[Joint House and Senate Hearing, 107 Congress]
[From the U.S. Government Publishing Office]



                                                        S. HRG. 107-185
                                                           H. Hrg 107-4
 
                    A TAX AGENDA FOR SMALL BUSINESS
=======================================================================




                            JOINT ROUNDTABLE

                               before the

                      COMMITTEE ON SMALL BUSINESS
                          UNITED STATES SENATE

                                and the

                      COMMITTEE ON SMALL BUSINESS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION
                               __________

                             APRIL 4, 2001
                               __________



    Printed for the Committees on Small Business of the U.S. Senate
                    and the House of Representatives












                        U.S. GOVERNMENT PRINTING OFFICE
                                WASHINGTON : 2002
_____________________________________________________________________________
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                              U.S. SENATE
                      COMMITTEE ON SMALL BUSINESS

               CHRISTOPHER S. BOND, OF MISSOURI, Chairman
            JOHN F. KERRY, OF MASSACHUSETTS, Ranking Member
CONRAD BURNS, Montana                CARL LEVIN, Michigan
ROBERT F. BENNETT, Utah              TOM HARKIN, Iowa
OLYMPIA J. SNOWE, Maine              JOSEPH I. LIEBERMAN, Connecticut
MICHAEL ENZI, Wyoming                PAUL D. WELLSTONE, Minnesota
PETER G. FITZGERALD, Illinois        MAX CLELAND, Georgia
MIKE CRAPO, Idaho                    MARY LANDRIEU, Louisiana
GEORGE ALLEN, Virginia               JOHN EDWARDS, North Carolina
JOHN ENSIGN, Nevada                  MARIA CANTWELL, Washington
               Emilia DiSanto, Republican Staff Director
               Paul H. Cooksey, Republican Chief Counsel
     Patrica R. Forbes, Democratic Staff Director and Chief Counsel
                                 ------                                

                        HOUSE OF REPRESENTATIVES
                      COMMITTEE ON SMALL BUSINESS

                      DONALD A. MANZULLO, Chairman
                   NYDIA M. VELAZQUEZ, Ranking Member
LARRY COMBEST, Texas                 JUANITA MILLENDER-McDONALD, 
JOEL HEFLEY, Colorado                    California
ROSCOE G. BARTLETT, Maryland         DANNY K. DAVIS, Illinois
FRANK A. LoBIONDO, New Jersey        BILL PASCRELL, Jr., New Jersey
SUE W. KELLY, New York               DONNA M. CHRISTENSEN, Virgin Islands
STEVE CHABOT, Ohio                   ROBERT A. BRADY, Pennsylvania
PHIL ENGLISH, Pennsylvania           TOM UDALL, New Mexico
PATRICK J. TOOMEY, Pennsylvania      STEPHANIE TUBBS JONES, Ohio
JIM DeMINT, South Carolina           CHARLES A. GONZALEZ, Texas
JOHN R. THUNE, South Dakota          DAVID D. PHELPS, Illinois
MIKE PENCE, Indiana                  JAMES R. LANGEVIN, Rhode Island
MIKE FERGUSON, New Jersey            BRIAN BAIRD, Washington
DARRELL E. ISSA, California          GRACE F. NAPOLITANO, California
SAM GRAVES, Missouri                 MARK UDALL, Colorado
EDWARD L. SCHROCK, Virginia          ANIBAL ACEVEDO-VILA, Puerto Rico
FELIX J. GRUCCI, Jr., New York       BRAD CARSON, Oklahoma
W. TODD AKIN, Missouri               MIKE ROSS, Arkansas
SHELLEY MOORE CAPITO, West Virginia  
                 Doug Thomas, Republican Staff Director
                 Michael Day, Democratic Staff Director













                            C O N T E N T S

                              ----------                              
                                                                   Page

                           Opening Statements

Bond, The Honorable Christopher S., Chairman, U.S. Senate 
  Committee on Small Business, and a United States Senator from 
  Missouri.......................................................     1
Manzullo, The Honorable Donald A., Chairman, U.S. House of 
  Representatives Committee on Small Business, and a 
  Representative in Congress from Illinois.......................     9
Velazquez, The Honorable Nydia M., a Representative in Congress 
  from New York..................................................    12

                           Appendix Materials

Coolidge, Nancy, Coordinator for Student Financial Support, 
  University of California, Washington, DC.......................    55
Heesen, Mark G., President, National Venture Capital Association, 
  Arlington, VA..................................................    51

  Alphabetical Listing of Senators, Representatives, and Participants

Acevedo-Vila, The Honorable Anibal, a Representative in Congress 
  from Puerto Rico...............................................   \*\
Alford, Harry, President and Chief Executive Officer, National 
  Black Chamber of Commerce, Washington, DC......................   \*\
Anderson, Steven, President and Chief Executive Officer, National 
  Restaurant Association, Washington, DC.........................   \*\
Angelier, Amy, Washington Representative, Associated Builders and 
  Contractors Inc., Arlington, VA................................   \*\
Anderton, Robert M., President, American Dental Association, 
  Washington, DC.................................................   \*\
Bennett, The Honorable Robert F., a United States Senator from 
  Utah...........................................................   \*\
Bond, The Honorable Christopher S., Chairman, Committee on Small 
  Business, and a United States Senator from Missouri............   \*\
Brost, Frank D., National Cattlemen's Beef Association, 
  Washington, DC.................................................   \*\
Burns, The Honorable Conrad R., a United States Senator from 
  Montana........................................................   \*\
Calimafde, Paula, Chair, Small Business Council of America, 
  Bethesda, MD...................................................   \*\
Christian-Christensen, The Honorable Donna M., a Representative 
  in Congress from the Virgin Islands............................   \*\
Cole, Henry S., President, Center for Environmentally Advanced 
  Technologies, Upper Marlboro, MD...............................   \*\
Cooper, Benjamin Y., Senior Vice President, Government and Public 
  Affairs, Printing Industries of America, Alexandria, VA........   \*\
Coleman, Dorothy, Vice President, Tax Policy, National 
  Association of Manufacturers, Washington, DC...................   \*\
Coolidge, Nancy, Coordinator for Student Financial Support, 
  University of California, Washington, DC.......................   \*\
Cox, John A. Jr., Manager, Government Affairs, National Tooling 
  and Machining Association, Fort Washington, MD.................   \*\
Dade, Michale, Legislative Assistant, National Association of 
  Enrolled Agents, Gaithersburg, MD..............................   \*\
Dennis, William J., Jr., Senior Research Fellow, National 
  Federation of Independent Business Education Foundation, 
  Washington, DC.................................................   \*\
Fisher, Donna, Director, Tax and Accounting, American Bankers 
  Association, Washington, DC....................................   \*\
Gager, William C., President, Automotive Parts Rebuilders 
  Association, Fairfax, VA.......................................   \*\
Goold, Linda, Tax Counsel, National Association of Realtors, 
  Washington, DC.................................................   \*\
Gray, Delna, Director of Government Affairs and Tax Counsel, 
  National Association of Home Builders, Washington, DC..........   \*\
Grucci, The Honorable Felix J., Jr., a Representative in Congress 
  from New York..................................................   \*\
Heesen, Mark G., President, National Venture Capital Association, 
  Arlington, VA..................................................   \*\
Hense, Paul, Chairman, Taxation Committee, National Small 
  Business United, Washington, DC................................   \*\
Homer, Pete, President and Chief Executive Officer, National 
  Indian Business Association, Washington, DC....................   \*\
Karl, Edward S., Director, Taxation Division, American Institute 
  of Certified Public Accountants, Washington, DC................   \*\
Kerrigan, Karen, Chair, Small Business Survival Committee, 
  Washington, DC.................................................   \*\
Kerry, The Honorable John F., Committee on Small Business, and a 
  United States Senator from Massachusetts.......................   \*\
Manzullo, The Honorable Donald A., a Representative in Congress 
  from Illinois..................................................   \*\
Mercer, Lee, President, National Association of Small Business 
  Investment Companies, Washington, DC...........................   \*\
Merski, Paul G., Chief Economist and Director of Federal Tax 
  Policy, Independent Community Bankers of America, Washington, 
  DC.............................................................   \*\
Napolitano, The Honorable Grace F., a Representative in Congress 
  from California................................................   \*\
Neese, Terry, Public Policy Advisor and Consultant, National 
  Association of Women Business Owners, Oklahoma City, OK, also 
  on behalf of the National Business Association & Grass Roots 
  Impact.........................................................   \*\
Nelson, Wayne, President, Communicating for Agriculture, Fergus 
  Falls, MN......................................................   \*\
Pascrell, The Honorable Bill, Jr., a Representative in Congress 
  from New Jersey................................................   \*\
Pence, The Honorable Mike, a Representative in Congress from 
  Indiana........................................................   \*\
Phillips, Bernie, Tax Manager, National Society of Accountants, 
  Alexandria, VA.................................................   \*\
Regalia, Martin A., Vice President for Economic and Tax Policy 
  and Chief Economist, U.S. Chamber of Commerce..................   \*\
Satagaj, John, President and General Counsel, Small Business 
  Legislative Council, Washington, DC............................   \*\
Shapiro, Les, President, Padgett Business Services Foundation, 
  Washington, DC.................................................   \*\
Shoaf, Jeff, Executive Director, Congressional Relations, 
  Associated General Contractors of America, Alexandria, VA......   \*\
Stallman, Bob, President, American Farm Bureau Federation, 
  Washington, DC.................................................   \*\
Velazquez, The Honorable Nydia M., a Representative in Congress 
  from New York..................................................   \*\
Wolyn, Michael A., Executive Director, Bureau of Wholesale Sales 
  Representatives, Atlanta, GA...................................   \*\

                               __________
\*\ Comments (if any) at various points between pages 16-46.

















    SMALL BUSINESS JOINT ROUNDTABLE: A TAX AGENDA FOR SMALL BUSINESS

                              ----------                              


                        WEDNESDAY, APRIL 4, 2001

                              United States Senate,
                               Committee on Small Business,
                                                   Washington, D.C.
    The Committees met, pursuant to notice, at 9:32 a.m., in 
Room SR-428, Russell Senate Office Building, the Honorable 
Christopher S. Bond, Chairman of the Committee, presiding.
    Members present: Senators Bond, Burns, Bennett, and Kerry; 
Representatives Manzullo, Grucci, Pence, Velazquez, Pascrell, 
Acevedo-Vila, Christian-Christensen, and Napolitano.

    OPENING STATEMENT OF THE HONORABLE CHRISTOPHER S. BOND, 
  CHAIRMAN, SENATE COMMITTEE ON SMALL BUSINESS, AND A UNITED 
           STATES SENATOR FROM THE STATE OF MISSOURI

    Chairman Bond. Good morning, and welcome to the first joint 
roundtable of the House and Senate Committees on Small Business 
in the 107th Congress. It is a very special pleasure for me to 
welcome the Chairman of the House Committee, Don Manzullo, as 
well as Congresswoman Velazquez, and their colleagues from the 
House.
    One of the reasons why we have these sessions is to listen 
to the voices of small business. When I had the pleasure of 
assuming the chairmanship of this Committee in 1995, my then-
ranking member, Dale Bumpers and I agreed we were going to use 
the Small Business Committee as the eyes and ears for small 
business. We have learned a lot just by listening. I think 
there is a line in there from some great philosopher, like 
Casey Stengel, that it is amazing how much you can hear if you 
listen.
    We have also tried to be an effective voice for small 
business, and a lot of times we have found that other 
committees regard us as officious intermeddlers because we know 
that there are a lot of issues that are not specifically within 
the jurisdiction of the Small Business Committees, that are, in 
fact, the most important things that can happen to small 
business. By mobilizing a strong bipartisan coalition on both 
the House and the Senate sides, we have been able to enact into 
law things that I think are making life a little better for 
small business.
    Today, we have a great cross-section of the small business 
community represented. I understand that my Ranking Member, 
Senator Kerry, has another hearing and is going to be coming by 
later on, and we hope that other members from both the Senate 
and the House side will be joining us. The purpose of these 
roundtables is to provide a record for us, for our staffs, and 
a basis for further action and activities during the coming 
session.
    This topic today, of course, is a red-hot one. It is taxes. 
We happen to be having some action on the floor in the Senate 
today on the budget. I am a member of the Budget Committee and 
I am supposed to be there, as well, so you are going to have to 
forgive me if I bail out, because I have some responsibilities 
there. But, what you tell us here today will be helpful, both 
in the Budget Committee discussions, on the floor, and in the 
work that we will do on the tax bill, which I am confident will 
be coming up in the Senate in the very near future.
    With 12 days and counting until the dreaded tax filing 
date, taxes are on the minds of the men and women who worked 
tirelessly to run small, successful enterprises, not only 
because of the high tax bills, but because of the enormous 
amount of time and energy it takes just to complete all of the 
tax forms required. For the past several months, the focus of 
the debate has been on President Bush's proposal, which I 
personally believe holds great promise for small business, 
especially in terms of rate reduction.
    According to the IRS, nearly 90 percent of small business 
with gross receipts of less than $1 million are organized as 
pass-through entities, sole proprietorships, partnerships and 
S-corporations, which means that they are taxed at the 
individual rates, and the individual rate decisions will affect 
those businesses. If we reduce rates, more money will be left 
to meet payroll, reduce credit card balances, or invest in new 
equipment and new technology, which makes the businesses more 
productive.
    The President's proposal for eliminating the death tax can 
also help small enterprises. One of the things we hear, not 
only from small businesses, but from farmers in communities 
throughout my state, is that they are unable to pass along a 
business or a farm or a ranch to the next generation. They want 
to keep it in the family, but when the government comes in with 
a 55 percent bite, it takes away too much of their dollars. 
They cannot continue and still pay the taxes.
    Beyond the President's tax cut, there is still more work to 
be done for small business tax relief. For my part, I have 
introduced a Small Business Works Act, which has additional 
relief in terms of cash accounting, expensing deductions, and 
lowering the AMT. I understand Chairman Manzullo has introduced 
a similar bill on the House side.
    We still need to hear from you. To start our discussion, we 
have asked each of you to list your top two or three priorities 
in the areas of tax relief, tax simplification, and taxpayer 
rights. We found that tax relief recommendations were among the 
top items that you have told us are important. I look forward 
to your comments on these priorities to begin the roundtable. 
We will hear from the leaders of the House Committee, then we 
will open the discussion.]
    When you want to speak, if you would just put your 
nameplate up on end, we will call on you, and we would ask you 
to limit your comments to 2-3 minutes, to keep plenty of time 
for everybody. We'll ask the Hearing Clerk to turn on the 
light, signifying the speaker has one minute left, and we ask 
that you collect your thoughts, provide as much information as 
you can. We will, however, keep the record open, and you may 
feel free to supplement it thereafter. With that, let me turn 
to Chairman Manzullo.
    [The prepared statement of Chairman Bond follows:]
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    OPENING STATEMENT OF THE HONORABLE DONALD A. MANZULLO, 
      CHAIRMAN, HOUSE COMMITTEE ON SMALL BUSINESS, AND A 
            REPRESENTATIVE IN CONGRESS FROM ILLINOIS

    Chairman Manzullo. Thank you very much, Senator. It is a 
real pleasure to be here. This should be a very interesting--I 
do not want to call it panel; I do not want to call it 
roundtable, but representatives from various small business 
industries. Congresswoman Velazquez and I have introduced the 
Small Employer Tax Relief Act of 2001. I think it is the most 
far-reaching, bipartisan tax bill that has been introduced in 
the Congress, and we worked and worked and worked on this to 
make sure that it is bipartisan.
    She and her staff have done an absolutely fantastic job, 
along with our staff, on getting this bill together. This bill 
provides for immediate relief for accelerating the health 
insurance deduction for the self-employed to 100 percent, 
increasing expensing to $50,000, repealing individual AMT; 
increasing the meal deduction 80 percent; allowing small 
businesses to use the cash method of accounting without 
limitation; simplified depreciation and higher education 
reporting rules; providing tax credits for small business 
investments for new, environmentally friendly technologies and 
for training highly-skilled workers; and eliminating capital 
gains and depreciation recapture penalties on home offices.
    We introduced this bill to complement, not to compete with, 
the President's proposals and other proposals out there 
involving the marginal rates. So we are really looking forward 
to your testimony, and I would yield to my counterpart, 
Congresswoman Velazquez.
    [The prepared statement of Chairman Manzullo follows:]
    [GRAPHIC] [TIFF OMITTED] T6195.005
    
    [GRAPHIC] [TIFF OMITTED] T6195.006
    
    Chairman Bond. Congresswoman Velazquez, welcome.

   OPENING STATEMENT OF THE HONORABLE NYDIA M. VELAZQUEZ, A 
            REPRESENTATIVE IN CONGRESS FROM NEW YORK

    Ms. Velazquez. Thank you, Senator Bond, and thank you, 
Chairman Manzullo. Welcome everyone. It is a great pleasure to 
be here with you. Everyone here understands one absolute truth 
about America's economic strength today. It rests squarely on 
the shoulders of America's small businesses. The last decade 
has seen record numbers of new businesses being created and 
interest in owning a small business has skyrocketed. That is 
why I have been repeating the mantra, small business is big 
business in America. The fact is small businesses contribute 
nearly one-half of this Nation's retail sales, and 50 percent 
of the private gross domestic product. They employ more than 
half of our workforce while providing over two-thirds of the 
new jobs created in the last decade's economic boom.
    Even with this growing role in the economy, small 
businesses still do receive parity when it comes to the issue 
of tax fairness. By providing targeted tax relief aimed at 
small businesses, we can offer them the incentive necessary to 
grow and continue to serve as the engine of the economy. We 
estimate paperwork costs nearly doubled for this Nation's small 
businesses. There is no one sector of the economy more in need 
of tax simplification. As tough as the tax cut is on the rest 
of us, to the small business owner, it is absolutely brutal.
    That is why it is crucial we work together to target those 
portions of the IRS code that are particularly onerous to small 
businesses. We need to sit down and work towards transforming 
our tax code into a system that is fair, simple and more 
understandable than its current form. In doing so, we will help 
small businesses focus their attention to running their 
businesses and away from their accountants. As you know, small 
businesses come in all shapes and sizes. While we each view 
them differently, the IRS does not and will not do so. That is 
why the third pillar of tax relief is taxpayer protection.
    By ensuring that small businesses are allowed to take 
corrective action when honest mistakes happen, we guarantee 
that entrepreneurs are not unfairly singled out. In doing so, 
we ensure that a single stumble does not bring the whole 
business tumbling down. To help small business in facing these 
challenges, I recently joined Chairman Manzullo in introducing 
the Small Employers Tax Relief Act. In this bipartisan 
legislation we provide critical tax relief, simplification and 
taxpayer protection for small business owners. I felt it was 
important to introduce this legislation after a view of the 
President's budget, a proposal that contained no specific tax 
relief for small businesses. Indeed, this lack of relief is in 
directcontrast to the President's claim, during the State of 
the Union, that help for small business means jobs for Americans. Some, 
including myself and most of my Democratic colleagues, believe that the 
new fees on SBA loan programs and technical assistance programs are 
actually a tax increase on small businesses. As the Ranking Democratic 
Member of the House Small Business Committee, I believe we are 
fulfilling one of our most important roles as we appear here today. 
That role is to help our colleagues on both sides of Congress, and more 
importantly on both sides of the aisle, understand the unique needs of 
America's small business community, particularly in the area of tax 
relief.
    While today's roundtable is an important first step, I do 
not believe this can nor should it replace a hearing. It is my 
hope that the Committee will begin to hold a comprehensive and 
formal hearing on tax relief in a forum that will give the 
issues the due diligence it should be given. In closing, these 
are without a doubt some of the most important and interesting 
times we have ever faced in America. We have an economy that 
clearly has more questions than answers, and we are desperately 
in need of a serious economic stimulus. I believe that if small 
businesses are to continue to thrive and push the economy 
forward, we must not fail to provide them with the same level 
playing field when it comes to tax relief. To do anything less 
will be to compromise this Nation's future economic prosperity.
    Thank you, Mr. Chairman.
    [The Statement of Representative Velazquez follows:]
    [GRAPHIC] [TIFF OMITTED] T6195.007
    
    [GRAPHIC] [TIFF OMITTED] T6195.008
    
    Chairman Bond. Thank you very much, Congresswoman 
Velazquez. It is a pleasure to have you and Chairman Manzullo 
here from the House side, and we look forward to having you 
participate with us.
    For all present today, this roundtable is formally 
recorded. We found these roundtables give more people an 
opportunity to make their case. So, in terms of due diligence, 
the record will be kept open, including your statements here 
today, and we expect that this will be a very productive and 
interesting session.
    As a result of the information you provided us prior to the 
meeting, I see that, in terms of numbers of participants 
recommending estate tax repeal, it is recommended by 17 as the 
most important; repealing/reforming the Alternative Minimum Tax 
is cited by 13; tax-rate reduction, by 8; 100-percent 
deductibility of health care by 7. That's just to give you a 
flavor of the scorecard.
    With that, let's turn now to comments from the 
participants, and I would invite you to state your association 
and identify yourself when you wish to speak. I see our old 
friend, John Satagaj, was the first one. He has been here 
before. He knows the game.
    Mr. Satagaj. I have learned these rules already, Mr. 
Chairman.
    Chairman Bond. He knows the game.
    Mr. Satagaj. My name is John Satagaj with the Small 
BusinessLegislative Council. The first and most important piece 
of business is for us to recognize that we have one fantastic team of 
advocates up here, and I think they deserve a round of applause. 
[Applause.]
    Chairman Bond. Thank you, John. We will note that and you 
may even get called on again.
    Mr. Satagaj. See, if you are going to get recognized, you 
have got to know why. Maybe I can set the precedent for brevity 
here, because all of us are all going to want to talk, so let 
me hit the first two points as quickly and simply as possible. 
Number one, there is talk already in the United States Senate 
about a minimum wage increase, and they're talking about how we 
are going to offset it with some tax relief. I can think of no 
better blueprint for small business tax relief than the bills 
Chairmen Bond and Manzullo have introduced. That, we all should 
be working for. If there is going to be a minimum wage 
increase, and I know some do not want it at all, that is what 
we need.
    Item two, and you all know that I am not afraid to speak my 
mind, today in the House the Democrats are going to offer an 
alternative to the estate tax bill. That alternative increases 
the exception or credit, call it what you want, to $2 million, 
going up to $2.5 million. If that doubled to $5 million, 
meaning $10 million for a married couple, we in the small 
business community are going to be hard pressed to say that is 
not a good deal for small business. That is going in the right 
direction now. If it goes to five, combined 10, that is good 
for small business.
    Thank you, Chairman Bond, Chairman Manzullo, and Ranking 
Minority Member Velazquez.
    Chairman Bond. Thank you very much, John. Mr. Grucci has 
joined us. Any comments you wish to make?
    Mr. Grucci. Well, I am not sure where we are in the 
discussion.
    Chairman Bond. It is jump ball, and it is scramble time.
    Mr. Grucci. One of the things I have always held to be very 
important is the health of small businesses, because we all 
know they produce the real baseline of our job growth and our 
economic stability. Anything we can do to help improve the 
business climate for small business is important. I think the 
elimination of the estate tax is just what the small business 
community needs and warrants, and I am eager to vote on that 
today, and I hope that we get that passed without much of a 
problem.
    I also think that things like capital gains reductions are 
important to stimulate the economy and to help grow our small 
businesses and midsize businesses and large businesses. So 
those are the issues that I hope are important, as well as 
obviously tax relief, and workplace improvements, so with all 
that in mind I am eager to hear what you all have to say.
    Thank you, Chairman.
    Chairman Bond. Thank you.
    Chairman Manzullo, we have time for brief comments, and 
welcome to additional House members who have joined us.
    Chairman Manzullo. They came just to hear the testimony.
    Chairman Bond. Okay. Any other comments? The next one I saw 
with the indicator up is John Cox.
    Mr. Cox. Well, thank you very much. I just wanted to echo 
some of the things that John Satagaj said, and for those of us 
representing small business organizations, lobbying is 
primarily a function of relationships, and I would like to 
compliment both Small Business Committees for firming up and 
establishing a lot better relationships over the years. It is 
improving every day.
    As far as the specifics, I think that the tax code is 
viewed by small business as the closest thing we have to an 
industrial policy in this country, so it should be designed to 
encourage the growth of small business and not to curtail it. I 
think that is reflected in the priority of the tax relief list 
that we have here. I was very encouraged to see that number 
eight is the Skilled Workforce Enhancement Act, H.R. 877, which 
has been introduced by Chairman Manzullo and Congresswoman 
Velazquez and about 30 other co-sponsors, and it also is in 
Section 108 of the Small Employer Tax Relief Act of 2001. I am 
sorry. Excuse me. Is that the right bill? I see staff shaking 
their heads yes. But it is not in S. 189. We would like to have 
seen it there. Being limited in our resources and establishing 
our relationship, sometimes we tend to stress one committee or 
the other, or the House or the Senate. So if we could have 
assisted the staffs in coordinating some of these provisions, 
it would have been a great thing to have these two bills, in 
fact, as companion bills.
    Maybe that can be achieved if they are both passed and we 
can establish these things in conference. So we think it is 
right on the money. Small businesses are part of this economy, 
and anything that can be done to help us grow is appreciated, 
and we will fight for it, and we appreciate you fighting for 
us.
    Chairman Bond. Well, thank you very much, John, and we are 
only able to succeed to the extent that all of you and your 
members are willing and able to make your priorities heard to 
the people who serve you in Washington. Let's turn now to Paul 
Hense.
    Mr. Hense. Yes. I am the National Small Business United, 
chairman of their tax committee, 1995 White Houseconference on 
Small Business tax chair, and AICPA member, and the reason I am grouchy 
is I am a practicing CPA.
    Chairman Bond. Our sympathies to you. You always feel much 
better on April 17 and much wealthier.
    Mr. Hense. It is payday here, but out there, it is a whole 
other thing. I do this all day, every day. This is what my life 
revolves around, and there are a couple of issues I would like 
to discuss. I learned a new term at a conference in Florida a 
couple of months ago, a BFO, a blinding flash of the obvious. I 
see so many things here that to me are a BFO, because it is 
what I do. One of them, the deductibility of health care, while 
full deductibility of health care is being phased in, it is not 
deductible against self-employment tax. That is crushing for a 
new business, for somebody just starting out, particularly if 
you have a family. You have got to have health insurance, and a 
little bit of it is deductible against income tax. But none of 
it is deductible against self-employment tax. That is a killer. 
So it makes it tough getting in to a health plan.
    I tried to figure out what the problem is with small 
business. Why is the family of the small business owner somehow 
viewed differently than a UAW member, a government employee, 
almost anybody else? Why cannot we deduct our health care? Why 
can't our pension plans be deductible before Social Security, 
before self-employment tax, like other people? It does not make 
any sense to me. I have a young woman who works for me. She 
would like to be an owner, until I explain to her that she 
loses deductibility of her health care; she loses her fringe 
benefits. She has a child with cancer, so basically this woman 
cannot be an owner because of what she loses to become an 
owner. You are supposed to gain becoming an owner. She actually 
takes a substantial cut because of the deduction she loses.
    People talk about the problems with the income tax. I have 
carried this around for years. This is the complete and total 
income tax and all the instructions and explanations for 1926. 
What has Congress wrought? I mean, you know, how did we get 
from there to here? I did some rough numbers. What is it worth 
to have a job as opposed to being self-employed? Figuring 
$6,000 a year for health-care tax free, $10,000 a year for 
pension tax free for 30 years--that is $480,000--no Social 
Security taxes on that, that is $72,000. So a job over 30 years 
is worth about $552,000. So, in closing, when I went to my 
class reunion last summer, it was not the self-employed people 
who were retired and had a house in Florida and a house in 
northern Michigan. They were still working and will be until 
they are 65 or 70 or 75. It is not just a disadvantage to being 
self-employed. In some cases, it is crushing. It keeps some 
people out of business, and it definitely diminishes the life 
of the people who do own a business. It is not fair and it is 
not right.
    Thank you.
    Chairman Bond. You feel strongly about that, I gather, 
Paul.
    Mr. Hense. Well, I am tired, and I am grouchy.
    Chairman Bond. I have been fighting a battle since 1995, 
and still have to wait until 2003 for deductibility against 
just the income tax. A lot of small business say we cannot wait 
until 2003 to get sick. So thank you very much for your 
comments. We are going to turn in just a moment to the members 
here to see if they have any further questions.
    Senator Burns. Paul, I kept getting fired all the time, so 
I had to go into business for myself.
    Mr. Hense. Well, then, you and I understand each other, and 
you just heard why.
    Mr. Bond.  Ben Cooper is next. Let me ask him for his 
comments.
    Mr. Cooper. Thank you, Mr. Chairman, and I join my 
colleagues here in expressing appreciation for your having all 
of us here for this important roundtable. My name is Ben 
Cooper. I am senior vice president for the Printing Industries 
of America.
    I want to relate a statistic to you. We have always been 
proud of the size of the printing industry as one of the 
largest manufacturing industries in the United States. Since 
1997, we have seen something that we are uncomfortable with, 
and that is a decline in the total number of printing companies 
in the United States. We have gone from 52,000 to 47,000. That 
is still a lot of printers, but what it is telling us and what 
we know is that people are not going into our business anymore. 
They are not going into manufacturing, and I believe this is 
true. If you look throughout the economy, you are going to find 
that fewer and fewer people are starting businesses, 
particularly in manufacturing. It is just too expensive. I look 
down the list of tax priorities here. We have such an array of 
penalties for going into business, and I support the gentlemen 
who just spoke. There are so many penalties for going into 
business and very few opportunities to succeed at it.
    The planning that goes in, the amount of money you have to 
spend to stay in business, is extraordinary. The tax incentives 
to stay in business are minimal. You cannot buy new equipment 
under almost any of the opportunities here. I think about 
Section 179 expensing. Try buying a printing press for under 
$200,000. It does not happen. So you buy one piece of 
equipment, you do not qualify for the expensing provisions. My 
biggest gripe: you buy a computer system that everybody knows 
lasts 14-24 months if you arelucky, and the government says you 
must carry it on your books for five years. That has not been changed. 
I hate to even talk about 1982 or anything. It has never been changed. 
We have never updated that rule. As a result, this government right now 
is doing everything it can to prevent success in small business.
    I really do believe this meeting today may be a crossroads. 
We are going to have to turn this thing around or we are not 
going to have small business manufacturing in this country.
    Thank you again.
    Chairman Bond. Thank you very much, Ben. Congressman 
Velazquez, that is in your bill and in our bill, too; is it 
not?
    Ms. Velazquez. Yes. Mr. Chairman, I just would like to ask 
a question.
    Chairman Bond. Please.
    Ms. Velazquez. Maybe to Mr. Cox, and, John, I care a lot 
about the printing industry, to the point that I married a 
printer. So I will try to do my best, you know. But considering 
that Congress must set priorities, when choosing to pass 
legislation, what are the top priorities in terms of tax relief 
for your organizations, either you or any of the people here 
that can answer my question, and you can answer my question in 
light of Chairman Bond and Manzullo and Velazquez legislation, 
in terms of tax relief aimed at small business.
    Mr. Cooper. I will be happy to answer. One priority is an 
indirect tax--do not pass Patients' Bill of Rights.
    Chairman Bond. Do not? In other words, do no harm?
    Mr. Cooper. Yes. First, do no harm. The Patients' Bill of 
Rights may end employer-based health care for small companies 
in this country if it is passed. The second thing is do some 
sort of relief on estate tax. It is not the people we worry 
about who ultimately pay the estate tax. It is the amount of 
money that has to be spent calculating whether or not you are 
going to have to pay it. Another very subtle thing, please do 
something about the AMT. Success is punished by the AMT. If you 
do really well, you are going to do really poorly when the AMT 
is applied. For us, those are the three main things. I could go 
on all day, but I will not.
    Chairman Bond. You can submit that for the record. 
Seriously, we have a lot of people. Let me move onto Steve 
Anderson.
    Mr. Anderson. Thank you, Mr. Chairman. My name is Steve 
Anderson. I am president and chief executive officer of the 
National Restaurant Association, and I appreciate Paul's 
comments. I think it was your high school reunion, and I had 
heard stories about 30-year-old people retiring in this 
country, little did I know that they were actually doing it.
    The National Restaurant Association last year implemented a 
program called the Cornerstone Initiative, which recognizes 
that America's restaurants are the cornerstone of America. But 
if you look at the people represented around this room, small 
business really is the cornerstone of America.
    Restaurants are indeed a cornerstone of America. There are 
844,000 restaurant locations in this country employing 11.3 
million people. We are the largest private sector employer of 
the country. This year we will do $400 billion in annual sales 
and we have a $1.2 trillion impact on the total economy. So, we 
are surely the cornerstone of the Nation's economy.
    We are the cornerstone of a rewarding career path. We are 
trying to encourage people to go into the restaurant industry 
and tell successful stories about how they can achieve success 
with not a lot of education. But with an entrepreneurial spirit 
and hard work, they can truly be successful in this country. I 
will come back to some of these issues that we are talking 
about and the impact there. And we are the cornerstone of the 
local economy and community involvement. Nine out of ten 
restaurants are involved in some type of philanthropic work. If 
you can loosen up some of the controls, the taxes, and the 
mandates that come out of Washington, there is so much that 
small business can offer to America to do good works within our 
local communities.
    To Congresswoman Velazquez's question and to the many 
issues that we are exploring, I will highlight our priorities. 
On the tax relief priorities, the business meal deductibility 
and permanent extension of the work opportunity tax credit are 
very important to us. On the tax simplification priorities, we 
are throwing in that category repeal of the estate tax, full 
repeal, which is the top priority of the National Restaurant 
Association. Additionally, the cut in marginal tax rates and 
banning employer tip audits and aggregate assessments are very 
important in the areas of taxpayer rights.
    As I mentioned, business meal deductibility is very 
important to our members. To put a human face to this issue, I 
have a brother-in-law, and I am probably one of few people in 
the room that actually likes my inlaws, who is a manufacturer 
representative for a furniture company out of New Orleans. His 
territory goes from Louisiana to Florida. Basically what he 
does is travel in his red pick-up truck, that some of us in the 
family call the bubba truck, and call on small business people 
who own furniture stores. For these sales calls his conference 
rooms are America's restaurants. That is very important, and I 
think he embodies the essence of whyincreasing the 
deductibility of business meals is so critical.
    Another important issue is the work opportunity tax credit. 
The National Restaurant Association has been actively involved 
in that issue as you well know. Three out of four quick service 
restaurants have hired employees who are former welfare 
recipients. One in four restaurants nationwide use the work 
opportunity tax credit to lure disadvantaged individuals to 
work for them. Individuals who are eligible for the work 
opportunity tax credit, when given time and training and the 
education they need, stay on the job longer than anyone else. 
Thank you, Mr. Chairman.
    Chairman Bond. Thank you very much, Steve. With some fear 
and trepidation and with hope that he is in a little better 
mood than his neighbor, I now call on Ed Karl with the AICPA. 
Is this tax season getting you down, too, sir?
    Mr. Karl. I represent the American Institute of CPAs, of 
which Mr. Hense is a member, and actually the first item I my 
want to mention has to do with fiscal years. Almost all small 
businesses must adopt a calendar year for reporting purposes, 
and what we would like Congress to do is provide some 
flexibility for small businesses by having a small business 
exception to allow them to use any fiscal year.
    We believe this would allow small businesses to focus on 
running the business, rather than worrying about filings and 
financial statements. Let me give one quick example: if you had 
a fuel-oil distributor in Boston who, right now, is likely to 
be required to be on a December 31 year end, that is not the 
time of year when the business wants to have to count their 
inventory, which is at its highest level.
    That distributor does not need to focus on business issues 
of reporting when he is so busy with the business. The 
distributor would rather do that at a time of year when he is a 
lot less busy. We would like to see some kind of an exception 
for small business to have the flexibility to choose any fiscal 
year.
    The other thing I wanted to mention is a reasonable-
compensation standard for calculating tax on self-employment 
income. For partnerships and entities treated as partnerships, 
there is a bit of confusion about when you rightfully pay tax 
on your self-employment income versus calculating a return on 
your investment in the business, which should not be subject to 
that tax. We would like to propose a legislative safe harbor 
that would bring some certainty in that area and reduce 
potential conflict with IRS. Thank you.
    Chairman Bond. Thank you very much, Mr. Karl. Let me stop 
here a minute. We have been joined by more members. You have 
already heard from my Chairman-in-waiting, warming up in the 
bullpen, Conrad Burns. I wonder if Senator Burns or if any of 
the other members who have joined us would like to make a brief 
comment on anything that is going on?
    Senator Burns. I have a mad-cow-disease hearing going on 
downstairs. So I may have to step out shortly.
    Chairman Bond. Any other thoughts? Thank you and welcome.
    Mrs. Christian-Christensen. I am Donna Christian-
Christensen. I represent the Virgin Islands. I am also a 
physician, and I was interested in the comment about the 
Patients' Bill of Rights, because as a physician member, I am 
really committed to passing a patient Bill of Rights, with an 
accountability provision in it. I wonder if you would elaborate 
on your statement that it would prevent employers from 
providing insurance, because I believe that area of concern had 
been addressed so that the employer was not going to be, in 
anyway, accountable unless they made specific decisions 
regarding the care of the patient. If anyone else had any 
comments?
    Mr. Cooper. I would be happy to do it as briefly as 
possible.
    Chairman Bond. If you could give a brief response, we would 
invite any others who have comments on that, either pro or con, 
to respond directly to Congresswoman Christian-Christensen, and 
also to the Committees for the record. We do not have a lot of 
time to get into that, but Ben, do you want to expand on it?
    Mr. Cooper. We are very concerned about direct employer 
liability. That is certainly an issue that should be addressed. 
However, whatever is done under the name of Patients' Bill of 
Rights that increases the cost of health insurance will 
decrease the benefits. Employers simply do not have any more 
money, and that is particularly true for small business. We 
have already had several members drop coverage under current 
law and the current health-care situation.
    The intentions of this legislation may be good; the results 
are going to be bad.
    Chairman Bond. Thank you very much, Ben. Any other comments 
from the members here?
    All right. We have got a great lineup waiting. Wayne 
Nelson.
    Mr. Nelson. Thank you, Mr. Chairman. My name is Wayne 
Nelson. I am president of Communicating for Agriculture and the 
Self-Employed. We are made up of farmers and small business 
people from throughout the country. Our concern would expand a 
little bit on what Paul has said earlier. We have long been 
champions, and we appreciate all the work that both chairmen 
and other members of the Committee have done, to provide a 100 
percent deduction for the self-employed. But we also feel a 
great need to expand that 100 percent deduction for all 
individuals who pay for their own health insurance.
    What is happening, as Ben has stated, and what I am afraid 
is going to happen in the future, is there is going to be more 
and more small businesses dropping their coverage. As of today, 
that individual who does not have a benefit plan working for a 
small business has a zero deduction unless he or she itemizes, 
and as you all know, a very small number of people are able to 
itemize. So we encourage Congress to add a 100 percent health-
insurance deduction for all individuals. We think that is very 
important keeping coverage for the people that are now insured 
and helping to decrease the number that are uninsured.
    Additionally, with a lot of farmers as members, we have a 
lot of ag tax things that are important. Farm, Fisherman and 
Ranch Risk Management (FFARRM) accounts are very important to 
us, as they are to others. We think it is a great idea and one 
that should be passed. In addition, we think that Senator 
Grassley's tax package, which includes a lot of agricultural 
tax provisions, is also very important. Of course, your bill, 
Chairman Bond, and Chairman Manzullo's bill both contain a lot 
of tax incentives that we think are very important to small 
business. I appreciate the time to discuss these issues.
    Chairman Bond. Thank you very much, Wayne, and let's see, 
number eight is Robert Anderton.
    Mr. Anderton. Thank you, Mr. Chairman. I'm Dr. Bob 
Anderton. I am president of the American Dental Association. I 
represent 144,000 practicing dentists out there, and I am a 
practicing dentist myself. Dentistry, of course, is a small 
business, and even though we are small in numbers, I think 
dentists contribute a great deal to the health of this country. 
Over 90 percent of the oral health care in the country is 
delivered by practicing dentists out there, most of whom are 
solo practitioners. I want to echo some of the things that have 
previously been said regarding small business.
    First, we, of course, are employers and very much 
interested in the 100 percent deductibility of health-care 
insurance. I think it is not reasonable that if you are a 
corporation, you can deduct health-insurance costs, but if you 
are a self-employed small business owner, you can only deduct 
60 percent of it. So we are very much in favor of allowing the 
self-employed to deduct 100 percent of these costs.
    Another issue I would like to raise in conjunction with the 
representative from the printing industry involves the 
difficulties that now exist for a dentist to set up a new 
practice. When I graduated back in the dark ages, about 95 
percent of the graduating dentists went into private fee-for-
service practice. Now, that is just about flip-flopped, and 
only about five percent are able to go into business because of 
the prohibitive cost and the tax disincentives that are 
associated with setting up a practice.
    One example of a tax distincentive is Section 179 of the 
code, which right now will only allow a practitioner to deduct 
up to $24,000 of capital expenditures. Today, it costs many, 
many times that amount to set up just a one-room office today, 
somewhere in the neighborhood of $200,000 when a laser unit 
alone cost $50,000. So we are very much in favor of expanding 
the expensing limits.
    If I may, I would also like to make a comment on patient 
protection. I realize and understand the concerns that 
employers have on the accountability provision, but we are only 
in favor of holding those employers accountable for treatment 
decisions that they make, and our studies show, at least, that 
that would not appreciably increase the cost to the employer.
    Thank you, Mr. Chairman.
    Chairman Bond. Thank you very much, Dr. Anderton.
    Ms. Terri Neese.
    Ms. Neese. Good morning, Mr. Chairman and other members of 
the Committees. Thank you very much for hosting this event 
today, and I would have to join with John Satagaj to say that I 
think we could not find better small business advocates than 
these men and women at the head of this table. They are really 
tremendous people and have helped us a lot. My own company is a 
human resources company in Oklahoma, and I am representing the 
National Association of Women Business Owners and also the 
National Business Association. I would also like to introduce 
Sheila Brooks who is here with me today. Ms. Brooks is vice 
president of public policy for the National Association of 
Women Business Owners.
    I would have to concur that many of these tax issues are 
important to women and minorities. Certainly, for me in human 
resources field, finding good talent to hire today is extremely 
difficult. That is a whole other issue, one that we will not 
touch on today, but certainly something out there that many 
small business owners are having to deal with right now. 
Certainly 100 percent deductibility of health insurance is 
important to our members, but no issue is more important than 
repealing the death tax.
    For and for women and minorities, in most cases we are 
first-generation business owners. So reality has just hit, and 
we are beginning to understand that we will not be here 
forever. The question keeps coming up: And what are we going to 
do with this business? So, as we look at that, we are trying to 
figure out: how do we take the money out of the business to 
spend, how do we make sure we put all of our assets in trust, 
or how do we protect ourselves so we can pass our business on 
to our children so they would not have to sell that business in 
order to pay the estate taxes? We realize also that we pay 
payroll taxes, income taxes, property taxes, sales taxes, and 
some of us pay State income tax. But, if we are successful 
enough, then we pay the death tax. So eliminating the death tax 
totally is where our industry stands, and raising the unified 
credit now will only be a band-aid for the future.
    Ms. Velazquez. Mr. Chairman, if I may?
    Chairman Bond. Ms. Velazquez.
    Ms. Velazquez. Terri, I would like to follow up on the 
estate tax issue. Last year, I was a supporter and co-sponsor 
of the Dunn-Tanner bill. I supported it after I did a lot of 
research. I listened to so many small business groups coming 
into my office, and coming to the realization that it was a 
burden against small businesses. So not only I supported it, I 
voted for it, but I wrote an op-ed piece in the New York Times. 
So I want you to react to the fact that the legislation that we 
will be voting on today leaves small businesses to be the last 
in line to reap the benefits of estate tax repeal. How do you 
feel about that?
    Are we here discussing issues that are important to small 
businesses? How do you feel about that?
    Ms. Neese. For our members, of course, I understand about 
revenues, and that you have to have the revenues. But our 
members are saying we should look at total repeal, and not 
raising the unified credit to $5 million or $6 million.
    Ms. Velazquez. Terri, I understand that. My question is 
small business will have to wait until the year 2011. By that 
time, many small business are going to be selling their 
businesses because they cannot restructure it. So do you think 
that the legislation we are passing today is a fair legislation 
when it comes to small businesses, that is my question? I know 
that it would be great. It's a great legislation for those who 
are on the top.
    Ms. Neese. For me personally, I would say no. I would say a 
lot of our members would say no, too, because it is very 
important that we have some relief on this now, not 2011.
    Ms. Velazquez. That is why I am voting against it, because 
it is leaving some of the Democrats, and we want to work in a 
bipartisan way to help small businesses. But that legislation 
cannot give me any coverage when I go back into my district and 
I say to small business, sit down, you have to wait 10 years 
from now.
    Mr. Pascrell. Mr. Chairman, I want to continue on this, 
because this is a priority to a great number of people in this 
room, and 98 percent of American families do not pay any estate 
tax, so we are talking about focusing in on--we know what our 
focus group is. It seems to me, we look at the Wall Street 
Journal today, very interesting article right on the front 
page, that the Bush plan relief would be phased in slowly and 
repeal would not occur for 10 years. When you look at the graph 
as to who is going to benefit over the next five years, and we 
talk about trying to get relief to those people who need it, it 
makes absolutely no sense. What I am suggesting here is we 
ought to read what we are voting on, including us on this side 
of the table.
    Chairman Bond. Thank you very much. We have a lot of folks 
who have asked to respond, and I am going to ask all the 
people, if you have comments, as I call on you, to respond.
    Apparently, our House colleagues have some votes coming up. 
The nice thing about these roundtables is they can operate 
without us. So we have votes at 10:30, and as soon as we leave, 
my staff will take over, and we will continue to get a lot of 
work done. But we will be back as soon as we can. Thank you all 
very much for coming.
    Mrs. Christian-Christensen. You are fortunate you have two 
delegates who do not have to go vote.
    Chairman Bond. Okay. Moving along, Henry Cole.
    Mr. Cole. Thank you very much, Mr. Chairman. I am Dr. Henry 
Cole, and I am here representing the Center for Environmentally 
Advanced Technologies. It is a non-profit organization that 
promotes technologies that prevent pollution, conserve 
resources and create new economic opportunities. I would like 
to say that Congress has a wonderful opportunity before it to 
help tens of thousands of small business dry cleaners across 
the nation, and at the same time improve the environment. 
Chairman Manzullo introduced H.R. 978, which provides a tax 
credit to cleaners who purchase safe, nonhazardous cleaning 
processes, and those who do would get a tax credit of 20 
percent, and if they are in an empowerment zone, enterprise or 
renewal community, they would get a 40 percent tax credit.
    This bill would help cleaners shift from a dangerous 
technology, perchlorethylene, to safe technologies, including 
wet cleaning and liquid carbon dioxide. If you have been 
watching the news, you know that there is increasing evidence 
that this chemical, which is exposing millions of Americans and 
hundreds of thousands of dry cleaners, is a probable human 
carcinogen. It also has caused billions of dollars worth of 
cleanup costs from the releases of this chemical from dry 
cleaners. That is something that businesses are paying the 
price tag on, and so are the taxpayers.
    Now, not surprisingly, dry cleaners face a host of 
financial pressures associated with this problem. These include 
cleanup costs, hazardous waste fees, tougher regulations, bans 
by shopping center owners, local zoning restrictions, and a 
shutoff of loans from banks. Talk about problems. It is bad 
enough to have all the problems of small businesses. When you 
add those industry-specific ones, you can imagine the pressure.
    This bill, H.R. 978, would provide a tax credit and 
wouldtherefore help these cleaners shift to a technology that 
eliminates those problems. This legislation last year received 
bipartisan support. It is beginning to receive strong bipartisan 
support this year, and it is being supported by cleaners and by 
environmental organizations. We have 50 environmental organizations 
that have signed a letter supporting last year's bill. These include 
large organizations like Environmental Defense, Natural Resources 
Defense Council, Clean Water Action, representing millions of 
Americans. So here you have a bill that can both help the environment, 
help the health and safety of people working in dry cleaning 
establishments, and at the same time promote technologies and help 
these dry cleaners avoid these kinds of problems.
    We think this is a win-win bill, and it would be wonderful 
if the leadership of your Committee, the Small Business 
Committee in the Senate, would join with Congressman Manzullo 
and introduce this legislation, that would help dry cleaners. 
It would help create economic opportunities with new 
technologies, and it would certainly help the environment. 
Thank you very much.
    Senator Bond. Thank you very much, and we will have our 
environmental staff look at that legislation.
    Michael Wolyn.
    Mr. Wolyn. Good morning. Thank you very much for the 
opportunity to speak, and thank you for introducing the small 
business bills that you have authored this year. I would like 
to dovetail on something that Steve Anderson mentioned with the 
restaurants. I happen to represent over 11,000 independent-
contractor selling agents across North America in the finished 
products industry, who happen to use your restaurants as their 
place of business, and I want to thank you for your comments.
    We are in the process of doing an online survey with our 
11,000 members, and I will submit that for the record when it 
is complete. One of the things that we have found is the 
average dollar amount committed by our folks in meals averages 
about $5,200, not $52,000. We went further to find out what 
exactly we are spending money on. As we testified last year, if 
you accept that sugar and caffeine are part of the four food 
groups, a lot of our people are quite frankly going in and out 
of these small restaurants, working with their people, and 
consuming hot dogs, hamburgers, coffee and the occasional 
doughnut.
    So it is terribly important for us to get this meal 
deduction under consideration. I realize we are moving from 50 
percent to 80 percent, but I will submit to you that if it is a 
business meal, it should be completely deductible. If it is 
not, it should not be deductible. I do not want to mince any 
words about whether it is half-deductible or two-thirds 
deductible. If it is a business meal, it should be deductible.
    The other areas we are very concerned about again is 
health-care deductibility. The average person in our 
association spent in excess of $6,000 a year on health care. 
Obviously, they are not able to deduct those costs. It is a 
very big issue and again, we will submit that for the record.
    The last thing that I would like to talk about is the 
vehicle depreciation. I thought the comment Ben Cooper made 
regarding computers was brilliant. We have been talking about 
this on the Hill now for four or five years. How you can take a 
piece of hardware and depreciate it over five years when it has 
a shelf life of maybe 12 months is silly. Further to the point, 
when you bundle hardware and software, you can deduct it. Most 
of our people are buying software independent of the hardware 
and are not getting the benefit of the depreciation, and I 
appreciate that being discussed.
    But the other thing we want to talk about is vehicle 
depreciation. I see that is part of Chairman Bond's and 
Manzullo's bills. Most of our people are buying vehicles for 
the size of the trunk, not for the price of the vehicle. They 
are carrying product, and I defy you to find a vehicle in the 
United States today under $25,000 that has a trunk large enough 
to put anything in it.
    Thank you, Mr. Chairman.
    Chairman Bond. Thank you very much. We have a vote coming 
up in the Senate. So I am going to have to vote. I am going to 
leave you to the tender mercies of Senator Burns. Good luck, 
and we wish you the best. I will be back later on, but thank 
you all very much for being here.
    Senator Burns. If there are any automobile dealers here, I 
am going to make them very mad, because I buy all my cars at 
garage sales. The other day, I bought a new Lincoln because it 
has got a big trunk. You can almost haul cattle in the thing, 
but it only has 60,000 miles on it. It is a 1993. It doesn't 
have a pimple or a dimple on it, and I gave them $7,000 for it. 
It gets me from point A to point B.
    Mark Heesen, president, National Venture Capital 
Association is next.
    Mr. Heesen. Thank you. Just two points I want to make. 
First, on the list that you handed out today, I find it 
interesting that things have actually been put into three 
areas, because my view is that if you do not do tax relief 
properly, you necessarily do not simplify the code, which then, 
in fact, affects how taxpayers' rights are affected. Our belief 
is that estate tax repeal is tax simplification, as is AMT 
repeal, which directly affects the ability of taxpayers before 
the IRS. It becomes very important when you are looking at 
revising things instead of repealing things, that you 
necessarily complicate the code.
    This little document from 1926 is going to be twice the 
size of what it is today, that many times over, if you are 
going to simply look at tinkering around with estate tax relief 
and tinkering around with the AMT. I think it is very important 
that we look at these things and say repeal is tax 
simplification, and it also is relief for the American 
taxpayer. You cannot really divide up these issues, in my view. 
Second of all, for every person around this table, for small 
business in general, capital formation is the key. We can talk 
about meal deduction and everything else, but without the 
capital formation to start the business, you are never going to 
have a business. So things like capital gains for individuals 
is critically important as we move forward.
    You know, your angel investors, your original investors in 
companies, are very tax sensitive. Your institutional investors 
are not as tax sensitive, but for your aunts and uncles who 
want to help you create a business, they are going to look at 
the tax consequences. Capital gains is an integral part of 
that. I think any time you look at change in the tax code and 
look at tax relief, capital gains really should be an integral 
part of that relief. Thank you very much.
    Senator Burns. Thank you. Now we will hear from Dorothy 
Coleman, Vice President, Tax Policy, National Association of 
Manufacturers. There you are, right there.
    Ms. Coleman. Thank you, Senator Burns. The NAM's 14,000 
members include 10,000 small and mid-sized members, and for 
them an estate tax repeal is the number one tax priority. 
Needless to say, we are thrilled that the estate tax repeal 
bill is coming to a vote on the House floor today. To answer 
the earlier question, reform just does not work, particularly 
for our members. They tend to be capital intensive. The value 
of the business is high. Something like an exemption is just a 
band-aid. It will have to be revisited. Repeal is what our 
members are strongly behind, and we are glad this is coming to 
the House floor today.
    The other two top issues on your list are actually very top 
priorities for our members as well. Rate deduction, 
particularly for our S-corporation members, is particularly 
important. Forty-three hundred of our 10,000 small businesses 
are organized as S-corporations, and for them the reduction in 
the top individual tax rates to 33 percent would be a real boon 
to their businesses. One of our members told me other day, when 
the rate hikes were enacted in 1993, her tax bill jumped by 
$50,000 in one year. It is not a huge company, but that is 
money that she would reinvest in her business.
    The other top issue here, repeal or reform of the AMT, both 
for corporations and individuals, is an important issue for the 
NAM. Particularly in an economic downturn, the AMT becomes a 
real problem for our members. During the last economic downturn 
about 50 percent of American corporations found themselves 
subject to an alternative minimum tax, actually paying a higher 
tax bill then they would otherwise under the regular tax 
system. Thank you very much for having us here today.
    Senator Burns. We thank you. I can remember, we sort of 
tackled AMT about two or three years ago, and we almost got 
some reform done. Now we are finding a lot more people qualify 
for AMT than they did two or three years ago, and it has got a 
little bite to it.
    We will hear now from Donna Fisher. She is with Tax and 
Accounting, American Bankers Association.
    Ms. Fisher. Thank you for holding this roundtable. I am 
Donna Fisher with the American Bankers Association, and it 
might surprise you to know that 95 percent of banks are 
community banks, and those banks are small businesses that are 
serving small businesses. So this is a very important 
roundtable for us as well. I have to kind of argue a little bit 
with the restaurant folks down the way here. We like to think 
we are the cornerstone of America's communities.
    One of the things I will share with you and leave with the 
staff is that we do have a book called Compliance, Competition, 
and the Community Bank Tax Burden, which is a blueprint for tax 
reform, and we can leave that with your staff. Probably our 
biggest issues that we have raised with this group are the 
estate taxes. We are very concerned, though, about the 
carryover basis versus step-up basis.
    That is an issue that has been an ongoing issue for years 
and years. Carryover was tried before, and it really did not 
work. I think someone who has a coin collection is probably the 
best example to use. Over the years, Aunt Mary has added to her 
coin collection and what is the original basis of all those 
coins, and how do you determine what the original basis is? So 
the step-up basis is really important to us as well as for our 
customers.
    The second issue is what we like to refer to as a funding 
issue, and that is a big issue both for small businesses as 
well as for small banks. There are also lots of ways to address 
that issue, but two that we would raise here are farm accounts, 
which would be good for farmers, ranchers and fishermen, as 
well as strengthening the agriculture bonds, with which I think 
some of you are familiar.
    The last issue would be Subchapter S reform. We view that 
as a simplification issue. You may not be aware of this, but 
for the first time in 1997, small banks could use Subchapter S 
or elect Subchapter S status. There are a number of issues we 
would suggest as simplification issues, including the expansion 
of thetypes of shareholders, expansion of the number of 
shareholders, issuance of a second class of stock, which is unique to 
community banks, modernizing the passive-income rules, and liberalizing 
the unanimous shareholder-consent rules. All of these, we think, would 
be beneficial not only for small banks, but for the small businesses 
they serve in their communities. Thank you very much.
    Senator Burns. Thank you. By the way, I want to remark. 
Delegate Christian-Christensen, you are a physician. I have a 
daughter who is in her first year of practice. She has a little 
tax education, too. I found that out. I think it is wonderful, 
though. She can start paying me back.
    Mrs. Christian-Christensen. It is going to be a long time. 
Trust me.
    Senator Burns. Mr. Bond and I were raised in the same state 
of Missouri, and both of us write alike. Frank--is this Brost.
    Mr. Brost. Thank you, Mr. Chairman, I am Frank Brost. I am 
from the beef-is-what's-for-dinner group, the National 
Cattlemen's Beef Association. I am also from your neighboring 
state of South Dakota.
    Senator Burns. You guys have to learn how to vote down 
there.
    Mr. Brost. I will comment on that later, sir. I am the 
chairman of our tax committee, on the NCBA. I am also a 
rancher, and I practiced law for 20 years in a little community 
in south-central South Dakota. So some of the issues that we 
are concerned with, I am not only sitting here talking the 
talk, but I have walked the walk on those issues and dealt with 
them with the people that suffered from them.
    We have five issues, Mr. Chairman, that are a major concern 
to us. Number one is the elimination of the death tax. That is 
the leading issue for the NCBA because of the breakup of our 
multi-generation family farms. As you know, all folks know that 
are connected with that business, we are capital intensive. We 
are, as I always say, asset rich, cash poor. We rely heavily on 
debt because of the increasing capital needs in our businesses. 
We are in a business that makes three, four, five percent 
return on our assets, and when you tax us at 55 percent, my 
little math says that is 11 years, not counting interest, to 
pay it off. That is a huge issue for us. It has driven many, 
many young people and ranchers and farmers in business out of 
business. It is our number one issue.
    The reduction of the capital gains, again, is a big issue 
for us. As you know, we own a lot of assets in our business. 
The capital gains tax is a big issue for us. Another issue of 
major importance is the full deductibility of health insurance 
for our people.
    The farm account issues are also important because of the 
ability to do a better job in averaging our income. Because we 
are a cyclical income business, we sometimes hold assets or 
products because of prices and drought and different things, 
and we sell them later. So it is important for us to be able to 
take the peaks and valleys out of our income, because our 
expenses just keep going up. That is a key issue. I think the 
idea of creating a fund, an account for a rainy day fund in the 
FFARRM legislation would be helpful for us.
    The AMT, as you correctly stated, is kind of like high 
blood pressure. It is a silent deal, and someday it is going to 
start killing people. That thing needs to be really worked on 
because it is going to hit us in our business. Those are the 
main issues, Mr. Chairman, that we think need to be addressed 
in this Congress. I appreciate the opportunity on behalf of 
NCBA to address those issues and present our views to you. 
Thank you, sir.
    Senator Burns. What is your town in South Dakota?
    Mr. Brost. Merdo is where my ranch is located; it is in 
South Central South Dakota. I now live in the Black Hills and 
run my ranch from here.
    Senator Burns. I tell you, it is pretty easy to get a 
ticket in Merdo, isn't it?
    Mr. Brost. It surely is, yes. Next time through, give me a 
call. I can give you some help maybe.
    Senator Burns. I left a lot of checks there. You could not 
get through there. From Merdo clear to Rapids, you just could 
not make it.
    Mr. Brost. See, that is part of the economic development 
system of that state.
    Senator Burns. You guys think it is funny. Linda Goold, who 
has to be smiling, because we just sold our house, and we are 
trying to buy another one. I will tell you what, my wife has 
not gotten me back in another house, but I have my drapes 
picked out. Linda Goold, Tax Counsel, National Realtors.
    Ms. Goold. I am with the National Association of Realtors, 
where we are fond of saying that America was built on real 
estate. I actually want to go back into ancient history. I have 
been involved with the tax-legislative process for 25 years, 
working a number of years ago for a senior member of the Senate 
Finance Committee.
    In 1978, we reduced the capital gains rate from 49 percent 
down to 28 percent. President Carter had proposed raising it to 
54 percent a year. That was the beginning of the long string of 
capital gains reductions. That remains an important issue, but 
right after we did that reduction down to 28 percent, the 
Finance Committee held a hearing not dissimilar from this 
roundtable, asking: what do we do next?
    One the most dramatic things that has stayed in my mind all 
these years came from Secretary Michael Blumenthal. He came up 
to the Finance Committee and said the single most important 
issue for helping the economy as we had it then, and if you can 
remember that was a pretty bad economy in 1978, would be to 
reduce the depreciable lives of all assets.
    A number of the concerns that you have heard today, about 
computers, about dry cleaning equipment, about capital 
formation, all of those could be cured significantly if we 
shortened the lives of all depreciable assets, including real 
estate. Why? Because for every dollar of depreciation benefits 
that you get goes straight your bottom line. They improve your 
rate of return. They expand the amount of income you can keep 
in your business.
    Those issues apply across the board to all equipment and to 
all real estate. I would wager that if we went around the table 
here, many of the businesses represented have owners who own 
their own buildings. They have to recover those costs today 
over 39 years. If they also have some rental property and they 
make some improvements for their tenants, who might only stay 
for six or eight or 10 years, they have to recover those costs 
over 39 years.
    Last summer, the Treasury Department released a study on 
depreciation, which said there is an across the board need to 
review depreciation and to consider depreciable lives. In that 
study, the Treasury Department said that the most imbalanced of 
all of the assets in terms of depreciation lives and capital 
recovery was real estate and that 39-year life that applies to 
real estate does not reflect economic reality in any respect.
    Under current law there is also a 27.5-year life for 
apartment buildings. We are facing a substantial shortage of 
rental housing in this country, and so that, again, underscores 
the need to improve the rate of return for those owners. The 
most significant and substantial way that can be done is to 
shorten depreciable lives and to revise the depreciation 
system.
    I might add just a word on capital gains. Any time you 
reduce capital gains rates, it is critical that you also reduce 
the depreciation recapture rates, or better yet restore the 
depreciation recapture rates to the 35-year rule that existed 
before, in which depreciation allowances are treated as capital 
gains. If you fail to reduce the depreciation recapture rates, 
every time you reduce capital gains rates, you will be 
increasing the tax burden for real estate relative to all other 
assets. Thank you very much, Mr. Chairman.
    Senator Burns. Thank you. We are going to change topics 
here. I am going to start with Bob Stallman, and of course we 
have been joined by our colleague, Senator Kerry. I want to 
move to tax simplification, which Mark Heesen touched on 
previously. With that, do you have a statement?
    Senator Kerry. I do have some comments I would like to 
make, if I may. Unfortunately, we have Alan Greenspan over in 
the Finance Committee, too, and my Governor in front of the 
Foreign Relations Committee, to be confirmed to go to Canada. 
So I am being tugged in a number of directions. I should have 
known when I walked in here and everybody was rolling in the 
aisles, that my friend, Conrad, was presiding.
    I am delighted to welcome Nydia over here. We are happy to 
have her cooperation, and the Chairman also. Thank you very 
much. First of all, I want to thank everybody for being part of 
this. These roundtables are the most productive efforts that we 
have in the Committee in our judgment, that is why we have kept 
them going this way. We are very appreciative for your 
participation.
    The record that is created out of this, the dialog that 
takes place is so much more productive in many ways than the 
standard hearing process. I think the Committee has worked very 
effectively as a result of that. I gather a few folks have 
talked about the rate cut and the proposal that is on the table 
here that is being voted on this week, but I personally am 
deeply concerned about the President's tax and his budget 
plans, particularly with respect to small business.
    All of you are better validators than we are these days 
here in Washington, as to the real meaning and impact on some 
of these choices on your lives as small business people. I am 
pleading with you to try to weigh in with some of our 
colleagues on the other side of the aisle, because they would 
listen to you. Where they may see something that we say as 
partisan, rather than purely substantive, I suspect they will 
be much more ready to hear what the practical applications are 
on your lives, of some these things that are being proposed.
    The fact is that the Bush tax plan assists only those small 
businesses who file individual tax returns. That, as we know, 
leaves behind millions of small businesses. They have been the 
most critical component of economic growth in this country in 
the last years. Those small businesses get no tax reduction 
from the plan. Notwithstanding, they provide the majority of 
small business revenue in the country.
    Second, the budget proposal actually winds up increasing 
the burden of what one might call taxation onsmall businesses, 
because it increases the interest rates by 50 percent on those that are 
victims of disasters or get disaster loans. It increases the fees on 
small businesses which apply for 7(A) guaranteed business loan. In 
addition, I think that with what the Federal Reserve report has said 
about banks tightening credit for small businesses, this is exactly the 
opposite direction to be moving in.
    Forty-three percent of financial institutions put a 
stricter standard on small business lending, and a lot of them 
have forced small businesses to provide additional collateral 
in order to obtain a loan. I am not suggesting that that is 
necessarily inappropriate as a banking practice or as a 
business practice, but it obviously makes things tougher and 
tighter and, therefore, whatever else you do becomes 
cumulative.
    In addition, not one bank reported an easing of the lending 
standards for small businesses in this survey. Obviously, 
whatever is happening in the economy at large is having an 
impact on business practices now.
    Last week before the Finance Committee, Dr. Robert Berney, 
the chief economist at the Office of Advocacy at SBA, said that 
small businesses suffered more severely than other businesses 
during the early part of this downturn, and generally speaking, 
do in any kind of downturn. He believes a strong counter-
cyclical public policy of reducing interest rates, lowering 
taxes and increasing Federal expenditures is appropriate.
    Instead, what we see, what the administration is proposing, 
is an increase in interest rates, an increase in taxes by 
increasing fees and a cut in federal expenditures for the small 
businesses. There are other areas where I think we can have a 
positive impact for small business. I am going to be 
introducing the Single Point Tax Filing Act, which will make 
tax filing simpler and easier if you choose to allow the 
Internal Revenue Service and State agencies to combine on one 
form both State and Federal employment tax returns. I hope that 
will ease the bureaucratic burden on small businesses, 
eliminating unnecessary duplication that many of you face.
    Secondly, we know that you are not always treated equally 
by the tax code. So, for instance, self-employed only have 60 
percent of their health-care costs deductible. I know we are 
trying to get to the 100 percent by 2003, but I hope we can 
resolve that disparity even sooner during the 107th Congress, 
because that would enormously help lift a burden on the self-
employed.
    In addition to that, in 1993 I introduced legislation with 
Dale Bumpers, where we enacted a targeted capital gains 
reduction for shareholders investing in a qualified business 
stock, who had got a 50 percent exclusion on the capital gains 
tax. I would like to see that go further, personally, by 
eliminating, altogether, the capital gains tax on qualified 
investments, particularly the so-called critical technologies. 
I believe if we did that, we would greatly excite investment in 
the high-value added job sector, which is the fastest and best 
lifter of all boats, if you will. So I would like to see us do 
that.
    Lastly, with respect to pension plans, in 1999 employer-
sponsored pension plans covered only 33 percent of workers in 
firms with fewer than 25 employees, and only 57 percent in 
firms with 25 to 99 employees. That compares with an average of 
81 percent in firms with more than 100 employees. I believe we 
ought to make it a major target of the Small Business 
Committee, to try to persuade our colleagues to provide workers 
in small businesses the same access to retirement plans and to 
pensions that counterparts in big business have. I think we 
ought to undertake to do that.
    I think we have a big mission ahead of us, notwithstanding 
all that we have accomplished. I hope in the course of this 
morning's dialogue, even though we have to go vote in the 
Senate now, many of you will pick up on this and put your 
comments before the staff. Thank you very much, Mr. Chairman.
    Senator Burns. Thank you. In tax simplification, we will 
start with Bob Stallman from the American Farm Bureau.
    Mr. Stallman. Thank you, Mr. Chairman. I am Bob Stallman, 
President of the American Farm Bureau Federation and represent 
our 5 million-member families across our country today.
    I am going to state the obvious and that is America's farms 
and ranches are small businesses, too. I sometimes think the 
public does not realize that, but we have many of the same 
issues that we have discussed here today. We are a subset of 
the small business community, to the extent that the capital 
intensive nature of our industry means we obviously have a lot 
of capital assets tied up, most often in the nature of land, 
some of which is becoming really highly valued now, given what 
is happening with the economy and the abilities of others to 
affect the market value.
    We also have extreme volatility due to the nature of our 
business and effects of international markets and also the 
weather. With that in mind and in keeping in the context of 
simplification, our number one tax priority is death tax 
repeal, on which we have already had some discussion here. 
There are some reasons that we want repeal, rather than 
increasing the exemption. The primary one is that at death, if 
you have onefamily farm that is just a little under the 
exemption, they have all the emotional upheaval, but do not have a 
visit by the IRS. If you increase the value of that operation just 
little bit, they have the same emotional upheaval and have a visit from 
the IRS. We are picking winners and losers.
    The other issue is the appropriate level in terms of value 
at which the estate tax should apply. Tell me what land prices 
will do in 10 years, and I can answer that question. Without 
knowing, the uncertainty still creates the need for extensive 
planning and the extensive cost associated with that estate 
planning. As long as the estate tax is in place, the need for 
planning will exist.
    I know of one instance with a family farm that worked very 
hard with professionals, such as CPAs and attorneys, to come up 
with a plan, and even then you do not have certainty, because 
that is now being challenged by the Internal Revenue Service. 
So, no matter how much you pay, no matter what professionals 
you get, you still do not have certainty, and that is why we 
favor repeal.
    The other issue I would like to address involves the 
volatility of farm income and the benefits of FFARRM accounts, 
which has been mentioned here. FFARRM accounts will allow us to 
plan, to do some financial risk management as producers, and 
that is critical. One other tax priority, and I will mention it 
briefly before going to some others, is the need for capital 
gains relief. The capital-intensive nature of our business 
means that lower capital-gains taxes would be very important to 
us.
    The other small business issues that we have talked about, 
whether it be greater expensing under Section 179, 
deductibility of health insurance, or the alternative minimum 
tax, in terms of real simplification these are issues that need 
to be addressed.
    Lastly, with respect to deductibility of meals, most 
farmers have their business conferences on the tailgates of 
pickups. We are eternal optimists, however, and hope one day to 
be able to go into the restaurants that Mr. Anderson represents 
and have our meals and therefore deduct the costs. Maybe we can 
work out field delivery.
    Chairman Manzullo. If I recall, President Clinton's tax 
increase in 1993 increased the marginal rates of most of the 
business people who have Sub-S corporations. That was not 
mentioned by Senator Kerry. I do not have the opportunity to do 
that, but I find that that was a huge tax increase on small 
businesses. Very few numbers of small businesses have small 
Sub-S corporations, so that is where the taxes went up. 
Perhaps, Mr. Regalia, you want to embellish on that.
    Mr. Regalia. My name is Marty Regalia and I represent the 
U.S. Chamber of Commerce. On behalf of our three million 
extended members, 96 percent of which are small businesses, I 
want to thank you for having this roundtable discussion. 
Representing the Chamber and its myriad member businesses is 
often times a little bit daunting. As I look at this list of 
small business tax priorities, I find very little on this list 
that I would not support or that our members would not support. 
Very specifically, I think in terms of the broad-based issues 
of estate tax reform, rate deduction, AMT repeal, these are 
things that the economy needs to continue to grow and to 
prosper.
    We look at the deduction area, and we see things like the 
health-care deduction for self-employed and the meal deduction 
as being imperative for a continuing vibrant small business 
sector. As an economist, I know the importance of investment 
and capital formation, and clearly, our taxes on capital in 
this economy are onerous and are counterproductive. Proposals 
like expanding the Section 179 expensing and really going 
beyond that to address the entire area of accelerated cost 
recovery for assets, I think, are highly important.
    In addition, the R&E credit should be made permanent. While 
it is effective already, it would be more effective if it was 
made permanent. Moreover, regulatory reforms like the cash-
method of accounting are also issues that we support.
    I think that one of things we have to remember right now is 
that there is a tax package in play that includes three of 
these major proposals: the estate tax reform, broad-based rate 
deduction, and permanent extension of the R&E. I would urge the 
Congress and the Senate to pass this particular tax package, 
and do it now, because, as an economist, I know that people 
behave rationally. They form opinions rationally. If we give a 
tax cut to the American people that is a permanent tax cut, 
they will respond very quickly in terms of renewed confidence 
and renewed spending, and they will keep the economy growing. 
So the most important tax cut is the one we can do right now. 
Thank you.
    Chairman Manzullo. Thank you very much.
    Ms. Velazquez. Mr. Chairman, if I may?
    Chairman Manzullo. Of course.
    Ms. Velazquez. Mr. Regalia, you said that you represent the 
U.S. Chamber of Commerce and 83 percent of the members are 
small businesses.
    Mr. Regalia. Ninety-six percent.
    Ms. Velazquez. Ninety-six percent of your members will 
support the estate tax repeal that we are passing today.
    Mr. Regalia. Absolutely, they would.
    Ms. Velazquez. Even though it will not affect them until 11 
years from now.
    Mr. Regalia. It does affect them. It affects them 
immediately because by passing a repeal, they begin to plan for 
that today. It is not just the estate taxes that are paid 
today. It is the planning for the estate tax. If youdo not 
repeal it, the planning costs, the compliance cost continue. My father-
in-law, before he passed away, was a certified life underwriter and 
estate planner. That is what he did for a living. While I am happy and 
my wife is very happy that he was very successful at that, we would 
like to see that particular cottage industry done away with. It is not 
a productive use of resources.
    Ms. Velazquez. Sir, I support repealing of the estate tax 
for small businesses. I do not support for them to have to wait 
11 years.
    Mr. Regalia. Anything that you could do to accelerate the 
entire repeal, we would support and welcome.
    Ms. Velazquez. I would welcome you to go and talk to 
Chairman Thomas of the Ways and Means Committee. He is the one 
to introduce this for scoring purposes. It will cost too much. 
So they decided if they would go with a today, it would cost 
too much in terms of small businesses.
    Mr. Regalia. We believe that the fastest repeal of the 
estate tax would be the best of all solutions. In a world where 
we cannot have the best, we do not want the perfect to stand in 
the way of what we see as the good. So we support the House 
package wholeheartedly.
    Ms. Velazquez. Four percent of your members will benefit 
today from the estate repeal, not 96.
    Mr. Regalia. No, 96 percent will benefit and 100 percent of 
our members support repeal of the estate tax.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Chairman Manzullo. You have an opinion on that; don't you?
    Ms. Velazquez. Very strong. You can come to me and talk 
about bipartisanship. We have demonstrated that in our 
Committee. I supported repeal of the estate tax last year, but 
I supported it on behalf of small business, not just two 
percent.
    Chairman Manzullo. Do you know what I support? It is 100 
percent repeal of the death tax on a 100 percent stepped-up 
basis. Let's get on with it, folks. This is a bunch of crap 
that is going on here. I had the horrible job of having to 
counsel a family who had to half of 640 in order to keep the 
320 and pay the damn death tax. We have all these reasons and 
all this stuff, that is good for insurance people--let's just 
get rid of the damn thing, have a 100 percent stepped-up basis.
    Ms. Velazquez. Mr. Chairman, I welcome for you today to go 
to the House floor and make that comment today.
    Chairman Manzullo. Do you know what stops that? The budget 
rules--Mr. Alford, you are next. Maybe we can repeal those 
budget rules, too.
    Ms. Velazquez. I am not in control, Mr. Chairman. You are.
    Chairman Manzullo. Together, we can conquer Washington.
    Ms. Velazquez. Sure.
    Mr. Alford. Thank you, Mr. Chairman. We are a federation of 
197 chapters, located in 39 States and nations, and we proudly 
represent the 820,000 black businesses in the United States. 
Since the beginning of time, in every society and every 
government people would tithe 10 percent to the Lord and then 
expect to give another 10 percent to the king. Here we are in 
2001, and we have a king, i.e., the government, that is just 
totally out of hand.
    Our tax system is oppressive and it is anti-small business. 
I would like to think, as we talk about tax relief and tax 
simplification, that we look at this in the mindset of creating 
capital access. With fewer taxes to pay or withhold, there will 
be, more money to infuse into the business. So, tax relief and 
tax simplification are increasing capital access, which will 
create business growth and also create jobs. With business 
growth and job creations, you have established a broader base 
of tax revenue coming into the Federal government. In regards 
to H.R. 8, today, Congresswoman Velazquez, we are indeed very 
proud of your stand last year, your editorial. I was in New 
York City the day it hit, and reporters were trying to attack 
you in a very caustic way, but we are very proud of what you 
have done, and your principles and your courage.
    This bill is not as good as the last bill. The last bill 
did not get through the White House. We think we should not 
have an all or nothing approach to this. While we certainly 
could have improvement, we would appreciate and would hold 
precious every yes vote we get today. Next year, maybe, we can 
come back and just get rid of the whole thing.
    Ms. Velazquez. I want to today.
    Mr. Alford. Good.
    Chairman Manzullo. Go ahead, Mr. Pence.
    Mr. Pence. Mr. Chairman, for those in the room, I am Mike 
Pence from Indiana. I am a new member and I am chairing the 
Subcommittee on Regulatory Reform and Oversight. In yesterday's 
hearing, our first hearing, I wanted to ask Mr. Alford, as you 
talk about capital formation, I thought about tax cuts today, 
but there was an interesting suggestion from several of our 
witnesses to create a vehicle in the tax structure that would 
allow a rollover of capital gains taxes, the way we do on 
certain residential properties when those resources are 
invested in an entrepreneurial way.
    I wonder if you could speak to that from a minority 
business perspective on how wise or unwise that approach might 
be.
    Mr. Alford. Let me say, minority business is black 
business, hispanic business, small business; business is 
business. If it is good for business, it is good for 
allbusiness, and we have yet to see an improvement in the tax code or 
some relief in the tax system with which we do not agree. So we have a 
high interest in what you are talking about and perhaps support it.
    Chairman Manzullo. Okay. Mr. Gager?
    Mr. Gager. I am president of the Automotive Parts 
Rebuilders Association, and I want to add my thanks to you for 
having this roundtable because I think it allows a lot of 
people have some input into the legislation. There has been a 
lot of discussion about different changes to the tax code, but 
one of the things that really hits our industry hard is the 
nonresponsiveness of the IRS to an issue in our industry that 
has gone on for over five years. We could fill volumes of paper 
on everything we have tried to do to overcome this particular 
issue. The accounting issue is one that had existed for 50-60 
years in our industry. But the IRS decided they wanted to work 
through the industry specialization program, which was supposed 
to, according to the rules set by Congress, involve the IRS 
sitting down with industry members and evaluating whatever 
particular issues were problems with that industry. 
Unfortunately, the IRS did not do that with our industry. 
Instead they just went ahead and issued this industry-specific 
specialization project or program that hurts our industry 
tremendously.
    There are about 73,000 companies involved in our industry 
with about half a million jobs, covering people that 
remanufacture automotive parts and a variety of other products. 
Just about anything that could be manufactured is 
remanufactured. But this particular issue has been very 
difficult. So it is a very serious issue for our people. As a 
result, anything that can be done to get some kind of 
simplification or protection for our industry in regards to 
this one specific inventory issue would be deeply welcomed.
    Thank you.
    Chairman Manzullo. Appreciate that. The next speaker is Les 
Shapiro.
    Mr. Shapiro. Thank you, Mr. Chairman. I appreciate the 
opportunity to be here along with all my colleagues around the 
table, and thank you for inviting us. I think this is a good 
opportunity to commend everyone at this roundtable for the work 
that they have done in identifying the issues that are most 
important to their respective industries. I am Les Shapiro, 
Chairman of the Padgett Business Services Foundation. I am not 
a lobbyist, which you may find refreshing from time to time. 
Padgett Business Services is a provider of tax and accounting 
work to an exclusive client base of small businesses, defined 
by Padgett to be under 20 employees. As a practical matter, 
small business means the mom-and-pop type operations, three or 
four employees, five employees. Padgett has offices throughout 
the United States, numbering over 300.
    I commend Paul Hense for his BFO reference, because I had a 
blinding flash of the obvious, which comes only after being 
able to speak toward the very end of this roundtable 
discussion. Almost everything that can be said probably already 
has been said, and as Mr. Regalia alluded to during his 
presentation, I think there is probably not one person at this 
roundtable who would disagree with anything that has been said. 
The only contentious issue we have is the Patients' Bill of 
Rights. I am very pleased that it is not on the priority list 
at all, so that issue is moot.
    Perhaps I speak for everyone, except those who have 
particular issues to advocate, in stating that the tax 
priorities identified by the participants are right on target. 
I think that if you follow the participants' lead and give a 
reality check to the issues that have been identified on the 
sheet of paper that all of us have been provided, you will find 
those are the sensitive spots, the spots that will touch 
virtually every small business owner in the nation. That is 
where the attention should be focused.
    I think you will be getting the most bang for your buck in 
advocating those positions--the AMT, the death tax, the cash 
versus accrual, and the depreciation rules. Having spent most 
of my professional career with the Treasury Department and the 
IRS, I think the taxpayer rights and protections priority 
section of the priorities list, insofar as they deal with the 
IRS, always have been real problems and always will be real 
problems. To the extent that Congress can continue its good 
oversight of those problems and perhaps even enact legislation 
that alleviates some of those problems, I think all taxpayers 
in the Nation, particularly those who are small business 
owners, will benefit. To the extent that the Padgett Business 
Foundation can help Congress or any one of the organizations at 
the table in the work you do, we would be happy to give it a 
try.
    Chairman Manzullo. We have got requests from seven more. I 
am going to limit the testimony to two minutes, so if the 
timekeeper could do that. The next speaker is Amy Angelier.
    Ms. Angelier. Thank you Mr. Chairman and Ranking Member for 
hosting this roundtable today, and also to Senator Bond and 
Senator Burns. I am with Associated Builders and Contractors, 
and we represent subcontractors, material suppliers and related 
firms. What I would like to mention under the auspices of 
simplification today is the issue of cash versus accrual 
accounting.
    The lion's share of our members are small businesses, and 
many of those members choose to use the cash method of 
accounting because it is a simple method. They can keep the 
books themselves, and generally there is no need to bring in an 
outside practitioner to maintain their books and records on a 
daily basis, and there is a significant cost savings with that 
component alone.
    However, as you probably know, the IRS strongly favors the 
accrual method of accounting when merchandise is a factor. That 
has been a problem for many of our smaller contractors because 
the IRS, we believe, targets our industry. The IRS came in and 
audited our members and are converting them involuntarily from 
cash accounting to accrual. The problem comes with the 
penalties, fees, back-taxes and assessments associated with 
that conversion. It is really hard to escape the situation 
without a penalty approaching six figures. We had a member last 
year in Michigan who was looking at $100,000 even and wound up 
settling, which required taking on a bank loan to settle with 
the IRS. That is one fewer employee he can hire. It is three 
less work trucks he can buy.
    Chairman Manzullo. That was the drywall contractor; wasn't 
it?
    Ms. Angelier. That was the drywall contractor, yes. I thank 
you, Chairman Manzullo, for sponsoring the legislation, and we 
truly appreciate your efforts.
    Chairman Manzullo. We had planned to turn to taxpayer 
rights and protections at 11:15 a.m. Those who want to join in 
that, raise up your placards now and we will continue with the 
list here.
    Ms. Velazquez. Mr. Chairman, if I may, I would just like to 
ask Amy, except for cash flow issues, are there significant 
ongoing problems from the use of the accrual method, and if 
there are, what are they?
    Ms. Angelier. From talking to our members, the problem with 
accrual is all about timing. It is all about when you pay the 
IRS. So you essentially are giving the IRS an interest-free 
loan. So if you are a drywall contractor and it takes you three 
months to be paid, you are responsible for the taxes right 
away, but you may not receive the taxable income for two, four, 
six months, until the business pays you.
    Chairman Manzullo. Okay. William Dennis.
    Mr. Dennis. Excuse me. I am going to cheat and not talk 
about compliance issues.
    Chairman Manzullo. Could you pull the microphone closer?
    Mr. Dennis. I am Bill Dennis. Senior Fellow with NFIB 
Education Foundation. I would like to point out that when we 
talk about simplification, there are just so many targets of 
opportunity and so little time, that you do not know where to 
begin. I would also point out that some simplification 
activities cost a lot of money in terms of revenue foregone. 
For example, with the changes of Section 179, there is a lot of 
revenue foregone. Nevertheless, there are a lot of things 
Congress can do to simplify the code that really do not cost 
much.
    For example, the cash versus accrual issue, which has just 
been mentioned. The IRS made a change earlier this month, but 
this is an issue that has been going on for one-quarter of a 
century, and it just needs concerted action. Independent 
contractors is another thing that can be done relatively easily 
if we just have the will. It is not a muddy issue for the most 
part. So let me encourage both committees to begin looking at 
these kinds of things. Finally, I am sorry Senator Kerry is not 
here because I believe he made an error in his statement of 
fact that I think is very important.
    He said something to the effect that owners of C-
corporations or C-corporations do not benefit from rate cuts. 
Well, they do. The owners benefit a great deal from rate cuts, 
and it is important to point out approximately 60 percent of 
all C-corporations had no taxable income. The reason they have 
no taxable income is they zeroed out their income by paying 
themselves salaries for the most part. So the idea that they do 
not benefit as well is not an accurate one, and I think it is 
very important for people to understand that point.
    Thank you.
    Chairman Manzullo. Nancy Coolidge. I feel like Bob Barker. 
Come on down.
    Ms. Coolidge. Thank you very much, Mr. Chairman. I want to 
thank you particularly for your work on behalf of the 8,000 
colleges and universities in this country who are seeking 
simplification of the tax reporting connected to the HOPE and 
lifetime tax credits. We are very grateful, particularly for 
the proposed elimination of the linkage that we were going to 
be expected to create between the taxpayer and the student.
    Since the IRS has this information, it is clearly more 
appropriate for the agency to do that, than for us to try to 
retool. It is very important that all of us be able to use 
information we currently have available and not have to 
generate new information. In this regard, another one of your 
provisions in this bill would eliminate the requirement that we 
all report the same thing. We do not have accounting systems 
that are similar. We cannot do it now. It would be expensive 
and difficult for the entire higher education community to 
change and generate what is currently required. It is important 
that the IRS be more flexible than they are currently 
apparently being in permitting us to reportinformation we have 
available.
    We should all be permitted to have the best information our 
institution has available, that was sent to the students and 
that they then have available to use for filing, not to report 
on students who do not provide or are willing to provide 
information on their assets. It is inappropriate for the higher 
education community to try to warn students about penalties 
that other agencies would impose on them. It is not an 
appropriate role for the higher education community. The amount 
of gift aid that is currently required for a reporting 
condition is not appropriate for us. We have no way of knowing 
which amounts of gift aid students get, which are deductible 
from the tax credits and which are not. The basic principle 
that your bill provides are: if we do not have information and 
cannot get it easily now, it is not appropriate to require the 
higher education community to try to change in order to get it.
    Chairman Manzullo. Thank you, and Commissioner Rossotti has 
been extremely helpful in trying to help us work through this 
regulation. Ms. Calimafde.
    Ms. Calimafde. Two things quickly. The only people who 
could applaud the estate tax bill that has passed Ways and 
Means Committee the other day are people who have heard on high 
that they will live at least 11 years, because if you read that 
bill, between now and 11 years from now, nothing much happens. 
In the last year, the rate reduces by 39 percent, which lets 
you know how slow the rate reduction is in the bill. So 
basically we are just frozen for 11 years. To me, for most 
small business owners who are in their older years, this bill 
does not help them, and we need more help.
    In the pension area, there is a terrific bill in the House; 
it is H.R. 10. In the Senate, it has not been introduced yet. 
It would definitely help small business owners and their 
employees be able to save for retirement. As we speak, there is 
a move in the Senate to take out two of the major small 
business provisions from this pension bill. One is the family 
attribution repeal. They want to take that out because they do 
not think husbands and wives are going to operate fairly in the 
context of small business. Another is the 401(k) safe harbor 
match. There is concern that small businesses will not tell 
their employees they even have a 401(k) plan. Once again, we 
are getting hit with the bias that small business owners do not 
treat their employees fairly. These provisions are in the House 
bill; the move is to take them out of the Senate bill.
    In the health care area, we think health-care costs are too 
high and need to be controlled. It is really important that the 
Patients' Bill of Rights does not get passed. That legislation 
would allow small business owners to be sued simply because 
they are sponsoring health-care plans.
    Thanks very much.
    Ms. Velazquez. I am going to write the leader about the 
hearing we held last week where we discussed the pension costs, 
and to detect pension costs.
    Ms. Calimafde. Yes, you are talking in terms of the credit?
    Ms. Velazquez. Yes.
    Ms. Calimafde. Yes, there was a credit in the Senate bill 
last year. I believe it is going to be in the Senate bill this 
year. That is a very good provision. Hopefully, the conference 
will take the best of both provisions and end up with a good 
bill for small business.
    Chairman Manzullo. Thank you. The next speaker is Lee 
Mercer.
    Mr. Mercer. Thank you, Mr. Chairman. I am Lee Mercer 
representing the National Association of Small Business 
Investment Companies. Our members are government-licensed, 
government-regulated, privately-managed venture capital firms 
that invest in small businesses, generally from about $250,000 
upwards to about $5 million per investment. These investments 
are significantly smaller than the typical non-SBIC venture-
capital firm. There is a quirk in the tax code that relates to 
the taxation of unrelated business taxable income for tax-
exempt organizations like pension plans, pension funds and 
other foundations, that serves as a disincentive for investing 
in small business investment companies, particularly one type 
of small business investment company that makes subordinated 
loans, loans that are subordinated to senior bank debt, to 
growing small businesses.
    It does not stop these organizations from investing in 
venture-capital firms. Indeed, they do make significant 
investments in venture-capital firms, just not in SBICs, which 
make these smaller types of investments, particularly the loans 
to small businesses or to any business that is established 
really as a pass-through entity, such as a Subchapter S 
Corporation or an LLC. So we believe there should be an 
exemption to this restriction that would aid in capital 
formation.
    This change is not going to take revenue away. It does not 
prevent money from flowing into venture capital. It just 
reallocates it down more toward the smaller entities that make 
the smaller loans, which small businesses need.
    Thank you.
    Chairman Manzullo. Thank you. The next speaker is Bernard 
Phillips.
    Mr. Phillips. My name is Bernard Phillips, and I am the tax 
manager for the National Society of Accountants. Our 
organization consists of CPAs, enrolled agents, tax 
practitioners, tax attorneys and nonlicensed accountants. I 
talk to these people on a daily basis. Part of my job is 
answering tax questions for these people that they cannot solve 
for themselves, and I am also the liaison for theorganization 
to the IRS.
    So the experience that I have is literately in the field, 
shall we say. The biggest problem that we have come across is 
with the AMT, and I do not call AMT a bad tax. I call it a 
disease. I have cases I would like to submit to the Committees 
that would really prove the point that this is a tax that has 
to go away. I have a case right now, in fact, that one of our 
practitioners called me about yesterday morning. The taxpayer 
has a $500,000 net operating loss and owes $38,000 in AMT. This 
is sad. We do plan to submit some testimony on this isssue to 
the Committees.
    The other thing is that the depreciation rules have to be 
changed. Again, we are back to simplicity, but it is another 
problem area for most of the practitioners that we deal with on 
a daily basis.
    There is one more area, and we talked about it earlier, the 
fact that the attorneys seem to be setting up LLCs instead of 
S-corporations. These LLCs are treated as a partnership, but 
because of section 1402, it is unclear who pays self-employment 
tax. This is an issue that has to be addressed, as well, and I 
have addressed this with IRS on a number of occasions. We 
cannot seem to come up with a regulation to handle it. I think 
it is something that has to be a congressional mandate to IRS 
to decide who pays self-employment and who does not.
    Thank you.
    Chairman. Manzullo. That depreciation is fine. I am putting 
a $20,000 rubber roof on my building that is 130 years old, and 
the cost of the roof is about \1/6\ the value of the building, 
and what is it for a roof? Thirty-nine years? You tell me that 
roof is going to last 39 years. I am planning on introducing 
legislation to do away with all depreciation, expense it out. I 
am serious. Let the business owner decide, let him or her 
decide the years they want to depreciate it and offset it 
against income. That makes life easy. Mr. Shoaf is next.
    Mr. Shoaf. I would also like to thank the Small Business 
Committees for having this event for us. I would like to echo 
everything I have heard here, even the conflicting feelings 
about whether it is the bankers or the restaurants that are the 
cornerstones of America. Every cornerstone that is laid is a 
job for our members, so we support both. Our members, by and 
large, belive that the tax code is not fair, it is not simple, 
and they are looking for ways to simplify and bring fairness to 
the tax code. Repeal of the death tax is something they have 
brought to us as a huge unfairness, and a huge complicated mess 
to figure out in the end. Only full repeal of the death tax is 
what our members want. They do not want any band-aids. They 
want to get rid of it. They do not want to have to plan for it. 
Full repeal is what they need.
    In addition, they also want simplification elsewhere. Our 
members would expecially like to see a recognition that 
construction raw materials should not be counted as inventory, 
and allow that they be allowed to use the cash method of 
accounting. Those are things that have been mentioned here 
today, and I am very glad we have the opportunity to be here to 
stress that priority as well.
    Chairman. Manzullo. Thank you very much.
    Steve Anderson.
    Mr. Anderson. Thank you very much, Mr. Chairman. Members of 
Congress love to go to restaurants with members of their 
families in the campaign.
    Chairman. Manzullo. You know, I chose to be born into a 
restaurant family.
    Mr. Anderson. Which we greatly appreciate, and what a 
strange turn of events, Mr. Chairman. Being a native of the 
16th district, I have eaten in one of those fine restaurants, 
called Manzullo's. I think a lot of people in Congress know 
that people own the restaurant, but many times they do not 
really understand the effect public policy has on employees. I 
am glad everybody is into this cornerstone initiative, and we 
will franchise that initiature throughout the small business 
community. While we encourage you to use that and talk about 
the impact public policy has on employees, as well as 
employers, we have also launched something called our pro-
employee and pro-employer initiative.
    I have been in this town for 25 years. I think a lot of 
times we go before Congress and tell everybody what we are 
against, and occasionally we have to do that. But I do not 
think we go up enough and talk about the proposals we favor and 
what we can do to help employees across this country. One thing 
I have not heard, and I would like to make sure is on the 
record, is the association health plan proposal. Labor 
shortages are hitting all of us, and we are all trying to find 
ways to add value to the lives of the people that work for our 
member companies and our member restaurants, in our case. I 
think the association health plan initiative is a wonderful way 
to get accessibility to health care coverage to every person in 
this country.
    Also, I think most of us in this room are affected by 
disposable income. I know restaurants are, and as a result, we 
are strongly in favor of the cuts in the marginal tax rates. We 
think it is very important. As a matter of fact, our 
association has met with President Bush three times in just the 
last six weeks on this issue, and we think this issue is very 
important as we go forward. I mentioned our 844,000 restaurants 
in the country, and the rate cut will have an impact on 
restaurant sales. But it will also put money in the pocketsof 
people that work in our restaurants.
    Chairman Manzullo. Thank you.
    John.
    Mr. Satagaj. I just wanted to speak briefly on tax 
compliance issues on a point that has not been raised, but I 
think it is one that is very important. That issue is to revise 
the Small Business Regulatory Enforcement Fairness Act to 
include the IRS under the purview of the act. We need to revise 
SBREFA, and I think that is a high priority.
    On another compliance issue, Les quietly mentioned earlier 
that he previously worked for the IRS. He was there in the 
1990s when they published a penalty handbook. It was a project 
that pooled all the penalties in one place, but the bad news 
was that when we saw them all in one place, we realized how 
many we had in one place. We think Congress should look at 
those penalties that no longer make any sense and eliminate 
them. That should be a high priority, as well.
    Thank you.
    Chairman Manzullo. I appreciate that. Before we conclude, 
Congresswoman Velazquez and I have some marching orders for 
your organizations, and that is we would like you to contact 
your members and have them get on board H.R. 1037. This is a 
very far-reaching tax-relief bill for small businesses, cash 
accrual accounting, $5 million, that is it. You gross under 
that, you can go on the cash method of accounting. Many of the 
things we have talked about in terms of reform, there are two 
complete sections in there that beef up Taxpayer Bill of 
Rights. This is a powerful bill.
    We have worked very, very hard on this bill. Please, you 
have come here and you gave us advice. Now we are asking you to 
contact your constituent members and have them contact their 
members of Congress in order to get on board that bill.
    Mrs. Napolitano.
    Mrs. Napolitano. I have been in and out, so I did not hear 
all of the testimony, but I am wondering how many of you have 
looked at what is being proposed for SBA cuts and how that will 
affect your companies, those that you deal with, those that you 
represent. Nobody----
    Mr. Merski. I could respond to that. Paul Merski, with the 
Independent Community Bankers of America. One of the major 
concerns right now in the community banking industry is 
liquidity and the funding they need to make loans in the 
community. It has been pointed out here by numerous people 
around the table that without the funding for small business, 
both to start small businesses and to expand and to buy the 
equipment that they need, which primarily comes from community 
banks, small business would be in very big trouble. We are 
concerned with a couple of the lending programs that are run 
through the Small Business Administration, and these are self-
financing. We are not looking for subsidies from the Small 
Business Administration. But the 7(A) loan program in 
particular, which Senator Kerry mentioned earlier, will be 
effected by the President's budget through huge fees, both on 
the lender and the borrower, associated with loans under that 
program.
    I think both the Senate Chairman and the House Chairman of 
the Small Business Committee have already written in response 
to that issue asking that these additional burdens not be put 
on these loan programs, particularly when you have Chairman 
Greenspan testifying frequently now about the credit crunch in 
the small business community.
    Mrs. Napolitano. The reason I ask is there is a roughly 42-
percent cut in SBA, and a lot of them are going to be fee-
based, as you are stating the fact. I believe the second-
largest amount of loans go to restaurants who are going to be 
suffering greatly if they are going to have to come up with 
either 25-75 to get a loan or to get assistance from SBA. They 
just will not be able to do it. I think it is important we get 
this message to our members of the Committee, as well as to the 
Administration, that this is hurtful to small business' ability 
to survive. No doubt about it. So why are we putting a burden 
on small business?
    Chairman Manzullo. If the gentlelady would yield, those 
increases in fees apply to loans in excess of $150,000.
    Mrs. Napolitano. Very few loans, I think, will be below 
that.
    Chairman Manzullo. It just depends on how you want to keep 
on refilling the pot, but for people to go into an SBDC, 
somebody wants to charge them and we have a hearing on it, and 
people get excited and we say, ``Well, you are already paying 
taxes.'' When you call the Department of Commerce, do you get 
charged for every call? When you call the IRS, do you get the 
right advice? So why charge people for basic services?
    Mrs. Napolitano. Right. I understand. I am a small business 
person, and I have been. For me to say to my colleagues and 
others, I am sorry, if you want to increase your business, you 
are going to have to pay additional money. My small business, 
in that area, is where we thrive, in that small economy base.
    Chairman Manzullo. Let's just throw it all out. I am upset 
with Chairman Greenspan. No one talks about the fact--I am from 
Rockford, Illinois. In 1981, we led the Nation in unemployment 
at over 25 percent. It reached 27 percent. We lost 100 
factories and 10,000 highly-skilled jobs. The one barometer, 
the one indicator, the Fed, if it looks outside the beltway, 
all you have to do is call a steel supplier, and you ask the 
steel supplier how is business, and for nine months he said it 
is flat. If you do not sell steel, youare not building, but 
more importantly, you are not building machine tools, and when tools 
are not being built, that means there are no orders for equipment. That 
means the wholesalers and the manufacturers are backing up and the 
retailers are not buying.
    So somewhere along the line, Mr. Greenspan needs to 
understand that when steel suppliers are not selling steel, you 
do not raise interest rates. Isn't it interesting that when the 
NASDAQ was at 5,000, that he used words such as an irrational 
exuberance, saying stock was overvalued, but now the Fed lowers 
the rates and says the rates have nothing to do with the value 
of stock.
    Let me ask you a question. What is the value of a 1957 
Chevy? It is whatever the market brings. Right now, 
unemployment in Rockford is pushing seven percent. We lost 
2,500 employees at Motorola, laid off the first shift at 
Chrysler Corporation, and no one wants to use the word 
recession or depression, but I want to tell you something. My 
brother has a restaurant, and it has been flat now ever since 
January. I say, ``Frankie, just hold on and work through this 
thing.'' But I just think that Congress has not gotten it. We 
sit around here. I mean, we need to pass an immediate tax cut 
big-time, make it retroactive, get money into everybody's 
hands.
    Anyway, you had a closing statement you wanted to make?
    Mrs. Christian-Christensen. Thank you, Mr. Chairman. I want 
to thank you and the Ranking Member for holding this hearing, 
and thank everyone who came here to share information with us. 
We have heard you, and I know that under the leadership of our 
Chairman and Ranking Member, we will address many, if not all, 
of the issues you discussed. I just want to urge everyone, 
then, on another issue, that I do not think you have heard us 
clearly on, to look at H.R. 8, the bill that repeals the estate 
tax, and I have heard that small businesses need relief now. We 
believe that.
    We heard, I think, Mrs. Thurman say when you look at 
projections, they are really unreliable. H.R. 8 does not give 
relief to 95 percent or more of businesses for 11 years, almost 
all of those are small businesses. A 10-year projection--we may 
just as easily end up with deficits, which on the back end, 
small businesses and all businesses are going to end up paying 
for it in the end. I agree we should not sacrifice what is 
practical and useful for us now for the perfect. Perfect is 
repeal, but the substitute bill that we also urge you to look 
at will give small businesses relief within the next year or 
two; whereas what is considered the perfect will not give you 
any for 11 years. I think if you look at it, you will see the 
sense of what our ranking member said and what I am trying to 
say to you now.
    Chairman Manzullo. Mrs. Velazquez, did you have a closing 
statement?
    Ms. Velazquez. Yes, Mr. Chairman. I just want to thank all 
of you for being here today, and I do not want to be a pain in 
the neck, but I hope you understand my passion. That is that I 
do care about small businesses, and no one can tell me we have 
not done the right thing because of partisanship. You know, my 
Committee reported out 27 bills, 20 of which were signed into 
law, because we work in a bipartisan way. I will ask you to go 
a step further, go and talk, not only the members, but talk to 
the leadership, and explain to them what is good for big 
business is good for small business, too. After all, you are 
the engine for our economy, and we have to be honest and we 
have to be serious about the issues that affect small 
businesses.
    When things are not right, we have got to say it. Sir, I 
expect you to write a letter to the President and to the 
leadership and say that is not fair that, on the one hand, we 
claim we are cutting taxes for small business, but on the other 
hand, we were imposing fees on the 7(A) loan program. How many 
members of the industry that you represent get 7(A) loans?
    So it is important that we say to the Administration it is 
wrong that you go around and talk about protecting small 
businesses, when on the other hand, we are cutting the budget 
of the Small Business Administration by 43 percent. The estate 
tax we are passing today, well, I do not know, you read the 
same legislation I read. Maybe they filed another legislation 
overnight. That is something else. I want to work with you, but 
we have to work together, because of the budget proposed 
resolution and on the estate tax and on the tax cut of 1.6 that 
they claim that I say is more than a trillion dollars, that we 
passed. There is nothing there that is targeted in terms of 
actually for small businesses.
    So we have got a lot of work to do. I am prepared to do 
that, but I want you to join with us in doing so.
    Thank you.
    Chairman Manzullo. Well, I cannot tell you how much I 
appreciate working with you.
    Ms. Velazquez. My passion.
    Chairman Manzullo. It is good. We have a great working 
relationship, and again, please take a look at our tax bill. 
What is that number again? I feel like an 800 number. You dial 
in and we give you a love gift. H.R. 1037. It is a great bill. 
I want to tell you something. If it were up to Ms. Velazquez 
and me, we would take care of that estate tax, wouldn't we? But 
we have to deal with other people in both bodies.
    Thank you all for coming. The Small Business Committee is 
adjourned.
    [Whereupon, at 11:47 a.m., the Committee was adjourned.]
      

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