[Senate Hearing 113-283]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 113-283

 
 SMALL BUSINESS TAX REFORM: MAKING THE TAX CODE WORK FOR ENTREPRENEURS 
                              AND STARTUPS

=======================================================================

                               ROUNDTABLE

                               BEFORE THE

            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 17, 2013

                               __________

    Printed for the Committee on Small Business and Entrepreneurship


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            COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                    ONE HUNDRED THIRTEENTH CONGRESS

                              ----------                              
                   MARY L. LANDRIEU, Louisiana, Chair
                 JAMES E. RISCH, Idaho, Ranking Member
CARL LEVIN, Michigan                 DAVID VITTER, Louisiana
TOM HARKIN, Iowa                     MARCO RUBIO, Florida
MARIA CANTWELL, Washington           RAND PAUL, Kentucky
MARK L. PRYOR, Arkansas              TIM SCOTT, South Caarolina
BENJAMIN L. CARDIN, Maryland         DEB FISCHER, Nebraska
JEANNE SHAHEEN, New Hampshire        MICHAEL B. ENZI, Wyoming
KAY R. HAGAN, North Carolina         RON JOHNSON, Wisconsin
HEIDI HEITKAMP, North Dakota         JEFFREY S. CHIESA, New Jersey
EDWARD J. MARKEY, Massachusetts
                Jane Campbell, Democratic Staff Director
           Skiffington Holderness, Republican Staff Director


                            C O N T E N T S

                              ----------                              

                           Opening Statements

                                                                   Page

Landrieu, Hon. Mary L., Chair, and a U.S. Senator from Louisiana.     1
Risch, Hon. James E., Ranking Member, and a U.S. Senator from 
  Idaho..........................................................     3
Scott, Hon. Tim, a U.S. Senator from South Carolina..............     4
Enzi, Hon. Michael B., a U.S. Senator from Wyoming...............     8
Shaheen, Hon. Jeanne, a U.S. Senator from New Hampshire..........     9

                           Witness Testimony

Arslan, Kristie, President and CEO, National Association for the 
  Self-Employed..................................................     3
Canty, Kenneth, President and CEO, Freeland Construction Company.     4
Eckert, Mike, Vice Chairman, Angel Capital Association...........     5
Edwards, Chris, Director, Tax Policy Studies, CATO Institute.....     5
Hodge, Scott, President, Tax Foundation..........................     5
Keeling, Michael, President, The ESOP Association................     6
Nellen, Annette, Director, San Jose State University Graduate Tax 
  Program........................................................     6
Nelson, Greg, General Manager, Brown Rental Inc..................     6
Randolph, Bill, Director for Business and International Taxation 
  in the Office of Tax Policy, U.S. Treasury Department..........     7
Sullivan, Ann, President, Madison Services Group, Inc............     7
Zinman, Sanford, Tax Policy Chair, National Conference of CPA 
  Practitioners..................................................     7

          Alphabetical Listing and Appendix Material Submitted

Acadian
    Prepared statement...........................................   108
Arslan, Kristie
    Testimony....................................................     3
    Prepared statement...........................................    44
Association for Enterprise Opportunity
    Prepared statement...........................................    81
Cantwell, Hon. Maria
    Prepared statement...........................................    42
Canty, Kenneth
    Testimony....................................................     4
    Biographical sketch..........................................    48
Coalition of Small Business Innovators
    Prepared statement...........................................   110
CompTIA
    Prepared statement...........................................   102
Credit Union National Association
    Prepared statement...........................................   114
Eckert, Mike
    Testimony....................................................     5
    Prepared statement...........................................    49
Edwards, Chris
    Testimony....................................................     5
    Prepared statement...........................................    54
Enzi, Hon. Michael B.
    Opening statement............................................     8
Employee-Owned S Corporations of America
    Prepared statement...........................................    84
Hodge, Scott
    Testimony....................................................     5
    Biographical sketch..........................................    57
Keeling, Michael
    Testimony....................................................     6
    Prepared statement...........................................    58
Landrieu, Hon. Mary L.
    Opening statement............................................     1
Louisiana Bankers Association
    Prepared statement...........................................   120
Louisiana Credit Union League
    Prepared statement...........................................   122
National Restaurant Association
    Prepared statement...........................................    93
Nellen, Annette
    Testimony....................................................     6
    Prepared statement...........................................    62
Nelson, Greg
    Testimony....................................................     6
    Prepared statement...........................................    65
One Voice
    Prepared statement...........................................    89
Professional Beauty Association
    Prepared statement...........................................   123
Randolph, Bill
    Testimony....................................................     7
Risch, Hon. James E.
    Opening statement............................................     3
Scott, Hon. Tim
    Opening statement............................................     4
Shaheen, Hon. Jeanne
    Opening statement............................................     9
Small Business Investor Alliance
    Prepared statement...........................................   125
Small Business Majority
    Prepared statement...........................................    87
Sullivan, Ann
    Testimony....................................................     7
    Prepared statement...........................................    67
Witness biographies..............................................    76
Zinman, Sanford
    Testimony....................................................     7
    Prepared statement...........................................    74


 SMALL BUSINESS TAX REFORM: MAKING THE TAX CODE WORK FOR ENTREPRENEURS 
                              AND STARTUPS

                              ----------                              


                        WEDNESDAY, JULY 17, 2013

                      United States Senate,
                        Committee on Small Business
                                      and Entrepreneurship,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 3:08 p.m., in 
Room 428, Russell Senate Office Building, Hon. Mary L. Landrieu 
(chair of the committee) presiding.
    Present: Senators Landrieu, Shaheen, Risch, Scott, and 
Enzi.

 OPENING STATEMENT OF HON. MARY L. LANDRIEU, CHAIR, AND A U.S. 
                     SENATOR FROM LOUISIANA

    Chair Landrieu. Good afternoon, everyone. Welcome to our 
roundtable on Small Business Tax Reform: How to Make the Tax 
Code Work for Entrepreneurs and Startups. I really appreciate 
the members joining me for this roundtable this afternoon.
    As the title indicates, the topic is extremely important. 
The venue is a little less formal than a regular hearing and we 
specifically wanted this subject to be considered in a 
roundtable format so we could encourage a lot of back-and-forth 
discussion and free, open dialogue. Of course, any written 
statements will be submitted for the record but this is a 
roundtable and the title suggests informality. A lot more 
informal.
    I am going to start with a short opening statement, and 
then turn to my Ranking Member for a short opening statement. 
Of course, we will recognize members as they join us. They may 
not be able to stay through the whole two hours but I will, of 
course, recognize them.
    But, then we are going to go through a series of questions 
and comments and have a free flow of information which I find 
very, very helpful; as it helps us to build a record on the 
subject of tax reform that we can then move to the Finance 
Committee.
    I want to say to begin with that I am very happy that three 
members of the Small Business Committee are senior members of 
the Finance Committee. Senator Enzi. So thank you, Senator, for 
joining us today. Senator Cantwell, who may be joining us 
later, and has submitted some questions and statements for the 
record. And, Senator Cardin who we are expecting today.
    So, we have got three members; and for many years my 
Ranking Member, Senator Snowe, who is no longer here but served 
as a member of the Finance Committee and had lot of impact on 
small business tax policies.
    Senator Risch and I are happy for you all to join us. Let 
me just begin with a brief statement. I thank you for being an 
important part of this debate, and being a part of this 
roundtable. I thank especially those of you that traveled all 
the way from the West Coast. It is a long way to come to 
Washington but we do want to hear views, of course, outside of 
the Beltway and from the West Coast.
    I am pleased to welcome so many small business owners, 
investors, and experts. We have experts from Louisiana, Idaho, 
South Carolina and all the way from California, again a very 
strong, wide spectrum of small business owners; and this 
Committee has been and will continue to be the place for your 
voices to be heard here in Congress.
    As many of you know, last month the Senate Finance 
Committee Chair, Senator Baucus, and Ranking Member Hatch sent 
a letter to all Senators requesting ideas and our partnership 
in the effort to get tax reform over the finish line.
    There are few matters more important to small businesses in 
America than the taxes that they pay and the records they are 
required to keep to support their filings. In-line with this 
Committee's long tradition of working to enlighten and inform 
the Senate on matters of concern to small business from 
immigration to health care to other important issues, this 
roundtable is designed to get your views on tax reform.
    I am looking forward to hearing from all of our 
participants and, of course, we will share the record if this 
roundtable with the Finance Committee, and they are well aware 
of our hearing today.
    In addition to ideas of how we can simplify the tax code, I 
also want to hear if you all agree or disagree with the three 
principles of tax reform laid out in the letter from the 
Chairman and Ranking Member of Finance to us; and also Rep. 
David Camp expressed these ideas in a Wall Street Journal op-ed 
on April 8.
    The first principle of tax reform this bipartisan 
leadership group identified is to protect the middle class and 
ensure taxes are not increased for working or middle class 
families.
    The second principle of tax reform they outlined is to 
level the playing field for U.S. employers to ensure tax reform 
makes U.S. companies more competitive in the global economy.
    The third principle they are committed to pursuing in tax 
reform and the one most relevant to our discussion today is 
parity for small business, to ensure that any tax reform plan 
does as much to help start up businesses create jobs, family 
businesses to be created, sustained, and grow as desired and 
compete as equally on that level playing field with large 
companies, whether privately or publicly owned, whether 
domestic or international.
    Are there other principles that you all would like us to 
consider as we move forward, and if so, what are they?
    Some discussion topics we are going to talk about today are 
do you agree or disagree with the principles outlined, do you 
have other suggestions, are there new and innovative ideas that 
you can throw on the table to accelerate startups, or increase 
angel investment that we should know about? What would a new 
reformed tax code designed to help American small business to 
employ more people and grow look like?
    In addition to the overall complexity of the tax code, are 
there specific provisions that seem particularly unfair and 
burdensome to you that you would like to jettison or to 
moderate or modify?
    So again, I am going to turn this over to my Ranking 
Member. I thank him for his participation and hopefully he can 
stay through most of the meeting today and I would be happy to 
turn the mike over to Senator Risch.

OPENING STATEMENT OF HON. JAMES E. RISCH, RANKING MEMBER, AND A 
                    U.S. SENATOR FROM IDAHO

    Senator Risch. Thank you, Madam Chairman. We are making 
progress here. Usually you get to make a long opening statement 
and then you turn it over to me for a short opening statement. 
So, it sounds like we are on parity now.
    Chair Landrieu. That is great.
    Senator Risch. Wonderful.
    Thanks all, and I want to thank all of you for coming today 
on what is a serious subject and something that is important 
obviously for those of us who are members of the Small Business 
Committee.
    I preach here all the time that the biggest problem that 
faces small business in America today is the Federal Government 
and the regulatory structure that it heaps on small businesses 
day after day after day. Obviously, the tax code is one of the 
most serious offenders, so we want to hear what you have to say 
about that.
    We are interested in that and we will hopefully have some 
substantial input as the Finance Committee writes a new tax 
code. We are aware, of course, that most small businesses are 
pass-through entities, and we are going to insist that be 
considered as tax reform goes forward.
    I have to warn you that there are people here in the 
Congress who do not look at this necessarily as an opportunity 
to help you, but rather to help themselves; that is, they want 
to do tax reform so that they can extricate more money out of 
small businesses.
    And, a number of us are going to insist that it be revenue 
neutral, that is, that it not be the situation where they do 
tax reform and at the end of the day small businesses say ``Oh, 
look, the Federal Government got another trillion dollars.'' 
So, we are going to be watching that as we go forward.
    So again, I thank all of you for coming. I know being small 
business people it is difficult to get away from your 
businesses so we appreciate that. We understand it, and thank 
you, Madam Chairman.
    Chair Landrieu. Thank you very much. As a tradition of our 
roundtables, I would like everyone to go around and just 
introduce themselves very briefly and provide literally 30 
seconds about what makes you excited to be here today. We will 
start with you, Kristie. You have got to speak right into your 
mic. It is a little difficult and make sure your button is 
pressed.
    Ms. Arslan. Sure. Thank you for having me. I am Kristie 
Arslan. I am the president of the National Association for the 
Self-Employed, and I am also a small business owner. My husband 
and I are new business owners. We own a gourmet popcorn company 
in Alexandria, Virginia that has been open for about 15 months.
    So, the NASE represents America's smallest businesses, the 
self-employed and micro businesses, those with 10 or fewer 
employees; and so obviously tax reform is a very big concern 
because the tax code either hinders people from starting a 
business or is their top priority.
    Chair Landrieu. How many members do you all have?
    Ms. Arslan. We have 150,000 member businesses.
    Chair Landrieu. Great.
    Ms. Arslan. There are 22 million self-employed Americans 
nationwide.
    Chair Landrieu. Mr. Canty.
    Mr. Canty. Good afternoon. My name is Kenneth Canty. I am 
the President and CEO of Freeland Construction Company, 
headquartered out of Charleston, South Carolina, and also with 
offices here in Bethesda and at Bowie.
    I am excited to be here to have somebody actually listen to 
our concerns and our frustrations regarding in the tax code and 
how burdensome it is too small businesses.
    Chair Landrieu. And your Senator wanted to welcome you 
personally and I would like to call on him now.
    Senator Scott.

OPENING STATEMENT OF HON. TIM SCOTT, A U.S. SENATOR FROM SOUTH 
                            CAROLINA

    Senator Scott. Thank you, Madam Chairwoman.
    One of the things that excites me about having Kenneth with 
us here today is that not only--you want the microphone on 
really. Okay. We will do it your way then.
    [Laughter.]
    One of the things I find exciting about having Mr. Canty, 
Kenneth, here with us today is the fact that not only is he a 
small business owner but his track to a small business 
ownership is so consistent with the story of the American 
dream.
    Mr. Canty was a leader of a demolition project on one of 
the largest projects South Carolina's history, the replacement 
of the Cooper River Bridge, the now infamous Ravenel Bridge in 
South Carolina, a $750 million project.
    He was working very hard on that project. At the end of 
that project, he got laid off; and like many people do when 
they find themselves in dire straits when they are laid off 
from a position, they decide, they scratch their head, pull 
their hair out and they make the decision to--it is gone now, 
he did a good job--they make the decision to go forward and 
start a business.
    Mr. Canty was in a position where in 2008 he was able to 
successfully acquire a business and he has grown that 
contracting business from $1 million to $10 million in sales, 
gross sales from 2008 to 2013. So, just in five short years he 
has had tremendous success.
    But, we ask ourselves, and I asked him as well, what is the 
secret sauce; and he says you have to be diligent. You have to 
be on the marketing trail all the time.
    I said, well, what are the impediments to your success? And 
certainly, he named a number of things. The tax code happens to 
be one of the impediments to his success.
    So, as we hear from Mr. Canty and other small business 
owners, not only today but into the future, we will find very 
consistently that the question of whether or not the tax code 
encourages success, encourages risk-taking or not his a simple 
answer. The answer is no. The tax code is an impediment to it.
    I think Mr. Canty's example and his story is one that we 
all share as small business owners. We are so happy to see your 
success as small minority businesses from South Carolina are 
rarer than they should be and your success is quite amazing. 
Thank you
    Chair Landrieu. Thank you. Let us continue the 
introductions.
    Mr. Eckert. My name is Mike Eckert. I am Vice Chairman of 
the Angel Capital Association. I am an entrepreneur. I have 
started three businesses. I am now a very active angel 
investor, limited partner venture capital funds, invest 
heavily. I live in New Orleans, invest heavily in New Orleans 
and in the Atlanta marketplace.
    Our concern relative to tax policy is ensuring that certain 
incentives are available to angel investors which are the 
primary funding source of startup companies and small 
businesses in America.
    Chair Landrieu. Thank you so much.
    Mr. Edwards.
    Mr. Edwards. I am Chris Edwards, Director of Tax Policy 
Studies at the CATO Institute, and I am honored to be here 
today and particularly honored to be amongst all of these great 
entrepreneurs.
    When I think of entrepreneurs and the tax code, I think of 
capital gains taxes and I have been very concerned that we have 
recently raised our federal capital gains tax rate from 15 up 
to 24 percent. If you had state and local taxes on top of that, 
you get a U.S. long-term capital gains rate of about 28 
percent.
    The average rate in the OECD countries, the high income 
countries, is only 16. So, other countries have figured out 
that there are a lot of good reasons to keep capital gains tax 
rates low, and one of them is is the importance of capital 
gains for the funding of high-growth entrepreneurial companies. 
I think we need to keep that in mind.
    Thank you.
    Chair Landrieu. Thank you.
    Mr. Hodge.
    Mr. Hodge. Thank you, Madam Chairman.
    My name is Scott Hodge and I am President of the Tax 
Foundation. The Tax Foundation is one of the Nation's oldest 
tax research groups. We spend our energies looking at the 
economics of taxation, trying to make sure that tax reform is 
done right, not just the arithmetic of tax reform but the 
economics of tax reform.
    I think it would be a shame to have a simpler tax code that 
actually leads to higher capital costs and slower economic 
growth.
    So, the real idea here is to have a tax system, a new tax 
system, that is conducive to long-term economic growth, not 
just for small businesses but all businesses and all Americans.
    That should be the goal. We should be very careful in how 
we get there because there are lots of ways in which we can 
streamline the tax system, broaden the tax base, but a lot of 
those ways will actually harm economic growth not improve it.
    So, we need lower rates but we also need lower costs of 
capital and less regulations that make it easier on small 
businesses to thrive and grow.
    Chair Landrieu. Thank you.
    Mr. Keeling.
    Mr. Keeling. Thank you. I am Michael Keeling, President of 
The ESOP Association, and I am excited to be here because I get 
to show you something.
    You can see this chart I hold up. There is a red bar and 
there is a blue bar. The general social survey shows that 
during the great recession conventionally-owned companies laid 
off employees at a rate of over 12 percent--the red bar. 
Employee stock-owned companies laid off employees at a rate of 
2.6 percent--the blue bar.
    We hear people talk jobs, jobs, jobs, jobs. Our nation has 
a policy that lets people keep their jobs, pay taxes, pay 
Social Security, pay Medicare taxes; and that policy is what I 
am excited about. The policy is in the tax code and we need to 
keep the policy encouraging employee ownership and perhaps 
expand it.
    A sidebar: This little green book I hold up is a transcript 
of a hearing the Small Business Committee of the Senate held on 
February 27, 1979 on employee ownership.
    Chair Landrieu. Great. I am glad we are following in such 
good stead all these years.
    Go ahead, Ms. Nellen.
    Ms. Nellen. I am Annette Nellen, a tax Professor at San 
Jose State University. I am pleased to be here to talk about 
one of my favorite topics, tax reform. For many years I have 
been a tax professor with the last 10 plus years focused on tax 
reform and how we can have tax reform that follows principles 
of good tax policy and modernizes our tax system.
    I would be pleased to talk about that when we get into the 
conversation. Thank you.
    Chair Landrieu. Great.
    Is it Mr. Nelson and I think you wanted, Senator, to do the 
honors.
    Senator Risch. Yes, thank you. I want to introduce Greg 
Nelson, who is the General Manager of Brown Rental, 
Incorporated, and about to become the owner of Brown Rental 
Incorporated, at least a substantial portion of it.
    First of all, Mr. Nelson has owned other companies and is 
now looking forward to taking on part of this company. Brown 
Rental has been around for a long, long time. They are a 
classic small business operation.
    Essentially they rent construction tools and other types of 
equipment to the community. It is really a poster child for 
small business in America. I am sure that Greg will be happy to 
enlighten us on his thoughts on tax reform. Thank you.
    Mr. Nelson. Thank you very much. I am glad to be here. 
Yeah, what Senator Risch was saying kind of continue with that. 
I have grown up in Idaho my whole life. I have had two 
businesses that I did successfully and sold. I am in my third 
adventure now.
    Some of the problems that I do see right now is a lot of 
the tax issues that I am dealing with. I am having to hire 
people to interpret it. I am having to have accountants kind of 
go through. I am in the middle of SBA right now and that is 
real difficult for just a regular business guy out there. I 
have to run my business, I work in the business, and now I am 
having to learn a whole new part or side of the business and 
that is difficult for me.
    I have kind of name that some of the unintentional 
consequences that role downhill to me. What happens up here it 
seems like sometimes it, it makes sense on paper up here but by 
the time it gets to me, man alive, it is tough.
    Chair Landrieu. Great.
    Mr. Nelson. It is.
    Chair Landrieu. Thank you so much.
    Mr. Nelson. You bet.
    Chair Landrieu. Next.
    Mr. Randolph. Thank you for inviting me. I am Bill 
Randolph. I am here from the Treasury Department. I direct the 
Business and International Taxation, Office of Tax Policy. I am 
an economist.
    I am actually very excited to be here to hear especially 
from people, business people outside the Beltway who know the 
problems that small businesses face. We are very well aware 
that small businesses face a very unduly complex tax code and 
face a disproportionate share of complying with that code; and 
we really are happy to take part in discussions about tax 
reform that can try to make the tax system simpler for small 
businesses and also increase the incentives for investors in 
new startups and try to take, try to make it so that businesses 
can spend more time on their business and less time on, you 
know, reading the tax code.
    Chair Landrieu. Thank you.
    Ms. Sullivan.
    Ms. Sullivan. Hi, I am Ann Sullivan. I am representing 
Women Impacting Public Policy. WIPP represents a million women 
business owners across the country and has 71 organizations in 
the coalition.
    I am excited to be here today because the thought of 
simplifying the tax code and making it fairer is something that 
is very attractive to the folks that I work with.
    Chair Landrieu. Thank you.
    Mr. Zinman.
    Mr. Zinman. Thank you for inviting me to participate today. 
I am the Tax Policy Chair of the National Conference of CPA 
Practitioners, NCPAP. NCPAP members serve over 1 million 
businesses and individuals throughout the country.
    We are the professional acting as the CFOs for those small 
businesses. We clarify confusing rules in the tax code, answer 
questions about employment and sales taxes.
    Small business owners often pay a disproportionate amount 
for legal and tax services. They rely on outside advisers to 
ensure that they are receiving the benefits of available tax 
credits while guaranteeing they are following the tax code 
regulations.
    Small business owners want to healthy economy. Tax 
incentives to help them grow their businesses, a tax code that 
is understandable, and a government that allows them to 
succeed.
    Thank you.
    Chair Landrieu. Excellent. Senator Enzi, as you know, is a 
member of the Finance Committee, and we would like him to say a 
word, and I really appreciate his help and attendance today.
    Senator Enzi. Thank you, Madam Chairman. I appreciate being 
on this Committee and its emphasis on small business. I have 
been on it ever since I came to Washington, and it does make a 
difference.
    Of course, I also enjoy being on the Finance Committee. I 
am looking forward to some real tax reform, and we have to do 
the corporate and the individual at the same time so that the 
pass-through corporations are not left at a disadvantage.
    I go home to Wyoming almost every weekend and travel a 
different part of the State so I get to know as many of my 
folks as I can, and I always try to get into a small business 
because if there is a small business that you have not worked 
in, it will look pretty simple; but when you get to talk to the 
people that are having to make those decisions on a daily 
basis, you find out that the simple decisions are really pretty 
complicated and affect a lot of people and have an ever 
widening circle of people that they affect.
    I once held a small business hearing in Wyoming courtesy of 
this Committee and I thought the room was pretty well packed 
but afterwards the media came up to me and they said, gee, not 
many people showed up, did they. I said, well, I am in small 
business and you know in small businesses if they have enough 
people to send them to something like this, they got too many 
people so they will get rid of them.
    [Laughter.]
    So, I appreciate having some expertise. I appreciate that 
you are doing a roundtable for this. That is an opportunity for 
everybody, hopefully a short bursts, to talk about pet peeves 
or pet solutions or that sort of thing, and then even have an 
interaction between the panelists. I find that it really works 
well.
    The current tax code does not work and I have reintroduced 
some different portions of bills that I think will help. One of 
them is logical tax return date schedules. I have got some 
bipartisan support on this side of the Hill for it and on the 
other side it has already round up in a bill. That will help to 
make the filing a lot easier.
    Besides being a former small business owner, I am an 
accountant. I love the numbers and I know that the current tax 
code is too complex. It is causing a domino affect of problems. 
It can be simpler. It can be fairer, and I think it is 
imperative that we reform both codes at the same time, and I 
just cannot thank the Chairman enough for having this 
roundtable so that we can learn a few more things from the 
people who are actually having to work with it.
    So, thank you for being here.
    Chair Landrieu. Thank you all very much. I would like to 
recognize Senator Shaheen who has joined us and also to 
notify--do you want to say anything?
    Senator Shaheen. No.
    Chair Landrieu. Okay. And to notify everyone we may have a 
vote that is called, but we are going to work through the vote 
and we will just come and go to vote and make sure that we get 
our votes in on time. They may call the vote in the next few 
minutes but we are going to continue forward with our 
roundtable.
    Now, this is how this works. You have a placard in front of 
you. When you want to speak, it is very simple. You do not have 
to raise your hand. You can just put your placard up. Try to 
turn the name to me so that I can see it and recognize you. 
Please jump in and offer your suggestions.
    I am going to kick it off with a couple of questions; and I 
would love to start, if I could, with Mike Eckert, who 
represents the angel investors.
    I was very, very taken in with your statement, Mike, that 
in 2012 angel investors invested $23 billion in approximately 
67,000 early stage companies, and that angel investors provide 
seed stage equity at any rate that is 20 times higher than the 
number of companies financed by venture capital.
    I am not sure that people in Washington know that. I did 
not know it. I am happy to know it. So, can you elaborate on 
that and say how the tax code either encourages or discourages 
that and what are some of your ideas about what we should be 
thinking about.
    I do know that getting capital into the hands of the small 
businesses that need it is essential, and I do know, because 
every roundtable we have had has had people up here saying if I 
could just get my hands on some capital, I could grow my 
business; and so, we really are pushing that very hard through 
our Committee.
    So, why do we not begin with you.
    Mr. Eckert. Thank you, Madam Chairman. The Angel Capital 
Association----
    Chair Landrieu. Try to lean into your mic. I am sorry it is 
a little awkward.
    Mr. Eckert. Is this better?
    Chair Landrieu. Yes, better.
    Mr. Eckert. 200 member groups that are populated by about 
10,000 angel investors who are all accredited investors. They 
write individual checks. This $23 billion is a real number. It 
came from individuals throughout the country. The angel 
investors provided about 90 percent of the capital to start up 
companies in America.
    Right now one thing that benefits angel investors who are 
generally high net worth individuals is incentives. It keeps 
them in the game. Angel investing is a very high risk 
investment class. Fifty percent of the deals in which we invest 
fail. Our objective is to keep people in the game and even send 
them.
    The hundred percent exemption from capital gains tax has 
been very, very important in keeping angel investors investing. 
That tax provision is due to sunset at the end of this year. We 
really are hoping that that can be made permanent.
    There are also two facets of Section 1202 that we are 
talking about here. The current holding period is five years. 
We are hoping that it can be reduced to two years because the 
dynamics of exiting investments for angels has been reduced. 
The IPO market is over.
    We are seeing a lot of larger companies come in and acquire 
the smaller companies that we have started and that we mentor 
and coach and grow exiting sooner. We think that five years may 
not be as practical.
    We also think that another facet of Section 1202 should be 
adjusted. Currently, Section 1202 only contemplates C 
Corporations. In many of the deals in which angel investors 
invest are LLCs, limited liability companies, and we would love 
to see those included in Section 1202's exemption.
    We are very worried that, if Section 1202 is not extended, 
that we are going to see hundreds and maybe thousands of angels 
fall out of the system which will preclude capital for a lot of 
the people like these in this room who are starting companies.
    Chair Landrieu. I would like someone else to comment on 
this particularly the CPAs. Go ahead.
    Mr. Zinman. I would be happy to.
    Chair Landrieu. And anybody that wants to speak just put 
your placard up.
    Mr. Zinman. As Mike was speaking, I wrote down a quick note 
that what I found over the years is the biggest problem for 
getting money from a bank is you cannot get it if you need it; 
and generally the small businesses, even with the SBA, are 
having problems, especially post the recession.
    There are a lot of businesses, a lot of individuals who put 
their houses up to mortgage so that they can finance their 
businesses and keep it going through the recession. Well, now 
they have come to the end of the rope. It is potentially a 
successful business but they need just that small extra 
infusion in capital. And, because of banking regulations 
possibly, because of conservativism, the small business owners 
do have to go and are happy to go to the angel investors 
because those are the ones that are able to make this happen.
    Chair Landrieu. And can I--go ahead, Ann, I am going to get 
you in but let me ask something and you all just jump in here 
if you have any comments.
    But, one question comes to mind. How do, Sandy, some of the 
people that you help know about angel investors and how do your 
angel investors know about small businesses? I am assuming you 
have a online network sort of like eHarmony.com or something 
like that.
    Mr. Zinman. Well, I will let you answer that question 
because you are better at it. My answer is we tried to network 
a lot. We spent a lot of time networking because we become the 
voice of the small business. But I will let you answer that. 
You are even better than me at that.
    Mr. Eckert. Thank you, Sandy, but I thought your answer was 
pretty good as well.
    Most angel investing occurs on a local basis. So, in the 
different markets in which I invest we are looking at local 
businesses to help create jobs, create companies in our local 
communities.
    Once an angel group is formed, entrepreneurs will find us; 
and we will also hold events to attract entrepreneurs to make 
them aware of what we do, the investment criteria that our 
groups require as we determine whether we are going to invest 
in a deal or not.
    So, it is not difficult for an angel investor, I mean, for 
an entrepreneur to find an angel investor; but also we angel 
investors want them to find us because we are seeking those 
kinds of investments.
    Chair Landrieu. Ms. Nellen and then Ann.
    Ms. Nellen. I think it is a great equity point being raised 
here, equity in terms of treating people similarly. With 1202 I 
think it should be expanded to cover more than just an 
investment in a C Corporation.
    And then there are other provisions. We hope everything 
goes well, but there is also, for example, a Section 1244 
provision that only applies for a C Corporation investment and 
that would allow for, if things do not go so well, up to 
$100,000 of an ordinary loss. That should be expanded to other 
types of entities besides just C Corporations. There are a few 
rules that should be broadened beyond just C Corporations for 
equity purposes.
    Chair Landrieu. Ms. Sullivan.
    Ms. Sullivan. Women have understood the importance of 
family and friends and more organized investors like angel 
investors for a long time.
    We have supported legislation to give them a big tax credit 
I would say 10 years ago because that is where women get a lot 
of their money. I would say the way that our members find them 
is mostly through organizations like WIPP or other 
organizations rather than individually. They look to their 
associations to help them find you.
    Chair Landrieu. Mr. Hodge, I want to ask you that--go 
ahead, Mr. Edwards, and then I have a question for Mr. Hodge.
    Mr. Edwards. The point about Section 1202, I noticed the 
Kauffman Foundation did a study recently about the importance 
of expanding Section 1202, extending the 100 percent exemption 
under Section 1202; and they tried to model exactly the 
economic impact of that.
    What has always struck me about angel investment, 
entrepreneurs, and the high growth companies in the United 
States is that it is very difficult for any economist to model 
the impact of an Apple or an Amazon or a Facebook.
    Some of these companies that have got angel and VC 
investment, they are hugely important for innovation. Almost 
all new innovation, if you look over the last century in the 
United States, has been pioneered by new companies, not 
existing ones.
    So, you know, IBM did not invent the PC. It was new 
companies like Apple and Microsoft that pioneered it. So, in 
thinking about angel and venture capital entrepreneurs, we have 
to think about the long term. We need to think about the next 
generation of these usually important companies.
    Chair Landrieu. I think that is an excellent point.
    Mr. Hodge, I wanted to ask you on your point that you made 
in your opening about making sure the focus is not only 
simplification but amplification of the economic power of 
entrepreneurship or business start ups.
    Do you want to add anything?
    Mr. Hodge. Well, there are kind of two elements of it. One 
is the overall tax rate, and right now entrepreneurs are facing 
a higher tax rate than the largest corporations in America. As 
you know, the U.S. has the highest corporate tax rate in the 
industrialized world at 35 percent; but many of our pass-
through businesses are paying a tax rate of over 40 percent.
    Those high tax rates are called success taxes, and they are 
a tax on our most successful businesses, and that is simply not 
only unfair but it is also bad economics.
    There is a second level of this is that as we try to lower 
the corporate tax or all the tax rates through tax 
simplification, we have to be careful about how we broaden the 
tax base; and there are some key elements here such as 179 
expensing, accelerated depreciation, and other things that not 
only help us identify what is taxable income but also help us 
identify what is the tax base and lower the cost of capital.
    And, if we move away from these things toward longer 
depreciation lives, even while we are lowering tax rates, we 
can increase the cost of capital and that undermines the 
economic growth that you achieve through lower rates; and we 
have modeled this with our macroeconomic model; and we have 
found that even if you lower rates and move toward longer 
depreciation lives, you actually neutralize the economic 
benefits that you get from a lower rate.
    Chair Landrieu. You know, there is a lot of talk up here 
about lowering the corporate tax rate. The President has even 
endorsed such an idea and there are Republicans and Democrats 
who support that.
    But when you lower the corporate tax rate, does that do 
anything specifically for small businesses generally?
    Mr. Hodge. Well, you have to be careful again in how you 
get that and how you broaden the base because the majority----
    Chair Landrieu. I am just talking about lowering the 
corporate tax. That in itself if you just lowered it does not 
really target small business, does it? It is the larger 
corporations.
    Mr. Hodge. But it helps the broader economy. It adds about 
two percent to GDP and that helps all businesses.
    Chair Landrieu. Sandy.
    Mr. Zinman. So many of these small businesses are LLCs, S 
Corporations, partnerships; and in fact, Mr. Hodge is 
absolutely right, you need Section 179, but these individuals 
and if you take it up to the Northeast, they are paying in 
excess of 50 percent when they get hit with the AMT, when they 
get hit with the state and local taxes.
    To the extent that sometimes, and I think it is 
counterproductive, some individuals want to find a business 
that is losing money because they can save some tax money. That 
is not a good reason to go into business. You should be going 
into business to make money; and when you are paying 50 
percent, if you are putting in a lot of sweat equity, there is 
a disincentive to be making money.
    Chair Landrieu. Excellent. Ms. Arslan.
    Ms. Arslan. Yes. You know, obviously I think tax rates, 
especially for the self-employed, are very important. Our 
members are also proprietors, LLCs, partnerships but I cannot, 
you know, do not want to----
    Chair Landrieu. If you speak into your mic.
    Ms. Arslan. I do not want to de-emphasize the importance of 
compliance and simplification because one of the biggest 
barriers or what stops people in their tracks from starting 
their businesses is the overwhelming burden of how am I going 
to figure this all out. So, you know, we can lower the rates, 
but if it is not simple, it is still going to prohibit people 
from starting businesses.
    And, I think in terms of corporate tax reform I think 
business, even our small businesses, the self-employed, see 
business as an ecosystem; and it is the reason why we think any 
kind of reform needs to be done together because healthy big 
businesses will help small business.
    You know, a lot of our members contract with larger 
companies, corporations. So, if they are not in a good 
financial state, and we saw that with the recent recession, 
they cut their contractors; and a lot of our members were hit 
by that.
    And so, we want a healthy corporate environment as well; 
but it cannot be done separately. It has to be done together so 
all business benefits from comprehensive tax reform.
    Chair Landrieu. I think that is an excellent point, and I 
think sometimes we do not think about that. We think in terms 
of big versus small or small versus big; but the fact is it 
makes up the ecosystem; and the healthier everyone is and the 
better it really helps to create that synergy that is 
important.
    Go ahead, Mr. Canty.
    Mr. Canty. Yes, I would like to just address the topic of 
what lowering the corporate tax, how that could effectively 
affect a small business.
    I own a construction company, and the thing that runs a 
construction company is bonding. Everybody is probably pretty 
familiar with that, and typically five to ten percent of your 
net worth is what your bonding level will be. So, if you have 
$10 million of bonding, you need to have usually $500,000 to $1 
million of net worth.
    Well, every time you go to pay, if you make money one year 
and let us say you are paying, you have to send a check in, to 
make the math easy, for $50,000 in taxes, that comes right out 
of your retained earnings.
    So, the bonding company can go back and look at you and 
decrease your bonding limit at that present moment when you pay 
those taxes in April. What else happens in April?
    Well, if you are a federal contractor, typically that is 
the time when your federal contracts are flowing the slowest. 
Usually around the springtime it tends to be a little bit slow 
until the summer time, and the Congress sets their budget and 
the contracting officers start putting out work.
    So, it is really a double whammy. So, when you pay those 
taxes on money as an owner that you really never, ever put it 
in your pocket, it is coming out of your retained earnings and 
affecting you negatively.
    Chair Landrieu. So, what you are saying is if there would 
be a way to have a different timing on the taxes that are owed 
quarterly, particularly that quarter, that would be the second 
quarter of the year? Or?
    Mr. Canty. I would say that as a short-term but really what 
I would say--I guess as of this conversation goes it is 
appropriate to say this--is going away from, going away from 
the tax code we have now to more of a consumption-based tax 
code, because as a small business I am going to keep growing 
and growing and growing whether it is by the size of my company 
of geographically, and the more consumption I have maybe 
instead of the more profit I make the more consumption I have; 
and that goes back to the argument of spreading the base. The 
more we consume, our tax code should be based on that, from my 
viewpoint.
    Chair Landrieu. No, and this is exactly appropriate to 
speak about that. That is what you want to talk about is you 
would rather have a consumption tax than a tax on your income.
    Mr. Canty. Yes, ma'am.
    Chair Landrieu. So, it is the tax on the income as well as 
the timing.
    Senator Enzi, this must be familiar to you. Can you add any 
wisdom? I am sure this is what you all talk about or I hope 
this is what you talk about in the Finance Committee. I do not 
know since I am not on it but I am hoping that this is what you 
are talking about.
    Senator Enzi. Well, you have been doing a marvelous job 
with the questions. I can give you a little bit of relief I 
think with perhaps asking a couple of questions.
    There are some expiring tax provisions, and we seem to hold 
businesses hostage with those on a regular basis. Are there any 
expiring tax provisions that add uncertainty to what any of you 
or your associations are doing that you would like to suggest 
that they be put on a longer basis? Yes.
    Ms. Arslan. All of them, but largely, you know, based on 
what our members are saying what really is frustrating and 
hurtful to their business is Congress's inability to create 
long-term tax policy and it has just gotten worse.
    It has gone from, we will extend this provision for two 
years to a year, to six months, to three months. It is really 
hindering small business' ability to plan. It is actually 
affecting our members, based on our polling data, and it is 
affecting their sales, especially when they do business to 
business, business to business customers.
    So, that is really the larger issue. Obviously for our 
members, big deductions or things like the start up deduction 
expired, but the ability to deduct your health care costs if 
you are self-employed as a business expense, depreciation 
expensing, all of those items are key but just the fact that 
Congress is doing it so piecemeal and for such short a period 
of time that we have to ramp up for another battle on these tax 
provisions, every few months has been a big challenge for 
business owners.
    Chair Landrieu. Mr. Nelson.
    Mr. Nelson. Yeah, I just kind of wanted to finish off what 
Kristie is saying. I am not a member of hers but I am like 
that. I am that guy.
    Right now I am going through and buying a business, and the 
amount of work just going through the SBA put on is ridiculous, 
I think. It is just hours of just reports and numbers and 
things like that; and I understand you have to have them but 
the in depth that we are going through is amazing to me.
    It seems a little bit over the top. One of the other things 
that would help me would be definitely to simplify our tax 
codes because again I have to hire people to go out and 
interpret it for me and tell me if I am compliant and tell me 
if it is right.
    And, I am not that type of person. I would rather do it 
myself but I cannot understand it and I do not have the time to 
get into it to understand it.
    Another thing that would help, especially in my industry, 
is the Ways and Means Committee Chairman Camp has put together 
a bill for Section 179. What that does for us is help when I am 
buying equipment right now. I am trying to project what my next 
couple of years are going to be out there for the SBA.
    But there is no consistency. Like Kristie was saying, taxes 
change every year. They changed in 2006. They changed in 2008. 
It has changed in 2009. It has changed again. And so, SBA is 
asking me to put together five years, and three to five years, 
and a changing tax code makes it real difficult.
    So, at that point now I am hiring another person to help me 
do something. To get my SBA loan put together, I am hiring four 
people basically to help me put this together.
    Representative Camp has put a proposal, and it is not in 
the numbers that I would like to see, but it would work for us. 
It would be great because it levels the playing field for us 
and I know where I am at for the next couple of years down the 
road, and to me that seems like that would be a very important 
thing to have happen is to get that section of 179 put through 
just for me as a small business guy out there.
    I have talked to a few other people in my neighborhood and 
they are in the same boat. It is too hard to predict what is 
going on right now and give us any type of projection.
    So, I think getting that Section 179 made permanent would 
make a real big difference in my business. It helps me know 
where my capital is, how much capital I will have. I will be 
able to buy more equipment than I usually can which I can use 
for doing more jobs, hiring more people, growing from the grass 
up. That is kind of where I am coming from on that.
    Senator Shaheen. Thank you. I know Senator Enzi had another 
question that he wanted to ask but let me just follow-up on 
what you have said.
    Senator Enzi. I better go vote.
    Senator Shaheen. Yes, you better.
    Senator Enzi. I will be back.
    Senator Shaheen. Eighty percent of all of the paperwork 
that is done by small businesses is around tax compliance. So, 
it is no wonder that everybody feels this burden because it is 
real; and in the past 10 years alone there have been more than 
4400 changes to the tax code. So, that is about one day for the 
last 10 years.
    So, clearly this is something that we need to address as 
part of any tax reform I think is to simplify the tax code.
    So, Mr. Edwards, let me call on you next.
    Mr. Edwards. Two quick points to follow up on what Mr. 
Nelson said. There is this data out there that show that tax 
compliance costs for small business are much larger as a share 
of assets or whatever compared to large business; but what 
always strikes me listing to entrepreneurs is that it is the 
headache costs which are unquantifiable that are really 
important.
    Large corporations can go and they can hire a lot of more 
accountants and stuff and the CEO can remain focused on 
investments and the big picture stuff.
    For the entrepreneur, it is the paperwork costs, the tax 
cost, the health care compliance costs. Those are real headache 
costs that sap their strength to do what they should be doing 
which is, you know, building a better company.
    The second thing I would point out, and Senator Enzi 
mentioned are expiring provisions. I think this Section 179 
expensing is really important as is expensing in general.
    The issue with capital investment, it seems to me, is that 
when companies go out and they buy new equipment, they are not 
just replacing the same equipment they had with the same new 
equipment.
    Capital investment incorporates new innovations. When 
companies go out and buy new machines, they buy better, faster, 
more high tech machines than they had before. So, capital 
investment and innovation are really the same things.
    I often see discussions about the R and D tax credit with 
respect to innovation, and that is fine and that is important. 
But, capital investment is very important for large and small 
businesses to move them ahead technologically.
    Senator Shaheen. Thank you. Mr. Hodge, then Ms. Nellen and 
Mr. Eckert.
    Mr. Hodge. Thank you. I would like to amplify a couple of 
the points that have been made here in particular on the 
compliance side and then on the expensing issue.
    The SBA in 2011 issued a report trying to estimate the 
compliance costs of the tax system for small business pass-
throughs in general, and they found out the total cost or 
estimated the total cost at about $52 billion a year for pass-
through businesses.
    And, if you think about that in economic terms, it is the 
equivalent of adding a couple of percentage points to the top 
marginal rate. If you could monetize that and capture that, you 
could actually cut the top marginal rate on small businesses by 
a couple of percentage points and that would do them all the 
better.
    On the issue of expensing which Chris mentioned, 
unfortunately Congress has treated expensing as a stimulus plan 
rather than long-term tax policy; and the unfortunate thing is 
that expensing is viewed by the Joint Committee on Taxation as 
a revenue loss for the Treasury when, in fact, it is critically 
important for lowering the cost of capital and improving long-
term economic growth.
    We actually modeled this and that is in terms of making 
expensing permanent, and we found that over the long-term not 
only would it increase GDP by about two percent, it would 
actually pay for itself in increased federal tax revenues.
    It is a good deal for the economy. It is a good deal for 
the Treasury, and unfortunately we are treating it as temporary 
and we keep trying to renew it each and every year which 
undermines the benefit of it.
    Senator Shaheen. Right.
    Mr. Hodge. As Mr. Nelson has found, it adds a tremendous 
amount of headache for small businesses.
    Senator Shaheen. Can I just ask you? Is that a report that 
is recent and is it something that you can share with the 
committee?
    Mr. Hodge. We would be delighted to certainly.
    Senator Shaheen. That would be great.
    Mr. Hodge. Sure.
    Senator Shaheen. Ms. Nellen.
    Ms. Nellen. In addition to the temporary measure which 
makes it difficult to plan, the additional problem is a lot of 
times they do not get renewed until very late in the year.
    For example, CPAs may have been telling their clients, you 
know, the 50 percent bonus depreciation is going to expire; the 
higher 179 amount is going to expire; you better get something 
before the end of the year, only to find out the last day of 
the year that it got renewed which causes tremendous problems 
regarding trying to budget, trying to plan, puts the CPA in a 
bad position.
    So, that is another unfortunate part of temporary 
provisions besides the one mentioned here. It's that they often 
get renewed so late in the game.
    Senator Shaheen. Mr. Eckert.
    Mr. Eckert. From the angel investor perspective beyond 
extending the hundred percent exclusion on capital gains which 
we spoke to earlier, what we hear from the companies in which 
we invest as many of us sit on boards of these companies or 
advised them and it relates to some of the things that you are 
hearing from the business people here, one general theme is 
certainty.
    Things are just so uncertain that they have difficulty 
planning their businesses, and that is a particular challenge 
for them.
    The other is related to what Mr. Nelson said. Many of them 
complain about the bureaucracy and paperwork burden related to 
these things because what these entrepreneurs are good at is 
their business, their market, whatever they make or sell or the 
services they provide; and they are not good at this stuff and 
they incur costs and time and that time takes them away from 
operating their business which in turn has a negative ripple 
impact on their business.
    So, it is not necessarily the law of unintended 
consequences. Everybody knows that, but it really is a fact 
that it impacts these entrepreneurs heavily. We see it 
everyday.
    Senator Shaheen. You know, I certainly could not agree more 
and I would bet that that is the sentiment on the part of 
everyone on this Committee, and what I hear from businesses, 
many businesses in New Hampshire, is, you know, we can live 
with whatever you do, just tell us what it is going to be so we 
are not dealing with it at the 11th hour that we do not know 
how to plan.
    I believe one of the most important things we could do here 
in Washington is to come up with a long-term budget agreement 
that does provide some certainty for folks and that does 
include tax reform as part of that.
    So, I could not agree more with what you are saying.
    Now, Mr. Canty, Ms. Sullivan, and Mr. Zinman.
    Mr. Canty. One of the things we were just talking about was 
the time it takes small business owners to make sure they abide 
by the law.
    I think this is something probably everybody on this 
Committee but particulate Mr. Nelson would understand is I 
spend a lot of my time trying to make sure I comply with the 
law so it takes me away from other things I could be doing, and 
I am paying my CPA to make sure everything is correct.
    Now, if the tax law, code was different one might say, 
well, that means you are going to be putting the CPA out of 
business. I said no, because I am going to be using him for 
something else as I grow to plan and everything else.
    But, the most insidious part of the whole thing is if I 
even unintentionally messed up my taxes or not pay or do 
something, I could go to federal prison.
    I am held at the point of a gun to pay these taxes 
essentially to comply with it when I could be spending my time 
growing my business. I have grown my company from four people, 
we were at 33 at the end of last year. Because of 
sequestration, we backed down to 25.
    I could spend my time figuring out how to employ people at 
60, 70,000, $80,000 a year so that is one family that could be 
self-sufficient.
    I would rather spend my time doing that as well as other 
people on this Committee than worry about, I think that they 
said the tax code is actually thicker than the bible. I need to 
spend my time worrying about how to grow my business, not how 
to pay my taxes.
    Senator Shaheen. I know that the two of you want to comment 
on this discussion. What can I ask a question as well? That is, 
you talked about, I think, Mr. Nelson, you talked about the 
importance of making the expensing provisions permanent.
    Are there other provisions in the tax code that you think 
would be helpful to small business in terms of increasing 
innovation and improving your ability to grow your business?
    Ms. Sullivan, I do not know if you want to comment on that 
or you want to comment on the other discussions but please feel 
free to do either.
    Ms. Sullivan. I just wanted to say that I am a little 
disheartened by the fact that we are jumping into discussions 
of ``do you like the current Section 179 expensing'' because 
women business owners see this as an opportunity to get rid of 
all of those tax breaks. We have polled them and the majority 
keeps on saying ``just give us a lower tax rate. You can have 
all the rest of the deductions and credits.''
    We care about the cash. We care about the money in our 
pocket. So, we can all sit here and talk about the 20 small 
business tax credits and deductions, all of which serve a 
purpose if you are talking about the current tax system. But, I 
guess we were kind of hoping that the Congress was serious 
about dialing it back.
    The other part that is really troublesome for businesses is 
just the formation of business and the complexity of forming 
them. We have to go to a CPA to figure out what formation our 
company ought to be, whether it should be a C, an S, an LLC. 
There are so many forms of business that you can choose.
    It seems to us that if you are thinking about simplifying 
the tax code, you might simplify the way you think about 
forming them.
    And then, one extra point was Senator Landrieu's question: 
does lowering the corporate tax rate have any effect on small 
business. I think the numbers show somewhere between 15 and 19 
percent of all C Corporations are small businesses.
    In fact, I have my own company and I am a C Corporation. 
There are those of us who are ``C's'' but there are not very 
many. That is a pretty low number.
    So, you are really not doing much if you are just thinking 
about lowering the C Corporation rate. We go back to the 
principle, business is business, right? Why does it matter if 
you are self-employed, a C, S, I mean, why should it matter? 
You should have a standard set rate. You should have the same 
rules, and that is really what we are hoping a redo of the tax 
code could achieve.
    Senator Risch. You know, what she said brings up more 
discouraging thoughts about what is going to happen with tax 
reform. One of the things that surprised me when I got here, 
not much has surprised me, but one of the things that surprised 
me when I got here is how members of Congress have lost sight 
of the purpose of the federal tax code.
    The federal tax code is meant to raise sufficient money to 
do the limited things that the Founding Fathers thought that a 
Federal Government should do. But, instead of that, what it has 
become is a social engineering tool.
    There are 535 members of the Congress and lots and lots and 
lots of them think that they know a lot better what you should 
be doing than you. As a result of that, they put things in the 
code that either encourage you to do things like buy an 
electric car because they think you should be driving an 
electric car, or to punish you for doing things that they think 
that you should not be doing. There are all kinds of examples 
of this.
    But, the federal tax code, as long as it continues to be 
used as a social engineering tool, is going to be the mess that 
it is today; and every time they pass something like that, the 
law of unintended consequences, which my experience tells me is 
present in every single bill that passes, comes right around 
and bites you when you do not want to get bit.
    Senator Shaheen. Mr. Zinman.
    Mr. Zinman. I just want to tag on two quick things in the 
discussion that has gone around. First is the idea of 
permanence, that we fix the tax code.
    Honestly, every time the discussion on the Hill goes on 
about reforming taxes, I make more money, because everybody 
turns to me and says just check the law and the changes that 
they make. Make it permanent. Let me do my business the right 
way.
    The other point that I want to emphasize, writing tax law 
is sort of like comedy. Timing is everything. A good law 
written in February can be a good law. If it is written in 
December and we have learned of this, is going to be God-awful.
    And, it is so important to enact the rule at a time when 
people can understand. The IRS can give guidance. Maybe there 
are some tax cases that will come down the pike and we 
understand what is going on. Rather than relying on computers 
to churn out numbers really quickly, we need people to 
understand the law, to develop the law and it does take time to 
do that.
    Senator Shaheen. Thank you. I do not know who was first but 
Mr. Edwards and then Ms. Nellen.
    Mr. Edwards. Just a quick comment to amplify a couple of 
points that Senator Risch made. You know, it is interesting you 
say that because you look back the night in 1980 last big tax 
reform 1986, there was general agreement leading up to that tax 
reform to get rid of a lot of the loopholes and use the money 
to lower the rates.
    The majority leader, Dick Gephardt, wrote an essay for the 
CATO Institute at the time. It could have been written by, you 
know, a sort of an extreme libertarian. It was a fantastic 
piece.
    He said all the social engineering in the code is 
ridiculous. We need to get rid of it. Use the money to lower 
the rates. So, I think back in the 1980s there was more of a 
general agreement that that is where we ought to be going. Have 
a revenue neutral bill, get rid of a lot of the loopholes.
    The other thing I would note about----
    Senator Risch. You know, that is gone today. I mean, you 
never hear anybody here complain about that at all.
    Mr. Edwards. Right.
    Senator Risch. It is never even discussed. It is just, 
well, we can make people do this if we just tax them this way 
or give them this credit.
    Mr. Edwards. Right, right.
    The other thing I would point out about that is that a lot 
of these scandals that have happened in the tax code most 
famously with Enron were caused, it seems to me, substantially 
by the use by corporations that are bending the rules on the 
special provisions that were supposed to be for something but 
the corporations have combined all of these different elements 
that were supposed to incentivize certain people and mix them 
up in a big stew and come up with this, you know, this 
financial engineering that was what Congress never intended.
    So, the social engineering is not just bad from an economic 
efficiency point of view, it is also bad in terms of, you know, 
corruption and scandal on the part of businesses cheating, it 
seems to me.
    Senator Shaheen. Go ahead.
    Senator Risch. You know, there is a poster child for that 
right now. I sat here and watched people pass tax incentives to 
build windmills in order to generate electricity.
    Well, you know, from an economic standpoint that is 
ridiculous. I mean, you are talking 24 cents compared to four 
cents for traditional ways of making electricity, but by golly 
the people here insisted they were going to force Americans to 
use green power and they were going to have them build the 
windmills.
    So, the way to do it is to give tax incentives for people 
to build windmills. Well, lo and behold, people went out and 
took advantage of the tax code and companies like General 
Electric Corporation paid no taxes. Why? Because they took 
advantage of the law that this Congress passed.
    And the exact same people who were saying, ``By golly we 
need this tax incentive to go out and build these windmills,'' 
are now complaining that these rich corporations are not paying 
taxes. Well, who did they expect were going to build the 
windmills, you know, people without any money that did not pay 
taxes? Does not make sense. But anyway that is a perfect 
example of exactly what you are talking about there.
    Senator Shaheen. I think there are probably a lot of other 
loopholes in the tax code that allowed GE to not pay any taxes 
but I do think that that is one of the challenges that I hear 
from small business in New Hampshire because they say, look, we 
have got these big corporations that are not paying any taxes 
because they can afford to have 2- and 300 lawyers and I have 
got, you know, my five or 10 or 20 employees and I cannot 
afford to have that kind of scrutiny of my taxes and so I am 
paying my fair share and other people are not, and I think it 
really does contribute to frustration that people have about 
the tax code.
    Ms. Nellen.
    Ms. Nellen. On both these items, what should be made 
permanent and also on the tax expenditures, a couple of things 
that have come up is one on 179 I think that should be made 
permanent for the certainty.
    It is labeled as a tax expenditure; but as Mr. Hodge noted, 
when you talk about depreciation, there is an additional 
inflation, interest factors that are not being weighed into 
that.
    So, that is the way a tax expenditure is. It is something 
that is certainly needed to measure net income. What are we 
going to do with the fixed assets we get, what kind of write-
off, is it an immediate write-off, or depreciation. But it is 
not honestly always a tax expenditure because you are going to 
have to, I mean, as opposed to giving some extra credits for, 
you know, a windmill, this is something you need to measure net 
income.
    179 should be made permanent, but I think it also needs to 
be updated. It focuses on tangible property. There is a 
temporary provision that has allowed software to be written off 
but today companies could be buying a variety of intangibles 
including just buying a business where one of the assets today 
is going to be a domain name. That is an intangible asset that 
would not fall under 179 today.
    But, to really make it simple, modernize it, 179 should 
cover all tangible and intangible, personal property purchased 
by a business. And, whether that is a tax expenditure could be 
questionable as opposed to something that is just, you know, 
some bonus you are getting, but that one actually is obviously 
to measure your net income.
    One other one that for some small businesses would be 
important would be the research credit. Now, is that just a 
giveaway? There are some other elements of some expenditures 
you are going to need to look at because a research credit has 
recognized some spillover effect that when the person is 
incurring the R and D there are benefits also being achieved 
from that by other companies that did not have to invest in it.
    And, the competitive pressure unfortunately to not have a 
research credit when most countries do, it does factor into 
decision-making maybe not so much always for small business but 
certainly for medium to larger businesses. The research credit 
does not work probably as effectively today as it should 
because it has always been a temporary provision in the law.
    But, those would be two I think of for innovation, 179 and 
the research credit, but probably not in their current form.
    Senator Risch. I would think that the research credit you 
are going to have trouble getting rid of. I mean, that is, as 
you point out there are legitimate deductions, not tax 
expenditures. These are legitimate deductions. A legitimate 
deduction is a cost of doing business.
    We have Micron Technology in Boise, Idaho, and I guarantee 
you if they did not have a full-time, robust R & D enterprise 
in the basement turning out new things to make, they would not 
be in business in six months. It is a legitimate cost of doing 
business I would think.
    I do not think they are going to have any trouble 
separating the cost of doing business versus the social 
engineering kinds of things that you are talking about.
    Senator Shaheen. I had asked before you got here if there 
were recommendations to try to incentivize innovation and help 
the businesses grow. So, I think you were talking about that in 
response to that.
    Ms. Nellen. That was a temporary measure.
    Senator Shaheen. Sure. Right.
    Ms. Arslan, then Mr. Canty.
    Ms. Arslan. You know, I think for America's smallest 
businesses is really the equity issue. I think that the tax 
code in particular is one of the biggest contributing factors 
to this Main Street versus Wall Street, you know, head to head 
battle royal, because, you know, our members cannot afford to, 
most of them do their taxes themselves. They do it with fear 
that they are going to make a mistake.
    Two, they cannot afford the teams of lobbyists to come up 
here and put in all of these different nice loopholes and 
credits that would benefit them and their business. And so, it 
creates a strong sense of frustration amongst these business 
owners who are playing by the rules, who are paying these 
exorbitant tax rates which inhibits them are growing their 
business and do not get the same benefits.
    In terms of provisions, you know, for our members it is 
just being treated as an equal business owner. Why is it that a 
self-employed business owner is treated less than a business 
owner who owns a C Corporation? Why cannot they have the exact 
same benefits, the exact same deductions just because of 
business structure? And so, those are some issues.
    So, one of the big provisions is just simply changing the 
definition of employee for a business and allowing the self-
employed business owner to be considered an employee of their 
business.
    It would change everything. It would allow them to deduct 
their health care costs which every other business gets to do. 
It allows them to participate in their retirement plans, in 
their HRA plans. That goes a long way for parity. So, that one 
simple change in the tax code would make a big difference for 
the 22 million self-employed Americans.
    Senator Shaheen. I certainly appreciate that. Back when I 
was in the State Senate in New Hampshire, I tried to change our 
state law to help self-employed people qualified for workers 
compensation; and because of the federal law, we could not do 
it. It does not make sense when you think about the 
requirements and the needs that self-employed business people 
have.
    Mr. Canty.
    Mr. Canty. Yes, one of the issues here that I hear and I 
just heard from my colleague here is a lot of this ends up 
being cultural.
    Number one, what is a small business? A small business, in 
my NASE code it is actually less than $33 million a year. And 
then, what is a wealthy person? That is one of the things that 
has always divided us. I think the latest tax code, I think 
they bumped it up 250 to 400 K.
    Well, if I am a small business and I am doing 20 million a 
year and I am doing five percent, and that is $1 million, 5 
percent, just to be even very conservative gross and the net I 
am doing 2 and a half percent, well, then that is $500,000 of 
income to me as an S Corporation owner that again is flowing 
through me.
    Then, I am all of a sudden part of this wealthy class of 
people when, in fact, I am not. I am the same guy who puts his 
feet on the ground and goes to work every day and starts 
solving problems as soon as he wakes up and everything else.
    Yet when we go to certain members of Congress, and I say 
that because you guys are the ones who make the laws and we 
abide by them, well, then we are being told, well, you do not 
have anything to complain about. You are rich. What do you have 
to complain about? I am not rich at all. I drive a Ford 
Explorer. I live in a decent neighborhood. My kids go to public 
school and everything else. I am not a wealthy person.
    Wealthy to me, just for me to set the record straight for 
myself is when you can reach into your pocket and whatever you 
want to buy, the money is in your pocket. You never have to 
worry. That is being wealthy, and that is a very few percentage 
of the United States.
    But small business owners are being put into that high tax 
bracket being called a wealthy. WE really need to stop doing 
that because what it does is that it separates us, and then it 
takes away the logic out of the argument and then becomes 
completely emotional. That is something I would love to see 
from you guys.
    Senator Risch. You know, you do not know the half of it.
    [Laughter.]
    I get in these arguments up here all the time and this 
business about, well, they can afford to pay more taxes. But, 
you know, the tax policy in this country is such that it 
absolutely amazes me. Sometimes I think they have quit teaching 
economics in the public school system.
    But, if you tax people who are at the upper end of the 
spectrum, can they afford it? Absolutely they can afford it. In 
fact, they do not even know it. Their accountant usually writes 
the check and they have no idea. But, where is that money 
coming from? Is it going to come out of their richness that a 
lot of people around here love to hate? Is it going to come out 
of their lifestyle, their car, their house, or their trips? Of 
course not.
    Do you know where it is going to come out of? It is going 
to come out of the money that they used to invest that makes 
America work. It is going to come out of the money that they 
use to build buildings, to build infrastructure, to hire people 
to run businesses. That is where that money is going to come 
from and guess where it is going to go?
    It is going to go to the United States government. What 
could possibly go wrong there? I mean, you are taking it from 
the most productive group of Americans, handing it over to the 
Federal Government, and taking it out of the working capital in 
this country.
    This business of, ``Oh, well, we will just take it from 
them; they can afford it,'' is just nonsense, absolute 
nonsense.
    Senator Shaheen. Mr. Zinman.
    Mr. Zinman. I do not want to lose what Mr. Canty said. I 
think he is 100 percent correct. There are so many people that 
I personally, small businesses that my members all talk about 
who are making the $500,000 and just getting by. These are not 
rich people but they are being taxed at the alternative minimum 
tax, and then in my New York metropolitan area you add on a 
second layer of state and local taxes. These people are between 
FICA and the federal taxes and then the state and local taxes, 
they are just getting by. They are not living high on the hog. 
They are getting by.
    And, Mr. Canty, you are absolutely right. A lot of people 
are in your same boat and perhaps some of these folks over here 
in D.C. do not understand it but we do.
    Senator Shaheen. Thank you.
    Before I call on Mr. Hodge, I want to go back to Mr. 
Keeling, and I may have missed this when I was going to vote 
but one of the things that you talked about when we went around 
for introductions was the way that ESOPs were able to continue 
to employ people throughout the recession. I wonder if you 
could talk a little bit about how that has happened and how 
they have been able to continue to build the wealth of their 
employees.
    Mr. Keeling. There are no set theorem as to why jobs were 
so stable in employee-owned companies during the Great 
Recession. I have my own idea. I have been around ESOP 
companies since 1981. I have visited over 500 ESOP companies in 
my career.
    One unpublished study showed that ESOP companies are right-
sized to begin with.
    Senator Shaheen. Can you explain what you mean by right-
sized?
    Mr. Keeling. I will with my left hand parallel to the desk. 
The study showed that if one took a line represented by my left 
hand and the hand is the number of employees at a beginning 
point the companies that were not employee-owned added 
employees when times were good--up where my right hand is. Then 
when times were bad their employment level was down here. The 
same study of employee-owned companies and the number of 
employees stayed pretty much the same, in good times and in not 
so good times.
    The theorem is, and the book ``Shared Capitalism at Work'' 
contains 100,000 points of data. People who feel ownership 
monitor one another. There is an attachment I have to my 
testimony that cites recent research about the growth of 
employee-owned companies during the great recession.
    But, I think much of their impressive low layoffs is 
because ESOP companies were right-sized to begin with and thus 
maintained a level workforce.
    For example, I think of a company in New Hampshire, where 
times became challenging. Instead of laying off people, 
employees mowed the yards out in front of the building. They 
mopped the floors and swept the floors versus saying we are 
going to lay off people. They kept employees and cut down other 
expenses because the company believed in saving jobs.
    That is the best I can do with it. I just cannot come in 
and say blah blah blah. I gave you my thoughts, my anecdotal 
experience on the topic.
    Senator Shaheen. Thank you.
    Senator Risch. We have to go vote.
    Senator Shaheen. Yes. Senator Risch and I need to go vote.
    Chair Landrieu. I am here.
    Senator Risch. The A team is back
    Senator Shaheen. You are back. Very good.
    Chair Landrieu. Thank you all so much. Mr. Nelson.
    Mr. Nelson. Yes. First of all, I just want to say thank you 
for inviting me here today. It has been a real pleasure. I do 
have a plane I have to go catch, get back to Idaho, get back to 
work.
    So, I am going to leave you with a couple of my last 
thoughts here. I agree with most everybody what they are 
saying. We need to simplify this a lot and make it an equal 
playing surface for all companies. I think that would help 
tremendously in my experience looking over it all.
    I want to be clear that, you know, in my business it is 
very capital intensive. I need to get something like that 179 
on a permanent basis. That lets me know where I am coming from, 
lets me project my futures. I can spend more money than I 
normally would to regain and get back some of those costs that 
I am not getting now if I can buy some equipment.
    So, I guess the bottom line is there if I get something 
like the 179 permanent, I can grow my business. I have every 
intention. I plan on taking over Brown Rental probably in the 
next 30 days. Within the first two years, we are going to put 
up about three more locations.
    That is more families that I am taking care of, more 
people, more jobs. And so, that is why it is really important, 
in my eyes, to get some of these things simplified and yet some 
permanence going.
    Chair Landrieu. Thank you very much. Excellent points. If 
you have to excuse yourself, please do.
    We are going to go on until five o'clock. Okay.
    I walked in when you were speaking, Michael, and I did not 
want to miss what you said. I will come back to you in a 
minute.
    But, Mr. Hodge, you wanted to say something.
    Mr. Hodge. Yes, Senator, thank you. One of the issues I 
think affecting small businesses the most in the tax system we 
have not talked about is the estate tax.
    It is kind of interesting to hear Senator Risch talk about 
Micron Technologies. Sadly, the Chairman of micron technologies 
died in a plane crash a few years ago; and although he had 
increased the value of the company tremendously during his 
reign, it did not cost the company a cent in estate taxes when 
he died because it is a publicly traded company.
    And yet, if a private business owner, such as Mr. Canty, 
passed away, his family would probably have to sell his 
business in order to pay the 35 percent federal estate tax and 
probably much more at that.
    And so, I think this is one of the untold issues in the tax 
system that secretly and stealthily is affecting the long-term 
prospects of small businesses as they tried to grow into larger 
businesses.
    Chair Landrieu. Do you know what portion pay an estate tax, 
what portion of businesses in the country are subject to it?
    Mr. Hodge. Not off the top of my head.
    Chair Landrieu. Okay. We will try to find out. Please 
continue. Go ahead.
    Mr. Hodge. No. That was my basic point. I think the 
research is pretty clear on the estate tax that, number one, 
its effects on the economy are much greater than what it 
actually collects in revenues for the Federal Government.
    The compliance costs alone, from the estimates I have seen, 
actually probably equal to some degree the amount of revenues 
that it produces for the economy. As we have estimated in our 
economic models, if you were to eliminate the estate tax 
overall, it would boost GDP in the long-term by as much as $128 
billion a year. It would probably end up generating more 
revenues for the government because of increased economic 
growth. So eliminating the estate tax would probably be one of 
the best things we could do to help small businesses.
    Chair Landrieu. Wonderful. Okay. Go ahead.
    Mr. Hodge. Thank you. Since we opened up the door on other 
taxes, I would like to add the issue of sales taxes that 
affects so many of the brick-and-mortar businesses and so many 
of the small businesses because they do have a difficulty in 
competing with some of these Internet companies that are 
avoiding the sales tax.
    Now, it is an interesting thing because if you look at it 
on the revenue side, if you try to score it, you cannot. But 
the reality is if the states and local governments wind up 
collecting more revenue because the sales tax is properly being 
accessed and the Internet companies are competing honestly with 
the brick-and-mortar companies and the states wind up 
generating a certain amount more revenues, theoretically they 
need less from the Federal Government.
    Chair Landrieu. I am very glad you raised that, because 
that is an issue. I do not know if Senator Enzi wants to add 
anything to this, but that is an issue that is under 
consideration right now. You know, the Senate passed the 
Marketplace Fairness Act, and I think both of us supported it.
    Mr. Zinman. NCPAP also supported it strongly.
    Chair Landrieu. Good. I supported it for exactly that 
reason because in the event that we do move to a more, even if 
we stayed where we are, I think it is fair but if you move more 
to a consumption tax, you want to make sure that everybody is 
paying their fair share and if you do not, then local 
governments end up not collecting that tax and end up to make 
up the revenues elsewhere, either cutting services below where 
it should be or raising taxes on income which gets back to what 
you said, Mr. Canty, that that is the last thing you want to be 
doing is raising taxes or putting more burdens on income.
    You want to take that income and those profits, I think, 
and reinvest back in your business. Was that not the comment 
that you made?
    So, Ms. Nellen, let us get to you and then Ms. Arslan and 
then Michael, I would since ESOPs are one of my favorites too, 
I would like to hear what you had to say to Senator Enzi.
    Ms. Nellen. Well, in the context of this multistate issue 
being raised, that is something I had on my list to address in 
that there are some issues that Congress will need to address 
besides federal tax reform, and I think today a trend you would 
see in even a small business is they are going to have most 
likely international and multistate operations.
    That might not have been the case 10 years ago but 
certainly today, I mean, they can start selling online and 
customers could be anywhere. So in addition to the sales tax 
issue to resolve, there is also income tax nexus that needs to 
be clarified and modernized.
    And then also, the mobile employees and where they need to 
file. I am a small company, my employee did travel and visit 
customers in some state, the small business has to deal with 
the complexities of the rules on withholding being different 
among the states.
    So, I think there are, besides the federal tax reform, 
there are some multistate areas where Congress needs to step 
in.
    They have been lingering for some time. They are not easy 
ones because the government and the businesses do not seem to 
agree on what they want. But, they would be impediments to 
small and medium-size businesses.
    So, it is the sales tax. It is modernizing Public Law 86-
272, and addressing some uniformity for the withholding rates 
when you have got employees working or traveling through 
different states.
    Chair Landrieu. And I do not know if the Finance Committee 
has reached out. I think it has been right now to Senator Enzi 
just to us but I am sure they must be reaching out to the 
National Governors Association, the national mayors, you know, 
the leadership conference of mayors, and NACO, which are the 
County commissioners I would imagine for some of the things 
that Ms. Nellen talk about.
    Are you familiar with any of that coordination that may be 
going on?
    Senator Enzi. Yes, of course, a lot of it is the same 
letter that went to all Senators explaining that it was going 
to be a blank piece of paper that we would start with and then 
they would come up with a tax rate and then we would have the 
opportunity to add back in anything, some people call them tax 
expenditures, some call them tax loopholes, some people call 
them tax incentives. It all depends on which side of the table 
you are on. And, every time one is added back in, it would be 
added back in with those votes being on it knowing what the 
cost of that would be.
    I do not think that it will actually start as a completely 
blank piece of paper. I think charitable contributions and home 
mortgages are pretty sacrosanct.
    But, beyond that there will be a debate on almost every 
other piece of the tax code I think. So, if there are things 
that you currently enjoy or your association currently enjoys, 
you should make known to us. And, if there are things that we 
could get rid of that would also help you, it would be helpful 
to know that as well.
    Chair Landrieu. To really have the small business community 
which, you know, we have a range here in our hearing but, you 
know, there are thousands of other types of businesses and 
associations. I mean, you are just a representative group.
    But, if there could be any kind of coalescing of major 
organizations, Senator Enzi, that really focused on small 
business to try to give a unified voice which may be too 
difficult or too complex to do but that is part of what this 
hearing is about, to put in order or in priority some of the 
things that are really, really, really important to startup 
entrepreneurs, to sustain that economic growth, to simplify, 
make it remove barriers to starting businesses and keeping 
businesses, that I think will help everybody.
    Now, whether there are a small short list of those things, 
I do not know but that is what we are trying to dig for here.
    Senator, go ahead.
    Senator Enzi. I am just very impressed with the diversity 
that you have among your panelists, between them and the people 
that they know, we ought to be able to get a lot of 
suggestions.
    And, even if you do not feel comfortable putting them in 
under your name, I am sure that either through this Committee 
or through myself or through the Chair, that we would be happy 
to submit those things.
    One of the questions, of course, that is always asked is 
how public will the letters be. Everybody is a little bit 
concerned about that because Senators all have constituents and 
they come down on all sides of issues. But, it is my 
understanding that the Chair and the Ranking Member are going 
to take whatever information they get, keep it anonymous, not 
even let the NSA have it.
    [Laughter.]
    And during August kind of work out a bill that, following 
the August recess, we in the Finance Committee can start 
working through as kind of a skeleton of what we are going to 
be working on.
    Chair Landrieu. Well, that is very good insight because I 
have been struggling with this as the Chair of this Committee. 
I mean I have certain views as a Senator from Louisiana, and 
then I have certain views that I think is my responsibility to 
try to communicate to the Finance Committee as the Chair of the 
Small Business Committee.
    So, our staff is going to be working on that exact thing 
and how we put something together from this roundtable. The 
problem with not putting anything together is the voice is not 
heard. Do you see what I am saying? So, let us keep going 
because we are making a lot of progress here. Thank you, 
really.
    Senator Enzi. Another important thing on any suggestions 
that you have if there is something that you need in the tax 
code, be sure and explain why it is important; and if you have 
some stories that can be used to explain that, that that is 
even more helpful.
    Chair Landrieu. And of course, the broader the application 
of it, the better. That is why I am so excited to hear from our 
CPA group because you all really get such a broad, you know, 
you are a touchstone for so many different kinds of businesses.
    Since I was State Treasurer, I learned to rely a lot on the 
CPAs who help me out when I got in trouble with the numbers. 
So, I really have come to appreciate, and you are not political 
in the sense. You are very apolitical. It is just like the 
Senator said, it is about numbers. It is about you know what is 
working, what is not working, and I think you can give a lot of 
good advice to us on this.
    Michael, let us go to you and then I will come back 
through. We are going to wrap up in about 10 or 15 minutes.
    Mr. Keeling. I will be brief. One thing about employee 
ownership and ESOPs that is overlooked in our discussion is if 
you read our founding fathers, Hamilton and Jefferson and a few 
others, they emphasize that broadened ownership of property was 
absolutely essential to a free society and democracy.
    I would submit that ownership of land was the prime measure 
of wealth in our nation when they wrote. Now ownership of 
productive property is the prime creator of wealth. Having 
ownership be broad-based is important.
    And, the ESOP community would like to see retained the laws 
encouraging the creation and operation of ESOPs, which were 
added primarily in the 1980s under the leadership of, of 
course, Russell Long; but there was a fellow named Ronald 
Reagan that had much to do with the inclusion of pro-employee 
ownership in tax laws.
    The employee ownership movement really grew California from 
a libertarian thought and many of that group became the kitchen 
cabinet for Governor, then President, Reagan.
    There is a book coming out in September by Yale press--I 
wished I had a copy with me--that will talk about how the first 
Congress of the United States dealt with an economic crisis in 
the whaling industry, and one of their solutions was to put 
some criteria in a law that helped the whaling industry which, 
by the way, was the oil industry back when the United States 
began insisting that the sailors on the ships that were 
harvesting whales share in the ownership of the profits of the 
whaling ships.
    So, I would submit that we will be asking, Senator Enzi, 
for, in essence, the three remaining special laws in the tax 
code that promote ESOPs. And, plus Chair Landrieu has 
cosponsored legislation with Senator Cardin that will add one 
more tax benefit. My statement, to the Committee and the staff, 
specifies these laws and the one proposal.
    But, I emphasize that the roots of the idea of more ESOPs 
also includes one that was added by a man named Senator John 
Breaux, that you may be familiar with.
    But having said that, the roots of the concern of Senator 
Long when he learned about the idea of broadened ownership was 
the idea of income inequality, or quote, ``the rich getting 
rich and the poor getting poorer.''
    And, income inequality in society creates a bad atmosphere 
of us versus them. Us versus them is not good in our homes. It 
is not good in our companies. It is not good in our states, and 
it is not good in a democracy based republican form of 
government.
    And, I think--the Chair said one of the criteria we were to 
base our statements on was the idea of parity. The greatest 
system known to mankind in terms of an economy is a free 
enterprise economy.
    You need to make it be all it can be. Otherwise, you get 
into us versus them leading to entitlements that have gone out 
the door in terms of being over broad, or the awful system of 
the government taking ownership and trying to make things fair.
    That is the roots of what we come forward to the Small 
Business Committee, because most businesses in the world are 
small business. I do not care what country you are in.
    Chair Landrieu. Michael, I really appreciate your advocacy 
and passion, and you know I support a lot of what you all have 
advocated. I hope you gave them your best line which is if you 
want to have a capitalist system, you need to have more 
capitalists.
    Mr. Keeling. Right.
    Chair Landrieu. And one of the best ways to have 
capitalists is to get people to help to own their own 
businesses just like land ownership is important. Being an 
owner of a business or an investor in the business really 
helped change a persons mind set.
    Mr. Keeling. Right.
    Chair Landrieu. And I think our country should be leading 
the world in that. I mean, I think our country is so strong 
because of that. When I travel, I do not see that in many 
places. I mean, one of the most startling things to me, not the 
filibuster here because we are not supposed to do that anymore 
around here, is, you know, one of the most startling things I 
see is the lack of individual ownership of land.
    When I travel to places like Guatemala where 1 percent of 
the people own everything and 99 percent of the people do not 
own much, it is not that the 99 percent are not hard-working, 
smart, and want to work, they own nothing to leverage their 
finances to either start a business, buy a house, et cetera, et 
cetera.
    One of the great, I think strongest pieces of our 
government has been private ownership. It is broadly spread in 
America. I think about that the same that you do if we could 
allow the barriers to be lower and let people rise on their 
merit to become capitalists and to be business owners and own 
parts of businesses, that would have the same breathtaking 
impact that private ownership of land has had which I would say 
is breathtaking. I mean, it is breathtaking as relative to 
other places in the world.
    And so, I cannot be more eloquent than you on your subject 
but it is important to think about. It is simplification, what 
are the barriers that help people really get capital and build 
wealth.
    So, the government is not redistributing it, the government 
is helping people to build it. I mean, I think that is a good 
principle to think about particularly in this Committee.
    Chris, go ahead and then we will get you, Ms. Arslan.
    Mr. Edwards. Yes, I think your comments are spot on; and in 
fact, to go on a bit of a tangent, this is the crucial problem 
with American Indian reservations, of course. The folks do not 
own the land. They do not have entrepreneurs because they do 
not own anything. That is a huge problem but, of course, not 
under this Committee's jurisdiction.
    Chairwoman Landrieu, you asked about startups. There was an 
excellent piece in the Washington Post the other day by Bob 
Samuelson, who had some very disturbing statistics about how 
the rate of business startups in the United States has 
declined. That is a real problem.
    Chair Landrieu. But declined over what time? Has it been 
reclining since the recession?
    Mr. Edwards. The last half of the decade he is talking 
about.
    Chair Landrieu. So in the recession period?
    Mr. Edwards. Yes.
    Chair Landrieu. But what was it doing before then? It was 
growing?
    Mr. Edwards. I do not know the answer to that but, you 
know, the unemployment rate is staying high because we do not 
have new startups hiring new people.
    Chair Landrieu. Right.
    Mr. Edwards. One small item that I think this Committee 
could address and the Finance Committee could address in tax 
reform is the issue of startup expenses.
    I am not an expert on this but it has always struck me 
that, you know, I think current laws you can expense about 
$5,000 of startup expenses. But above and beyond that you have 
to amortize the startup expenses over 15 years. That strikes me 
as crazy. We want Americans to start firms.
    Chair Landrieu. Maybe startups should be free.
    Mr. Edwards. Absolutely.
    Chair Landrieu. Maybe startups should be completely free. 
You do not pay any tax for the first year until you get 
yourself going, and then you will be much better and able to 
pay taxes later on.
    I have had any number of my constituents come up and ask me 
that. Why, if I am starting this business, why would I have to 
pay all these taxes initially? Why do we not just let us start 
up the business? We will be more profitable, and then we are 
happy to pay a fair share.
    Mr. Edwards. Right.
    Chair Landrieu. I think that is kind of an interesting 
principle. I do not know how far, I am wanting to throw a lot 
of new ideas on the table.
    Ms. Ashton.
    Ms. Arslan. One of the things our members have been saying 
is, you know, the tax code does not need to incentivize them to 
be a business owner.
    Chair Landrieu. Right. They are going to be one whether----
    Ms. Arslan. Exactly.
    Chair Landrieu. They are entrepreneurial.
    Ms. Arslan. They are entrepreneurs by nature. They will 
find a way in any economic climate, environment to be a 
business owner, to start their business, to try and be 
successful and make a go of it.
    But, what it must do is not disincentivize them, not create 
barriers and roadblocks for them to be successful by being so 
complicated, by being so costly, and so that is one of the big 
messages that they wanted to put forth is that, you know, the 
way the tax code is set up right now it is a huge disincentive 
for them to grow, you know, more employees, more problems, more 
money, more problems.
    It is also a big disincentive for people who are thinking 
about starting a business because of that regulatory burden. 
You know, and when we talk to them, you know, Mr. Enzi had 
said, when we talk to them about if we could throw everything 
out, what would be the things you would definitively want to 
keep?
    It was four things. It was deduction for charitable 
contributions, a deduction for their health insurance costs, 
the mortgage interest deduction, and the home office deduction. 
Those are the only four things that if they could have a lower 
individual tax rate, they would scrap everything. Those were 
the only four things they cared about.
    Chair Landrieu. Excellent. Excellent. I want everybody to 
get that on the record. If you have your two things or three 
things you want to get on the record, get them.
    Ms. Sullivan.
    Ms. Sullivan. I just wanted to put some numbers to your 
idea about startups which SBA says the average cost to start a 
business is $30,000 and the average microloan when they are 
starting a business is $13,000. So, if you are thinking about a 
deduction for startups, I hope that puts it in context as maybe 
what we are talking about.
    Earlier, I said, you know, our members would just like to 
start from ground zero, ``give us a lower tax rate.'' You can 
take all the other credits and deductions.
    Especially those lower income entrepreneurs who cannot 
afford a CPA. They do not even take advantage of them anyhow, 
those 20 or so deductions that are right now all on the books. 
You have to know to be able to take advantage of it.
    If we are going to add back into the tax code some 
deductions and credits, we are thinking about principles. The 
first one was, and I think it was Mr. Edwards who said, an 
incentive for new businesses to remove financial barriers for 
business creation. We just want to make sure that we could have 
a one-time tax deduction.
    The other principle is that if you want to add things back 
in, you should think about encouraging investment in small 
businesses like angel----
    Chair Landrieu. Angel investors, et cetera.
    Ms. Sullivan. Right. And then third, we really like the 
idea of rewarding employer ownership, employee ownership 
because we see it as a way to keep your business going and to 
keep it beyond the owner, the original owner.
    So, those are kind of our three principles going forward 
that if you wanted to add anything back in, that those 
principles be thought about in terms of the tax code.
    Chair Landrieu. Mr. Eckert.
    Mr. Eckert. I am----
    Chair Landrieu. Would you speak into your mic.
    Mr. Eckert. That is a constant problem I have today.
    Related to the number of startups and relative to the past 
and going forward, interestingly we are seeing a new class of 
entrepreneur emerging in America coming out of the recession, 
and that is, people who were laid off or who lost their jobs 
and who could not find other jobs but who had an 
entrepreneurial instinct or had the need because they simply 
required livelihood, and we are seeing many of them come to us 
now with business ideas and we are funding them.
    That complements the classic entrepreneur that we see and 
read about. Just a point, they are driving more startup 
companies.
    Chair Landrieu. And you know, necessity is the mother of 
invention.
    Mr. Eckert. That is right.
    Chair Landrieu. People have been unemployed so long. There 
are no jobs like the one they had, and so people are just like, 
okay, I have got a family to raise, I have got notes to pay, I 
have got to create my own job. And, they are getting about 
doing it because that is what Americans do. We do that very 
well.
    Interestingly enough, this health care debate which has not 
gotten much coverage at all, if you think about, not to get 
into a debate on the Affordable Care Act here.
    But, one of the interesting benefits to it, why I voted for 
it, and why many people did, not all, if we could ever get it 
to work, is because you can disassociate your insurance from 
your employment; and in some ways, it can incentivize 
entrepreneurship because the idea is your insurance travels 
with you.
    In the old days, it was connected to your employment. Under 
the Affordable Care Act, although for large companies you can 
still get your insurance if you do from your employment, the 
idea is to connect it to yourself.
    So, wherever you go, you have your insurance that is 
affordable. That is a principle of the Affordable Care Act that 
I do not think gets talked about, but it really is a pro-
entrepreneurship idea.
    Now, how we can get it to work, because there are lots of 
problems with the subsidies and the exchanges and everything 
but that was a very powerful idea of the underlying bill that I 
do not think has been talked about enough.
    We are going to just have one more, anybody else, we are 
going to wrap up in just a second so put your placard up if you 
have one more thing to say.
    Let us do wrap-up comments. We will get everybody to do a 
one-minute wrap-up comment.
    Go ahead.
    Ms. Nellen. One really big topic that I do not think we 
spent enough time on, I do not want to overlook it, is 
simplification. That is really kind of around the edges of many 
things we talked about.
    But, I think really a big emphasis on that would be very 
important. Basically, I think if you cannot describe in a few 
simple sentences how a rule works or it requires alternative 
calculations, the rule is not simple and it needs to be revised 
or repealed.
    Some areas they just kind of bring out complexity. One, for 
example, that small businesses face is worker classification. 
You want to hire somebody, not sure if they are a contractor or 
an employee, you could struggle over that and then the risk of 
getting it wrong can be high.
    Why not just have, you know, like a five-question check 
list. If you honestly answered all of these questions yes and 
you then treat them as a contractor, you are fine. If it is 
determined it is wrong going forward, you can fix it.
    I think you need to think of new ways to address some of 
these things that otherwise have been decades-long complexity 
that do not tend to get resolved.
    Also, another area of complexity businesses face is when 
there is regulations on something that are very complicated. 
Right now, small businesses are facing a set of regs regarding 
repair versus capitalization.
    They are 64 pages long. They are incredibly complicated. I 
would like to see maybe if there is some way that if that 
happens, if we have a very complicated set of regs, there has 
to be a backstop, some safe harbor, as another way that a small 
business of a certain size could come in and deal with that.
    I think you need to find ways for the states to be joining 
with you because you put certain simplifications in place and 
the states do not follow them, then the complexity remains at 
the state filing level.
    Chair Landrieu. 30 more seconds.
    Ms. Nellen. Okay. The blank slate. Small business would 
want to have use of the cash method, Section 179 expensing, 
retirement plan provisions, and the self-employed medical 
insurance deduction but also for self-employment tax; but all 
of these need to be modified in some way for further 
simplification.
    Thank you.
    Chair Landrieu. Thank you. Very good. Thank you so much.
    Last words, we are just going to go around.
    Kristie, starting with you.
    Ms. Arslan. I just want to leave you with facts because 
often people get confused about the self-employed, but there 
are 22 million self-employed Americans; and when you look at 
them as a percentage of the small business population, 78 
percent of all small businesses are self-employed.
    So, they are a very important demographic and thus the tax 
code and any tax reform really needs to be representative or be 
of help to this particular demographic. As we all know, all 
businesses start small. So, let us be sure to focus on tax 
bills or tax reform that really does help all businesses, 
especially the smallest.
    Chair Landrieu. Thank you.
    Mr. Canty.
    Mr. Canty. You know, this is very real to me in terms of 
paying the taxes. I remember when I had that AMT bill in 2009 
that I still do not understand what it is. I have two children 
who are, my daughter is severely disabled with autism and my 
son has a high-functioning form of autism; and as anybody who 
is familiar with that, there are a lot of different intricate 
medical bills that are associated with that.
    Well, I had to take that money I had set aside for the 
taxes and pay some of our bills. So, I got a tax lien. I am 
still paying for that tax lien. Our friends at the IRS really 
did not care about that. I mean, that is what I said before 
about the IRS. They do not care if you cannot pay or what your 
excuse is.
    So, there is a real detrimental effects of this to small 
business, to myself notably; and I will be submitting that 
story for the record. But, that needs to be considered, cases 
like that, for small business owners.
    Chair Landrieu. Absolutely. Thank you.
    Mr. Eckert.
    Mr. Eckert. We worry that if the 100 percent capital gains 
exclusion is not extended and made permanent that significant 
dollars will fall out on the system and that large numbers of 
startups will not be funded, companies will not be created, 
jobs will not be created.
    We also feel that by shortening the holding period from 
five years to two will help the system and keep capital in the 
system and we think by including LLCs in the law in 1202 that 
it will help everybody.
    Chair Landrieu. Thank you.
    Mr. Edwards.
    Mr. Edwards. I would just encourage Congress to focus on 
tax reform for small businesses and overall, look at ideas that 
would make the code both simpler and more efficient.
    So, you know, the capital expensing is one of those ideas. 
Section 179, expand it. It makes life much simpler for small 
business and it is more efficient. I mention, for example, 
startup expenses. Why are we amortizing those. That just 
complicates the code. Let us expense them.
    With capital gains, I agree with Mr. Eckert's view about 
1202. We probably should expand it. It would be simpler rather 
than doing that just to lower the overall capital gains tax 
rate. So, think things that are simpler and more efficient.
    Chair Landrieu. Mr. Hodge.
    Mr. Hodge. Well, there is a simple adage in economics that 
when you tax something, you get less of it, and high taxes on 
pass-through entities gives us less entrepreneurship, less 
investment, less risk taking, and ultimately less job growth 
and job creation.
    And so, while we all want to wipe the slate clean, we want 
a blank slate, there are certain provisions in the tax code 
that help us define the tax base and help us define taxable 
income, things like expensing, accelerated depreciation, and so 
forth.
    So, we need to be very, very careful as we reform the tax 
system, that we do not undermine and take away the things that 
improve economic growth and reduce the cost of capital and 
ultimately lead us to a more prosperous economy.
    Chair Landrieu. Michael.
    Mr. Keeling. I put it in my prepared statement that you 
have, I will personalize them a bit. Number one, we want to 
save the Breaux approach to S Corporations with ESOPs, and then 
save these Long-Reagan proposals having to do with exiting 
shareholders being able to keep their companies going by 
transferring it to the employees and not having to pay that 
capital gains tax under certain circumstances.
    Then addressing the two income, issues that attracted 
Senator Long having the dividends be deductible. It is paid in 
cash to the employees.
    And then of course, we would like to add a provision in the 
tax arena, in the Cardin bill that you are a cosponsor of along 
with several of the colleagues on this Committee.
    Then there are other ideas that we can throw out but I just 
hit the top four that we listed out to our written statement.
    Chair Landrieu. Thank you very much, Michael. You did your 
wrap up. Mr. Nelson had to leave early. So we are down to our 
last three. Go ahead.
    Mr. Randolph. Thank you. I am happy to be part of this 
discussion. A lot of the tax reform discussion for business 
focuses on large businesses and multinationals and a lot of the 
discussion is about broadening the base and lowering the 
corporate rate, and we have to make sure that small businesses 
do not get caught in the crossfire of that discussion.
    Chair Landrieu. Thank you.
    Mr. Randolph. Some of those broadening measures, as Mr. 
Hodge points out, such as for depreciation, would affect small 
business as well. So, we need to really focus on that.
    But going beyond that the discussion really needs to, and 
that is where this discussion fits in, really needs to focus 
also on the problems that small businesses face. I am really 
happy to hear that there are constant calls for permanence, 
because that is really important.
    Specific things we need to focus on are a permanent 
extension and expansion of 179. Cash accounting the same thing. 
I echo that again and also the incentive for startups in 
Section 1202, the 100 percent exclusions and so on. We need to 
focus on that.
    And, we need to focus on things that generally make life 
simpler for small businesses--you know, cash accounting is one 
of those types of things--and not try to pepper the tax code 
with a lot of very complicated incentives at the same time.
    Chair Landrieu. Thank you so much. I hope you take those 
ideas back to Treasury and let them know you heard from the 
Small Business Committee.
    Ann.
    Ms. Sullivan. A lot of people touched on this. Our tax code 
is really outdated. It is really thinking about business in a 
very traditional way. As Kristie pointed out, there are 23 
million self-employed. You said people are creating their own 
jobs, a do-it-yourself economy basically. We have access to 
world markets. Our consultants are all over the place. 1099s 
are now a way that we do business by being able to employee 
those folks rather than trying to skirt employer obligations.
    There is just a whole different way of looking at business 
and how business is conducted, and so we are really hoping that 
when Congress thinks about redoing the tax code it thinks about 
how business is done today versus how it was 50 years ago and 
how this complexity has built upon itself.
    Chair Landrieu. Ann, I think that is so excellent. I am 
going to make that I think the heading of my letter to the 
Finance Committee. We are operating in a do-it-yourself 
economy. Let us have a tax code that helps us do it.
    Ms. Sullivan. Yes.
    Chair Landrieu. I mean think about that, I mean, because it 
is absolutely, it is just breathtakingly different than it was 
20 or 30 years ago. I mean, this Internet and the way people 
conduct business today is so different. We have a tax code that 
was built for the last century. This is a very exciting 
opportunity. Whether we can get it done or not, I do not know.
    Go ahead, Sandy.
    Mr. Zinman. Well, to add on to what can just said, too much 
of the current tax code is burdensome and confusing. The 
compliance issues are difficult. We need to have an 
understandable tax code with some amount of permanence.
    Granted we live in a dynamic economy but we have always 
lived in America in a dynamic economy. So, we need to have some 
amount of permanence so business owners can feel that they know 
where they are going. Also, one last thing is we do need to 
coordinate with state and local governments because we seem to 
step on each other.
    Chair Landrieu. Excellent point.
    Senator Enzi might have a few closing remarks and again 
thank you so much for being here. I mean we are so happy to 
have a member of the Finance Committee, because whatever 
letters we decide to send or not send, we have had a good solid 
member here listening to this and I think it will really help. 
I hope it was helpful to you, Senator.
    Senator Enzi. It was. And of course, this was my first 
Committee and it took me a long time to get on the Finance 
Committee as well. So, I am pleased on there. I guess they did 
not want an accountant on there. So, that explains a lot on 
balancing budgets and fixing taxes.
    Chair Landrieu. It explains why we are in the trouble we 
are in.
    Senator Enzi. And, I just appreciate all of the comments. 
There have been a lot of really valuable suggestions here that 
I have done, that I have written down.
    For the small businesses, I like that do-it-yourself 
economy. That is the small businesses. Of course, unfortunately 
our definition of a small business is five hundred or less 
employees, and this Committee, I have always said that my 
definition of a small business is where the owner of the place 
sweeps the sidewalk, cleans the toilets, does the bookkeeping, 
and waits on customers, and definitely not in that order.
    That is who we have got to keep in mind when we are doing 
this. When I talked to big businesses, I say find a small 
business that has got the same problem that you have got and 
help them to be able to explain it and it will fix it for both 
of you. One of the problems with small businesses is not having 
the time to find out their problem exactly and then to explain 
that.
    I appreciate the comments on ESOPs. Be sure and watch out 
for the new fiduciary rules on valuing the ESOPs. For everybody 
I suggest that when I first was coming back here, there was a 
company in Missouri that made, redid farm implements. They did 
a little audiotape called ``The Great Game of Business'' about 
how these people that had never owned a business, never really 
understood their own finances took over an implement business 
and were able to set it up very competitively and keep it going 
which was one of the ESOPs.
    When we are talking about forms, if you have some 
suggestions or questions about why anything is on a form. Some 
of the forms that we have are not very explanatory. In fact, 
the form 5500 that people have to fill out for health care and 
insurance, the questions do not match up with the form. When I 
asked about it, they said, well, if we change the form, then we 
get penalized under the Paperwork Reduction Act so we just go 
with the old form and we add to the manual, and that is a 
problem we have got with a lot of forms.
    I was able to change the student aid form from 12 pages 
down to two just by asking a bunch of questions about, you 
know, who uses that information.
    So, if you can supply that on any of the business forms you 
have to do, and I am sorry that Mr. Nelson is gone with his 
small business application that he is trying to do.
    There is a Small Business Advisory Committee that works 
under the SEC. Any time there are regulations that deal with 
small businesses that amount to $1 million in cost, almost 
everything amounts to $1 million in cost, this advisory 
Committee reviews it and helps to decide whether it is a 
worthwhile rule or not. So, take advantage of that.
    In all the states, there is a tax advocate as well. So, if 
you are having problems that Mr. Canty mentioned, the problems 
where you had some kids that had some extra bills and stuff, 
sometimes the state tax advocate can help on that at least 
illuminating penalties. And I like the suggestion for cash 
accounting on the small business too. I have a whole pile but I 
will not go through them all.
    Chair Landrieu. Thank you.
    Senator Enzi. Thank you for having this hearing.
    Chair Landrieu. Senator Risch.
    Senator Risch. Well, thank you very much all of you for 
coming. I think this has been informative and I think everybody 
has come away with some different ideas.
    I hope you have taken away from this that there are people 
up here that actually care about what you do. I know before I 
got here, I always thought what are these people thinking up 
there.
    Well, now that I am here I can see why a little bit, but 
there are people here who are actually very considerate of what 
goes on outside these walls and we appreciate what you do. Keep 
doing the best you can and we will keep doing the best we can.
    Thank you so much.
    Chair Landrieu. Thank you. I am going to end with one of 
the most interesting articles that I have read in the 
Washington Post in a long time. I do not know if you all got to 
see it.
    The headline, and my Ranking Member will love this, watch 
him pull a USDA-mandated rabbit disaster plan out of his hat. 
Did you all see that? Now, it should be the subject of the 
regulatory oversight that we are going to do but it has 
reference here.
    This summer, Marty the magician got a letter from the U.S. 
government. It began with the six ominous words. Dear Members 
of our Regulated Community. Washington had questions about his 
rabbit again. He has been regulated under a regulation that had 
to do with zoos and circuses; but since Marty has one rabbit, 
they decided to ask him about his rabbit.
    So, we did not get to the rabbit today but we will but we 
got to a lot of other good things.
    So, thank you all very much for coming.
    [Whereupon, at 5:04 p.m., the roundtable was adjourned.]

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