do you agree that our tax code is too complicated and the compliance burdens are too great? >> yes. >>. Yes.
▶ 2:55:10Chair Williams: >> yes.
▶ 2:55:14Rep. Goodlander: Ms. zimmerman? Can I get a yes? Thank you. I want to ask you, Mr. click. How much time and energy, what resources does your small business dedicate to tax compliance?
▶ 2:55:32Mr. Click: It is a lot. We have a professional cpa firm, professional staff, absolutely fantastic, years in public accounting, to help us grow. Without her, we would not be where we are today.
▶ 2:55:51Rep. Goodlander: Ms. zimmerman you shared with us in your written testimony that the section 199a deduction is so complex the best majority of small business owners cannot determine if they qualified. Far too many cannot determine if they qualify and far too many cannot take advantage of this.
▶ 2:56:13Rep. Goodlander: Can you speak to from your perspective what you believe congress should be doing in the days ahead to address these disparities which really hurt small businesses overwhelmingly?
▶ 2:56:23Ms. Zimmerman: Balanced tax cuts between big business and a small business, simplify the code, give some first employee credits, immediate relief to people trying to enter the employer field. Staff the irs.
▶ 2:56:48Rep. Goodlander: I appreciate that. You also testified to the need to close a series of loopholes in our tax code. What top three loopholes would you advise congress to take a hard look at closing? Or maybe just your top loophole? I come from the live free or die state. We are not big on loopholes.
▶ 2:57:12Ms. Zimmerman: If I had to pick the top one I would say round tripping. Which allows corporations to pay a 10.5% tax instead of 21%. So they are lower than even our lowest rate or down with it. That cost us about $70 billion a year.
▶ 2:57:33Rep. Goodlander: Thank you. Can we all agree tariffs are taxes?
▶ 2:57:38Ms. Zimmerman: Yes. >> I don't think so, no.
▶ 2:57:43Rep. Goodlander: I will ask you, Ms. zimmerman. You noted in your testimony the pervasive feeling of uncertainty small businesses are feeling, I hear it every single day from small businesses across my state. The uncertainty is crippling, the uncertainty is bad for the bottom line.
▶ 2:58:06Rep. Goodlander: Can you speak to what you are hearing from small businesses about threats of trade wars and tariffs being imposed have had on our small businesses across the country.
▶ 2:58:16Ms. Zimmerman: They are absolutely afraid it will cut into the small business -- share of business in this country. They will get hit the worst by tariffs, increasing prices from the tariffs, because they are not able to negotiate like the big companies. They don't have the same ability to do that.
▶ 2:58:41Ms. Zimmerman: Their suppliers, when you are a 0.1% of your supplier, instead of 50%, they don't listen to you or negotiate with you. That will make a huge difference to main street, huge.
▶ 2:58:57Rep. Goodlander: I would like to enter into the record an article from the concorde monitor about the viking house, a small business in concord, new hampshire in my district. It shares the story of emily who runs the business, has been doing so for over a decade.
▶ 2:59:16Rep. Goodlander: She weathered the covid-19 pandemic, but her heart and soul into this business, and what she sees is clear, and clear to many of us in this room today, the cost of these tariffs as she put it will be passed on to us. I think she is right. Simply put, these tariffs are taxes on hard-working people and small businesses, on consumers and american families, who are paying the cost for trade wars, senseless trade wars.
▶ 2:59:45Ms. Zimmerman: It will put some small businesses out of business.
▶ 2:59:49Rep. Goodlander: It sure will. I think you for your testimony today and with that I yield back.
▶ 2:59:55Chair Williams: The gentlelady yields back. I want to thank our witnesses for the testimony. I want to make sure no one runs over. I want to thank you for appearing before the house and senate committees today. Without objection, five house legislative days to submit additional materials and questions for witnesses to the chair. Those questions will be forwarded to the witnesses. I ask witnesses to please respond promptly. Thank you for being here.
▶ 3:00:26Chair Williams: If there are no further questions the joint committee hearing is adjourned. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap.org]