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Now is the best time to launch a new business, according to Small Business Committee Chair Steve Chabot.
This year’s tax cuts have significantly reduced tax rates for small businesses from 40% down to around 21% and as low as 9% for the “very smallest of businesses.” This frees up capital to reinvest in equipment and talent.
Another significant tax policy is in equipment purchase. Business owners can now take the entire deduction in the first year after investing in new equipment instead of writing off a percentage over time.
Representative Chabot predicts this influx of money will allow American businesses to compete better globally.
Another area of focus for the current administration is on cybersecurity. 60% of businesses that fall prey to cybercriminals end up closing within six months. A recent bill gives small business owners the ability to contact their local Small Business Development Center (SBDC) for help in preventing these devastating attacks.
Greg Corombos: Our guest this week on Expert Insights is Ohio Republican Congressman Steve Chabot. He is also Chairman of the House Small Business Committee. And as May celebrates small businesses across the country, we want to get his insights on what’s working well in terms of tax policy and regulations, and what other ideas are coming down the pipeline. We also want to get his thoughts on cybersecurity—what businesses need to know, how well they’re implementing what needs to be done, and what the government can do to help them in that effort. Mr. Chairman, it’s great to have you with us. Thanks for your time today.
Steve Chabot: Thank you, Greg. I look forward to talking with you. Hopefully, your listeners will learn something, and I hope I learn something by talking to you, too.
Greg Corombos: Excellent! Let’s start first with tax policy. Perhaps the most significant piece of legislation to come out of this Congress is the tax bill, just before Christmas 2017. Big cuts on corporate tax rates, tax cuts also for small businesses and families. What do you see as the biggest impact for small business in that legislation?
Steve Chabot: The reduction of rates is the important thing. They’ve come down from around ballpark of 40 percent on a lot of small businesses to around 21%. In many cases for the smallest of small businesses all the way down to 9%. So that’s going to mean that a lot of small business owners across America get to keep more of what they’ve earned, plough that back into the business so they can buy more equipment—which they will, by the way, be able to write off in the very first year and not have to take it off over time. It means they’ll be able to hire more people, and pay the people who are working for them more, and therefore be more competitive. So I’m really optimistic about how this is going to help all kinds of folks, not only right now but into the future. Whether you’re a business person or not, because if you’re not a business person—and most people aren’t—if you’re a consumer, an average taxpayer, your taxes, for the most part, have come down as well. Somewhere between 80 and 90 percent of Americans will pay less taxes as a result of this than had we not passed this.
Greg Corombos: Just how big of a boom are we going to see potentially for corporations? Their taxes went down from 35 percent to 21, and that’s almost 50 percent. We saw the bonuses being sent out to employees, for example, when the legislation was first announced. But once this settles in, and things build up over time, and they can put some of that money back in, what are we going to see in terms of productivity and jobs?
Steve Chabot: I think it’s going to be tremendous. It already is, and fortunately, employees are getting a significant part of that, too, because there have been quite a few bonuses given out, people have gotten raises because of this. Most importantly, because they’re having to withhold less in their paychecks, they’re getting more in their paychecks each week. People are consumers, so they can buy more, and corporations and small businesses produce those goods and services. So it’s great for the economy overall. We’re going to see American companies more competitive around the world, too. We’re going to compete better with the Germans, with the Chinese, with so many others that we’ve had some struggle with over the years. Our businesses are going to be more competitive all across the globe, and that’s good for workers and people who own companies right here in the United States.
Greg Corombos: We’re talking with Ohio Republican Congressman Steve Chabot. He is Chairman of the House Small Business Committee, and sir, one of the complaints we did hear from some business experts in response to the tax cuts, especially on the small business side, but even on some of the others as well, is that there is still too much complexity going on here. It wasn’t simplified as much as it could be. So there are some good things, some bad things here, whether we’re talking about pass-throughs or other businesses that pay on the individual scale and so forth. What're your thoughts on what was dealt with in terms of complexity and what could still be done better?
Steve Chabot: Well I agree with the criticism that there wasn’t as much reduction in the complexity as we would like to have seen. There was a lot of reduction when the House passed the bill initially. By the time the Senate got their paws on it...literally, you needed to get this vote and that vote. A single senator could hold things up, and some of the complexity got back into the code. That being said, even though it’s still for businesses, not a whole lot complex than it was. They’re paying a lot less. And far as individuals go, it will be less complex than it was before. For example, a lot more people are going to be able to take the standard deduction now, which is double by the way, than had to itemize in the past. Unless you’re in a high tax state, where it’s not the federal taxes that are higher, it’s the state taxes are higher, the odds are you’re going to be paying less taxes for a whole bunch of reasons. For those who might live in traditional high tax states like New York and Illinois and California, what I would encourage folks to do is, don’t complain about your federal taxes being too high, complain about the state taxes which are too high. That’s what the real problem is. And those tend to be Democrat controlled states. So they need to argue with their Democrat state office holders to get their taxes down.
Greg Corombos: Let’s talk about regulations. That was a big focal point of Congress and the Trump administration as soon as he took office in 2017, Congressional Review Act used a number of times on that front. What do you see as the biggest accomplishments on that front, and what still needs to be addressed.
Steve Chabot: Well we were able to get rid of 15 pretty significant regulations by what you mentioned, the Congressional Review Act, CRA. So there was progress made there. But most importantly, a lot of regulations are executive actions by the presidents or elements of the executive branch under him, the bureaucracy in general, the rules and regulations—businesses especially, individuals to some degree also have to deal with. And President Trump’s commitment was to get rid of two regulations for every new one coming out of Washington. So, two for one. And not only has he met that, he’s exceeded it—along with congressional help. Of 22 regulations gone for every new one coming out of Washington. And that’s some tremendous progress. Unfortunately, there are a whole lot of regulations out there, so even though we’ve gotten rid of them, it’s kinda like the tip of the iceberg. Down below the surface, there’s still a whole lot of them. For example, using my congressional district as an example, I represent Cincinnati. Right on the river, we have the Great American Ballpark where the Cincinnati Reds play, unfortunately not so well this year so far. In the northern part of my district which is 23 miles up the road is Kings Island, and they have an Eiffel Tower, which is one third as large as the Eiffel Tower in Paris. It’s 23 miles. If you looked at the regulations that we had, and you put those regulations next to each other page by page, they would stretch those 23 miles. It’s about 175,000 regulations, pages of regulations, and it’s incomprehensible to most people. We need to get rid of as much of that as possible, and we’re making some real headway. Again, that being said, there’s a lot of work to do.
Greg Corombos: What do you have on the agenda? What’s on your front burner for the rest of this Congress?
Steve Chabot: There are a number of things, but the one thing I would mention is that small businesses especially, we’re seeing more and more hit with cyber attacks of all sorts. If you are the federal government, you’re the postal service, which has been hit. You are the defense department, you’re the White House even—all have been successfully hacked. They have the most sophisticated type of encryption and devices to protect themselves. But if they’re getting hit, what chance does a small business owner have? So we’re trying to help small businesses to avoid the potential of being hacked or having a cyber attack on their business, and it happens far too frequently and a lot more often. The bad actors tend to be Russia, China, North Korea, Iran, or criminal cartels here in the United States. And it’s happening left and right. The one sad case I remember, there was an owner of a small business in Maine who testified as to how it was payday, he was supposed to pay his employees that day. And when it turned out when he went to do that his bank account was zero because he had been hacked. About 60 percent of businesses that have been hacked end up going out of business within 6 months. It’s about 30,000 dollars, the cost of a small business if they get hacked. We’re working on that. We’re trying to protect small businesses around the country, and the good news is we passed 7 small business oriented bills in the House of Representatives yesterday. And one of those is to help small businesses combat cyber attacks...The main thing it does, we’ve about a thousand small business development centers all across the country, and this requires those small business development centers to make themselves available to small businesses within their area, to help them with best practices, and the best way to protect yourself against a cyber attack. That’s one thing among many that we’re working on for the rest of the year.
Greg Corombos: That’s a very important topic, and I appreciate the explanation of what you’re doing. What would you encourage business owners to do on their own?
Steve Chabot: Change their passwords. There’s a whole range of things you can do. You can contact your local small business development center. You can hire somebody to do it, but that can be expensive. And some are better than others. You can call your member of Congress if you don’t know what your local SBDC is, and they can put you in touch with them, and it’s supposed to be mostly free. Hopefully that a quick way to get some help.
Greg Corombos: Lastly, sir, very quickly. The economy seems to be on the upswing by a number of key indicators. For anyone thinking this might be the right time to launch, what would you tell them?
Steve Chabot: Go ahead and launch. I say go do it. I don’t think you can pick a better time than right now. I think the good economic indicators, I think we’re in it for the long term because of a couple things. Number one, we’ve already talked about the tax cut. The tax cut is real, it’s going to affect people very positively into the foreseeable future. And the other thing is the reduction of regulations, which tends to be one of the biggest wet blankets over the individuals and businesses, and we’re getting rid of them left and right. That being said, we’re being really careful. I’m not only a father, but a grandfather, and I want my kids and grandkids to breathe clean air and to drink clean water, so we’re not getting rid of important environmental regulations, and that sort of thing. It’s the stuff that common sense says, what in heck are we doing that for? Or why do we have 12 different departments requiring you to send paper to them doing the same thing? It’s that kind of stuff we’re getting rid of.
Greg Corombos: Mr. Chairman, I hope you’re enjoying Small Business Appreciation Month, and thank you very much for your time today.
Steve Chabot: Absolutely. Thank you, Greg. And make sure everybody shops small.
Greg Corombos: Ohio Congressman Steve Chabot is Chairman of the House Small Business Committee. I’m Greg Corombos reporting for Expert Insights.
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