[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]


                  THE TAX LAW'S IMPACT ON MAIN STREET

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

                                HEARING

                               BEFORE THE

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             JULY 25, 2018

                               __________

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
                               

            Small Business Committee Document Number 115-087
             Available via the GPO Website: www.govinfo.gov
             
             
                               __________
                               

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                   HOUSE COMMITTEE ON SMALL BUSINESS

                      STEVE CHABOT, Ohio, Chairman
                            STEVE KING, Iowa
                      BLAINE LUETKEMEYER, Missouri
                          DAVE BRAT, Virginia
             AUMUA AMATA COLEMAN RADEWAGEN, American Samoa
                        STEVE KNIGHT, California
                        TRENT KELLY, Mississippi
                             ROD BLUM, Iowa
                         JAMES COMER, Kentucky
                 JENNIFFER GONZALEZ-COLON, Puerto Rico
                    BRIAN FITZPATRICK, Pennsylvania
                         ROGER MARSHALL, Kansas
                      RALPH NORMAN, South Carolina
                           JOHN CURTIS, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                       DWIGHT EVANS, Pennsylvania
                       STEPHANIE MURPHY, Florida
                        AL LAWSON, JR., Florida
                        YVETTE CLARKE, New York
                          JUDY CHU, California
                       ALMA ADAMS, North Carolina
                      ADRIANO ESPAILLAT, New York
                        BRAD SCHNEIDER, Illinois
                                 VACANT

               Kevin Fitzpatrick, Majority Staff Director
      Jan Oliver, Majority Deputy Staff Director and Chief Counsel
                     Adam Minehardt, Staff Director
                           
                           
                           
                           C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Steve Chabot................................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Mr. Wettlin Treppendahl, Owner, Treppendahl's Super Foods, 
  Woodville, MS, testifying on behalf of the National Grocers 
  Association....................................................     5
Mr. Tibi Czentye, Chief Executive Officer, All Pro Solutions, 
  Rock Hill, SC..................................................     7
Mr. Gary Ellerhorst, President/CEO, Crown Plastics Co., Harrison, 
  OH.............................................................     8
Ms. K. Davis Senseman, Founder, Davis Law Office, Minneapolis, 
  MN, testifying on behalf of the Main Street Alliance...........    10

                                APPENDIX

Prepared Statements:
    Mr. Wettlin Treppendahl, Owner, Treppendahl's Super Foods, 
      Woodville, MS, testifying on behalf of the National Grocers 
      Association................................................    32
    Mr. Tibi Czentye, Chief Executive Officer, All Pro Solutions, 
      Rock Hill, SC..............................................    36
    Mr. Gary Ellerhorst, President/CEO, Crown Plastics Co., 
      Harrison, OH...............................................    38
    Ms. K. Davis Senseman, Founder, Davis Law Office, 
      Minneapolis, MN, testifying on behalf of the Main Street 
      Alliance...................................................    44
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Statement of David Borris, Owner, Hel's Kitchen Catering.....    51
    Statement of Kelly Conklin, Owner, Foley-Waite LLC...........    52
    Statement of Hon. John Curtis................................    53
    Statement of Mike Draper, Owner, RAYGUN......................    59
    Statement of Deborah Field, Owner, Paperjam Press PDX........    60
    NFIB Small Business Economic Trends..........................    61
    NFIB Research Center.........................................    82
    Statement of Maurice Rahming, Owner, O'Neill Construction 
      Group......................................................   107
    Small Business Index.........................................   108
    SBA Table of Small Business Size Standards...................   132
    Statement of ReShonda Young, Owner, Popcorn Heaven...........   178

 
                  THE TAX LAW'S IMPACT ON MAIN STREET

                              ----------                              


                        WEDNESDAY, JULY 25, 2018

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 11:02 a.m., in Room 
2360, Rayburn House Office Building. Hon. Steve Chabot 
[chairman of the Committee] presiding.
    Present: Representatives Chabot, King, Luetkemeyer, Kelly, 
Blum, Marshall, Norman, Curtis, Velazquez, Evans, Lawson, 
Clarke, Chu, Adams, and Schneider.
    Also Present: Representative Harper, and Norman.
    Chairman CHABOT. Good morning. I call the Committee to 
order, and we thank everyone for being with us.
    After more than 30 years of thinking and talking about tax 
reform, Congress produced and passed the Tax Cuts and Jobs Act. 
On December 22nd of last year, President Trump signed this 
historic tax package into law. Today, the unemployment rate is 
at historic lows. New claims for unemployment benefits have 
recently plunged, and equipment purchases are on the rise. The 
economy as a whole is recording very positive marks. Beyond 
macroeconomic data trends, this tax law will be judged on its 
direct impact on the ground. From a business perspective, 
optimistic scores, optimism, it is really sky high. That is a 
very good thing, and for small businesses, it is a great thing.
    According to the NFIB, National Federation of Independent 
Business, their most recent Small Business Optimism survey 
recorded the sixth highest mark in history. When it comes to 
problems facing small businesses, the NFIB survey showed that 
small firms listing taxes as a major problem has fallen 
considerably. It used to be way up there on the list but now 
people think that we finally dealt with it. It does not mean we 
are done but we are certainly headed in the right direction as 
a result of the Tax Cuts and Jobs bill.
    Additionally, NFIB released a separate survey specifically 
looking at the Tax Cuts and Jobs Act. According to that report, 
more than 85 percent of all small business owners believe that 
the tax reform package will produce positive results. In 
another report, the U.S. Chamber of Commerce and MetLife joined 
forces and found that small business owners were forecasting 
continued growth as the year progresses.
    And I ask unanimous consent to enter these three surveys 
into the record.
    And without objection, so ordered.
    While reports capture the overall temperature of the 
industry, I want to hear directly from those that are on the 
ground. And that is the folks sitting before us here this 
morning. That is what we are here to discuss today--the 
reactions, the impact, and the effects of the Tax Cuts and Jobs 
Act on small businesses all across the country. And I think we 
all look forward to hearing from each witness about the 
business environment in their community and how they have been 
impacted from the tax reform package. Additionally, I think we 
are interested in hearing where your companies were a year ago 
and where they are today as a result of the tax cut. From Ohio, 
to Mississippi, to Utah, small businesses are transforming 
communities and neighborhoods. They are responsible for the 
creation of two out of every three new jobs in the private 
sector, small businesses are, and as we continue to study the 
impact of tax reform, it is important to hear from those 
employing nearly half of the private sector workforce. Simply 
put, the economy runs on small businesses.
    Before we move forward in this hearing, I want to take this 
time to especially thank all the witnesses for being with us 
here today. I know that you are sacrificing time and energy 
away from your business to testify before us, and we really do 
appreciate that. So thank you for joining with us.
    And I would now like to yield to the Ranking Member for her 
opening statement.
    Ms. Velazquez?
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    A little more than 7 months ago, President Trump signed 
into law a partisan Republican tax bill. Unfortunately, it has 
become increasingly clear that the lion's share of benefits 
from this law will fall disproportionately to the largest 
corporations and the very wealthy. At the same time, small 
businesses who could have benefitted from well-crafted targeted 
tax reform are largely left behind. Some small firms are 
seeing, at best, marginal benefits. Many others have yet to see 
many meaningful advantages at all. A longstanding challenge for 
small businesses has been managing Tax Code complexity. 
Complying with intricate and frequently changing tax rules 
imposes a significant burden on small enterprises, many of whom 
do not have in-house tax professionals. Instead, small firms 
need to spend time and money on outside counsel and tax 
preparers. We have heard time and again from small businesses 
that this uncertainty and unpredictability imposes additional 
costs for them making it difficult, if not impossible, to plan.
    Unfortunately, the Trump tax law did little to alleviate 
the twin problems of uncertainty and complexity. Instead, it 
has fueled more confusion and uncertainty. For instance, as of 
today, an overworked, underfunded IRS has yet not released 
Section 199A, Pass-through Regulations. Another example is the 
promise that small businesses will be able to file their taxes 
on a piece of paper the size of a postcard. As always, the 
devil is in the details.
    Recently leaked IRS documents suggest there will be 
additional paperwork and worksheets small businesses will need 
to navigate. For those firms that think they will be able to 
capitalize on the new tax laws through restructuring, they can 
expect an expensive and time-consuming process that may eclipse 
any benefits.
    While benefits for Main Street small businesses are minimal 
at best, the Trump tax law will be a boom to Wall Street big 
companies and the extraordinarily wealthy. Millionaires will 
receive an average tax cut of nearly $70,000 this year, more 
than 100 times the size of the average tax cuts for families 
earning less than $150,000 annually. Not only does this cast 
doubt on how large a tax cut most entrepreneurs will receive 
but it also suggests most locally owned businesses will not see 
much secondary stimulative economic benefit. Unlike the very 
wealthy, when working and middle class families get a tax cut, 
they are most likely to spend it quickly at local Main Street 
businesses, spurring customer demand for small businesses' 
goods and services.
    Simply put, the cost of tax reform has been put on the 
backs of small employers and working families that will see any 
rate reduction expire at the end of 2025, while corporate rate 
deductions continue permanently. On top of it all, the Trump 
tax changes will mean the federal deficit grows by trillions of 
dollars. So much for fiscal conservancy.
    Already, the tax plan jeopardizes health coverage for 13 
million Americans, and these future deficit pressures could 
imperil Social Security, Medicare, and Medicaid. Most small 
business owners I know want to take care of their employees. 
Ultimately, cutting the ACA and vital social safety net 
programs imposes indirect costs on responsible entrepreneurs 
who want to do right by their employees. The fact is real 
bipartisan tax reform that helps small businesses, American 
families, and it is fiscally responsible could have been 
achieved if Republicans had worked across the aisle. 
Unfortunately, the Trump tax plan was pushed through rapidly 
with the support of just one party aimed at achieving a 
political goal. Not good policy. It is my hope that in the 
future Congress can work together on more responsible tax 
solutions that help small firms and strengthen our economy for 
the long term.
    With that I yield back.
    Chairman CHABOT. Thank you. The gentlelady yields back.
    I will take just a moment before introducing our panel to 
explain our lighting system and timing things.
    We operate under the 5-minute rule. Each of you will have 5 
minutes to testify. The green light will be on for 4 minutes. 
The yellow light will come on for a minute to let you know that 
you should be wrapping up. And then the red light will come on 
letting you know your 5 minutes is up. And we would ask that 
you stay within that time if at all possible.
    And I would now like to yield to the gentleman from 
Mississippi, who is the Chairman of the House Administration 
Committee, Mr. Harper, in order to introduce our first witness 
here this morning.
    Mr. HARPER. Thank you, Chairman Chabot, and Ranking Member 
Velazquez for allowing me the opportunity to participate 
briefly in this Committee's hearing this morning in order to 
introduce my constituent and friend, Mr. Wettlin Treppendahl.
    Wettlin is the Owner of Treppendahl's Super Foods in 
Woodville, Mississippi, a town of just over 1,000 people, and 
one of our state's oldest communities having been incorporated 
in 1811, 6 years before Mississippi became a state. While the 
first Treppendahl did not arrive in Woodville until almost 100 
years later, the Treppendahl family name today is readily 
recognized throughout Southwest Mississippi and immediately 
identified with Woodville and Wilkinson County.
    The Treppendahl family history is the classic American 
success story. In 1903, as a 24-year-old, Carl Treppendahl was 
sent from Denmark to New Orleans wearing a shipping tag pinned 
to his coat that said, ``send me to Woodville, Mississippi. I 
do not read or speak English.'' He had been promised a job as a 
bookkeeper by a fellow Danish immigrant, but unfortunately, 
that business failed shortly after Carl immigrated to the 
United States. Carl was left in Woodville with nothing, so he 
got busy. He opened a small store where he bought and sold 
everything from hardware and dry goods to lumber and 
fertilizer. In 1924, he added a grocery store in downtown 
Woodville to his enterprises. Carl's son Adolph took over 
operation of the business, which eventually passed to his son 
and our witness today, Wettlin Treppendahl, Jr. Wettlin is 
assisted in the daily operation of the family's full-service 
grocery store by his son and daughter, Adolph Wettlin 
Treppendahl III and Susan Treppendahl LeBlanc.
    Mr. Treppendahl is testifying today on behalf of the 
National Grocery Association, and I would like to welcome him 
today to this hearing and to Washington, D.C., on behalf of the 
House of Representatives.
    And I thank you, Mr. Chairman. I wish I could stay longer 
but I have to go and chair a matter over in the Committee on 
House Administration. Thank you for allowing me to introduce 
Mr. Treppendahl.
    Chairman CHABOT. Thank you very much for that, and you are 
excused. We appreciate you being here.
    And our next witness, I would recognize the gentleman from 
South Carolina, Mr. Norman, for the purpose of introducing our 
second witness.
    Mr. NORMAN. Thank you, Chairman Chabot. And I would also 
like to thank Ranking Member Velazquez and the rest of the 
Committee for the opportunity to introduce one of our witnesses 
who is from my hometown. Tibi, great to see you again, and 
thank you for traveling all the way from the great state of 
South Carolina to join us today in our talk about tax reform 
and what it means for small businesses, particularly yours.
    I have known Tibi for quite some time now and I have not 
only found a smart businessman but also a great friend. If you 
do not know, Tibi is the CEO of his company, All Pro Solutions. 
All Pro Solutions is a very small business in my hometown of 
Rock Hill, South Carolina, which is just south of Charlotte, 
North Carolina. Twenty-six years ago, after fleeing from 
communist Romania and coming to America, Tibi started All Pro 
Solutions and has turned it from a small startup to a thriving 
small business. Ten years ago, Tibi and his family moved to 
South Carolina. They have enjoyed every minute, and he 
attributes his move to South Carolina not only as a personal 
decision for him and his family but a business decision where 
he would be able to grow his family-run business, which he did. 
Since I have known Tibi, I have grown to know him as an honest, 
hard-working, and dedicated family man, businessman, and 
friend. I look forward to his testimony. He is a true success 
story. When we went through his business, he really was excited 
about his business and what he does. I welcome his wife here 
today, and Tibi, again, thank you for taking the time to come. 
And I look forward to your testimony.
    Chairman CHABOT. Thank you very much.
    And I will introduce our next witness, who is Gary 
Ellerhorst, who actually is from my district in the great State 
of Ohio, and about a half hour outside the city of Cincinnati 
in Harrison, Ohio, where he is the Chief Executive Officer and 
President of Crown Plastics Company. Crown Plastics is an 
innovator and manufacturer of advanced plastics and polymers 
that has locations in both Ohio and internationally. With 
impact-resistance characteristics, Crown Plastic's materials 
are helping advance the shipping and transportation industry, 
as well as the ski and snowboard markets. The company was 
founded back in 1972 by Mr. Ellerhorst's father, Robert 
Ellerhorst. Today, the company is led by Gary Ellerhorst, who 
has over 40 years of experience with Crown Plastics. In 
addition to his responsibilities there, Mr. Ellerhorst is past 
president of Main Street Harrison and the Greater Harrison 
Chamber of Commerce. And we thank you for taking time away from 
the business, and we welcome you here today.
    And I would now like to recognize our Ranking Member, Ms. 
Velazquez, for the purpose of introducing our fourth and final 
witness.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    It is my pleasure to introduce Ms. Davis Senseman, the 
Founder of Davis Law Office in Minneapolis, Minnesota. Her law 
firm employs five people and serves a roster of over 800 
Minnesota-based small business clients. Ms. Senseman graduated 
from Becknell University and magna cum laude from Mitchell 
Hamline School of Law. She serves on several nonprofits and 
hails from Brooklyn, New York. She is testifying today on 
behalf of the Main Street Alliance, a national network of small 
business owners.
    I want to welcome you and all the witnesses. Thank you so 
much for being here today.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    And if Committee members have opening statements, I would 
ask that they be submitted for the record.
    And we will now turn to our witnesses.
    Mr. Treppendahl, you are recognized for 5 minutes.

 STATEMENTS OF WETTLIN TREPPENDAHL, OWNER, TREPPENDAHL'S SUPER 
     FOODS; TIBI CZENTYE, CHIEF EXECUTIVE OFFICER, ALL PRO 
  SOLUTIONS; GARY ELLERHORST, PRESIDENT & CEO, CROWN PLASTICS 
       CO.; K. DAVIS SENSEMAN, FOUNDER, DAVIS LAW OFFICE

                STATEMENT OF WETTLIN TREPPENDAHL

    Mr. TREPPENDAHL. Good morning. Thank you to Chairman Chabot 
and Ranking Member Velazquez, and to the members of the Small 
Business Committee for the opportunity to testify and share my 
family business story.
    My name is Wettlin Treppendahl, and I am a fourth-
generation retailer and owner of Treppendahl Super Foods in 
Woodville, Mississippi. My family business originally opened in 
the 1800s and later expanded to the grocery store that we own 
and operate, and have been since 1924. Treppendahl's is a full-
service grocery store offering specialty items, a deli, a 
bakery, and premium meats. My daughter assists me in the 
operation and plans to take over the business someday.
    I am testifying on behalf of the National Grocers 
Association, the national trade association representing the 
retailers and wholesalers that comprise the independent sector 
of the supermarket industry. Woodville is a 1-square mile town 
of 1,200 people, and Treppendahl's is the largest employer with 
50 employees. We are the only grocery store in town where 60 
percent of our customers are eligible for the SNAP benefit and 
would face significant difficulties in accessing fresh fruits 
and vegetables if not for our store.
    The new tax law has had an immediate impact on my 
business's ability to invest in our store and community. We 
have upgraded and replaced 12 doors of frozen foods section 
providing work for our local refrigeration company and allowing 
us to expand our selection of frozen food and save on energy 
costs. We are also in the process of upgrading our check lanes, 
which are 18 years old. Tax reform has allowed me to provide 
full-time employees with raises.
    The estate tax has also been a concern of our business. 
Supermarkets are somewhat unique in that most of our assets are 
nonliquid, tied up in property, inventory, fixtures, and 
equipment. Paying a big estate tax could mean going into debt 
or selling off part of the company. The new tax law's double 
exempt threshold for the estate tax has reduced fear I have 
about the future of my business as it is to be passed through 
generations. The permanency for this provision would assure me 
that our store will remain in business for years to come.
    The 20 percent pass-through deduction is a positive for my 
business as we are organized as an S corporation, but long-term 
certainty for this provision and rate parity with C 
corporations is desired for the future since we must compete 
with chain stores.
    Another important aspect to the tax reform is 100 percent 
bonus depreciation qualified improvement properties. As a 
supermarket owner, I must replace expensive equipment over 
time, as well as upgrade shelving units, flooring, ceiling 
tile, wiring. These items carry high price tags, and the 
ability to write them off fully and immediately gives me the 
confidence to invest in my store.
    However, a drafting error in the new tax law prevents me 
from being eligible for the benefits, and I urge Congress to 
fix this issue as soon as possible.
    Thanks to the new tax law, I have received new confidence 
in my business. As Congress looks to improve the tax law, I 
urge you to make permanent pro-growth policies for small 
businesses that would remove uncertainty so I can continue to 
invest in my employees, my business, and my community for years 
to come.
    Thank you, and I am happy to answer any questions you may 
have. Thank you.
    Chairman CHABOT. Thank you very much.
    Mr. Czentye, you are recognized for 5 minutes.

                   STATEMENT OF TIBI CZENTYE

    Mr. CZENTYE. Good morning, Mr. Chairman, Ranking Member 
Velazquez, and members of the Committee. I am honored for the 
opportunity to testify before the Committee today on how the 
Tax Cuts and Jobs Act helps small businesses.
    My name is Tibi Czentye, CEO of All Pro Solutions located 
in Rock Hill South Carolina. I am a legal immigrant and a proud 
U.S. citizen. I escaped from Romania in 1989 and after 2 years 
of vetting, I received political asylum for U.S. After 5 years 
of working three jobs, I opened my own company, bought my own 
house, and sent my kids to good colleges in California. And 
then after 18 years there, we left California and found our 
dream state, South Carolina, where we enjoy family values, good 
business opportunities, and a lower cost of living.
    All Pro Solutions was created in 1996. We are a 
manufacturer of disc publisher archiving systems and digital 
services. We sell our equipment all over the world, including 
the government.
    When we started the company, we were two people and now we 
are 10. Recently we added two. We were eight; now we are 10. 
And we expect to hire even more at the end of the year. Because 
of the Tax Cut and Jobs Act, the optimism in the small business 
community is very high. I am a member of York County Chamber of 
Commerce, and after each meeting I notice the optimism of our 
community entrepreneurs growing higher and higher.
    The tax reduction is huge and the extra in the company's 
pocket is a big amount of money a small company can do a lot 
with. Until last year, many companies, including us, didn't 
want to spend their money, but now, because of this big tax 
cut, any entrepreneur can see the opportunity to invest in its 
company with the goal to make more money and for the employees 
also. It is a very good feeling.
    All Pro Solutions' forecast for the end of this year and 
beginning of the next increased four times compared to the last 
period of the year. Because of that, we already started to buy 
new inventory to build our equipment. Last year, we built 50 
units, and this year we plan to build 150-185 units. Because of 
this extra number of products, we already began to expand our 
company, and in the end, when everything is done, we will hire 
between two and maybe even four people.
    One of the other good signs on how the Tax Cuts and Jobs 
Act works can be seen through jobs advertising on Craigslist. I 
used to advertise each year, and I used to receive 200-300 
resumes, and now we received just 20-30. It is clear why. The 
economy is booming, people have jobs, and the job market starts 
to be a huge issue to hire for us. Therefore, we have to 
increase the employees' wages, and also, when we hire, we have 
to offer them more than usually just to be able to catch them.
    Another big opportunity for us, arisen because of the tax 
cut, is to try to bring in U.S. Chinese manufacturers that 
already sell their products here. To manufacture their products 
here could be a big advantage for them comparing to making them 
in China which adds some expenses, and also the transporting 
can be a huge amount. And besides that, I believe we even can 
have lower costs to build products to them than what they have 
there. And also, it is more safe.
    We already have a company interested. They visit us and we 
are in the third phase of dealing with them. The company name 
is Oulupa Filtration, a manufacturer of high precision filters. 
I hope we will be able to partner with them, and I am really 
happy to bring companies from China to the U.S. This shall be 
something special for us.
    Reduction in the individual income tax is another big help 
for the employees, and a lower tax by an average of $1,334 per 
family per year, which is 2.2 percent, put more money in their 
pockets.
    Expanding the Child Tax Credit, which I think is big, too, 
from $1,000 to $2,000, and preserving the mortgage interest 
deduction, this is one very big, good thing to preserve it so 
the people, if they buy, it is good to be able to be helped.
    Because of all these wonderful results of the Tax Cuts and 
Jobs Act, you can see many happy faces in the streets, more 
people shopping our malls and eating out in the restaurants. 
Whatever people say, what I know is that money brings 
happiness.
    Thank you for listening to me, and I would be pleased to 
answer any questions you might have.
    Chairman CHABOT. Thank you very much.
    Mr. Ellerhorst, you are recognized for 5 minutes.

                  STATEMENT OF GARY ELLERHORST

    Mr. ELLERHORST. Chairman Chabot and Ranking Member 
Velazquez, good to see you both again. Thank you very much for 
having me. It is an honor to testify.
    In 1972, my father started Crown Plastics Company. After 
working several years as a second shift machine operator while 
attending Xavier University, I came on full time at Crown in 
1978. In the past 40 years, I have experienced just about every 
level of financial difficulty and success due to both general 
economic as well as market-specific conditions. What I have 
come to learn is that although a singular situation or event 
can bring a solid successful business to its knees, for 
example, streaming videos, complete annihilation of Blockbuster 
Video or regulatory impact on small community banks, it takes a 
combination of specific market and economic conditions to fuel 
significant profitable growth. These include internal aspects, 
such as a skilled workforce, product value and innovation, 
wages and benefits, external items, such as general economy, 
global competition, regulation, taxation, and availability to 
capital, and other more nebulous things, such as corporate and 
consumer confidence in the future economic environment.
    Although each of these aspects play an important individual 
role on overall economic performance, it is a combination of 
these that create the synergistic rocket fuel of a booming 
economy. Separately, Mentos will freshen your breath, and Diet 
Coke will quench your thirst, but together in the proper 
environment they are explosive. Either of them alone will not 
do it, nor could you replace them with Tic Tacs or Diet Pepsi 
and get the same result. So trying to evaluate the impact of 
the recent tax bill contextually removed from the other 
contributing economic influences, which combine to generate the 
overall economic picture, can be difficult and potentially 
misleading. I will to the best of my ability provide my 
perspective as to how the bill both directly, and more 
importantly, in conjunction with other economic and policy-
based contributors, is impacting my business.
    The attached exhibit is a drastically simplified 
illustration of the direct impact on our tax liability. As an S 
corp, under the new bill, Crown shareholders would be eligible 
for the 20 percent pass-through tax deduction. However, we also 
lose the 9 percent domestic production activity tax deduction 
that was eliminated. Based on a million dollars in taxable 
income, which is about where we budgeted for 2018, Crown would 
see a net decrease of just over $64,000 in shareholder tax 
liability. As with most S corporations, we commit to 
distributing to the shareholders enough to cover their Federal 
and state tax liabilities, so the result is that the company 
would be able to reduce its distributions by the $64,000 and 
still provide our shareholders the funds to meet their tax 
requirements.
    Now, that may not sound like a big deal for a $14 million 
company, but in reality, it is. Over the past 10 years, we have 
invested over $5 million in new equipment, process 
improvements, and technological updates, and have paid out 
little to nothing to our shareholders. Even if we decided to 
just pay out the pre-tax bill numbers, it would provide the 
opportunity for the shareholders to keep their portion of the 
tax reduction and use it for themselves and their families. And 
as a privately held company, our shareholders are just regular 
folks like myself, many of them, the children of initial 
investors who have inherited the stock from their parents.
    We could also choose to use the money to pay down debt, 
further reducing interest costs. $64,000 a year would also 
provide us with the capability to service well over $1 million 
in additional loans for further investing in our business, 
which is very timely as we just signed a contract on an 
additional building adjacent to ours, which with upgrades will 
cost us about $1.1 million. The tax savings will allow us to 
cover this additional expense without adversely affecting our 
current cash flow, which is the most critical factor to a 
growing business.
    A key impact for us is with regard to our medical insurance 
benefits. We continue to pay 100 percent of the premiums for 
our employees' high deductible HSA medical insurance policies, 
as well as 40 percent of the deductible on the backside. This 
has been a commitment of ours to our employees, and over the 
past 10 years, we have worked hard with our insurance broker to 
do whatever we could to maintain that benefit through increased 
deductibles, change in carriers, and sponsoring employee 
wellness programs. We are at a point where one more large 
increase in premium costs could force us to start requiring 
employees to contribute to the program.
    But with the new tax bill, not only can be maintain the 
status quo for 2019, but for many years to come. Why? Because 
when we realize the impact of a booming economy, along with the 
returns from recent investments we have made in the business, 
we expect to double profits next year, which means $64,000 
becomes $128,000 in tax savings, and even more in 2020.
    Another aspect that is potentially even more impactful than 
the tax rate itself is the ability to accelerate depreciation 
of our investments into our company. Outside the purchase of 
the new facility, we have budgeted capital expenditures of 
$800,000 for 2018. Although the net impact over time is a wash, 
the ability to expense these investments, rather than 
depreciating them over 5 to 7 years, will provide us with an 
additional $200,000 of cash in 2018, which again is often the 
most critical item for a growing company. With increased 
receivables, inventory, and work in process, a growing business 
requires significant cash.
    So in closing, the recent tax reduction in and of itself 
will have a positive impact on our employees and our business 
in 2018 and beyond. But when augmented by the reduction and 
regulation, and most importantly, the hugely positive outlook 
by business leaders and consumers which started the day after 
the 2016 election, the resulting booming economy takes that 
positive impact of the tax bill and increases it exponentially.
    Thank you very much.
    Chairman CHABOT. Thank you very much.
    Ms. Senseman, you are recognized for 5 minutes.

                 STATEMENT OF K. DAVIS SENSEMAN

    Ms. SENSEMAN. Chairman Chabot, Ranking Member Velazquez, 
and members of the Committee, thank you for the invitation to 
testify today examining how the Tax Cuts and Jobs Act has 
affected real Main Street small businesses.
    My name is Davis Senseman, and I am a member of Main Street 
Alliance, a national network of over 30,000 small business 
owners. I have owned a small business law firm for more than 8 
years, currently employ five people, and have a roster of over 
800 business clients, many of whom I have consulted with about 
the TCJA.
    The vast majority of those clients, like others across the 
country, are not seeing consequential gains from the TCJA and 
its 20 percent pass-through deduction. It is nice that some of 
the other testifiers here today are but they are most certainly 
the exception and not the rule. And from what they offered as 
concerns about their businesses, I wonder how many Americans 
would actually classify them as small.
    At last measurement by the SBA, the median income for self-
employed individuals who own pass-through was $49,204 a year. 
These businesses are the bodegas, auto mechanics, and small 
farmers who would have to pay more to an attorney like me, or 
an accountant, to figure out the new law than they would ever 
gain from tax cuts.
    The Act's small business provisions were also needlessly 
confusing. The TCJA turned the tax treatment of tax treatment 
of pass-through entities completely on its head, and now two 
businesses making the same amount of money may have completely 
different tax situations.
    As Ranking Member Velazquez mentioned, we sit here today, 
July 25th, still without any IRS regulations about what 
specifically will constitute things like qualified business 
income or specified trades, making it nearly impossible for 
these businesses to do any tax planning.
    My law partners and I sit in a very privileged position as 
attorneys, and yet we still spent nearly $2,500 with our 
accountant on tax planning for 2018, a cost which could have 
doubled if we also had to hire legal advisors. In future years, 
once we have recouped the cost of our accountants, the TCJA 
will likely result in our having a slightly smaller tax burden.
    But first and foremost, we did not need it. And it 
certainly will not be enough to hire more staff.
    And we are not alone. A recent poll by Businesses for 
Responsible Tax Reform found that 69 percent of small business 
owners do not plan on hiring a new employee because of the new 
tax law.
    While many Main Street businesses will not feel benefits 
from the TCJA, they will feel a hit. The Congressional Budget 
Office estimates the TCJA will slash government revenue by 
nearly $2 trillion. As many predicted, some of your colleagues 
are using this deficit increase to justify deep cuts to Social 
Security, Medicare, infrastructure, and other public services 
that small business owners and our communities rely on. Many 
republicans were ardent opponents of any increase in the 
Federal deficit under President Obama, but now remain silent in 
the face of a burgeoning deficit due to a new tax law.
    The Tax Policy Center estimates that a typical small 
business owner, those folks with a median yearly income of 
$49,204, will experience a tax cut of roughly $500 in 2018. You 
would be hard pressed to find any Minnesota small business 
owner who would rather have $500 in hand now than an assurance 
that they can access heating assistance if their business is 
down in one of our tough Minnesota winters, or in Minnesota 
Care, our state Medicaid program, if they need it in the 
future. The CBO also found that the TCJA's repeal of the 
individual mandate will cause 13 million Americans to lose 
access to healthcare and health insurance premiums to climb.
    I started my firm in 2010, the first year that the 
provisions of the Affordable Care Act took effect, at a time 
when large corporations in Minnesota were still reducing their 
workforces from the last recession. And do you know what I 
spent most of my time doing in those early months? Creating 
LLCs and drafting agreements for folks who had been laid off 
from Minnesota's largest companies, but who had decided that 
they would take the risk to start their own business simply 
because they were on longer reliant on a large company to 
provide them health insurance.
    I would like to close my testimony with a story about an 
early U.S. small business owner, Henry Ford. Due to the Model 
T's success and an innovative assembly line, Ford had a capital 
surplus of $60 million by 1916. He planned to use the money to 
employ more workers, make his cars more affordable for his 
employees, and help them build their lives, which is a lot of 
the promises we heard about the TCJA. Unfortunately, Ford had 
two shareholders, John and Horace Dodge, who sued him, arguing 
that the purpose of the company is to maximize shareholder 
profits, not to benefit the community. The court agreed, 
holding that management's primary duty in a corporation is to 
maximize shareholder wealth. Dodge v. Ford makes clear that any 
attempt to stimulate the economy and create jobs by making sure 
that businesses have more money will run right into the issue 
that those businesses are legally obligated to use surplus 
money to benefit their shareholders through things such as 
stock buybacks, which have increased by $615 billion since the 
passage of this bill and not for the greater good. For the vast 
majority of small business owners, the confusing outcome of the 
TCJA has bene of little benefit, especially when compared with 
the good, affordable healthcare system, sufficient retirement 
funds, and the high quality jobs that sustain a strong customer 
base.
    I urge Congress to reexamine this entire bill and 
reconsider the methods used. I look forward to answering any 
questions.
    Chairman CHABOT. Thank you very much.
    And we will begin our questions now. And I recognize myself 
for 5 minutes.
    Let me ask Mr. Treppendahl, Mr. Czentye, and Mr. 
Ellerhorst, how many employees do each of you have? Let's just 
go down.
    Mr. TREPPENDAHL. Fifty.
    Chairman CHABOT. Fifty.
    Mr. CZENTYE. Eight and a couple part time.
    Chairman CHABOT. Eight and a couple part time? Two part-
time?
    Mr. ELLERHORST. Fifty-three here and 20 in our 
international manufacturing facility.
    Chairman CHABOT. Okay. And I would ask unanimous consent to 
enter into the record the SBA Small Business Administration's 
size standards that determine whether a business should be 
considered small. And let the record show that all three 
businesses before us indicate that they are small according to 
the size standards of the SBA, generally 500 or fewer 
employees. And they are also within, as far as the gross 
revenues.
    And without objection, so ordered.
    The same three witnesses, let me ask you this.
    Mr. KING. Will the gentleman yield?
    Chairman CHABOT. I would be happy to yield.
    Mr. KING. I just want to ask the Chairman if you have got 
that in your hand for the benefit of the Committee, what the 
gross receipt number is that is used to measure small business.
    Chairman CHABOT. It is $32.5 million under that.
    Mr. KING. Five hundred employees.
    Chairman CHABOT. Yes. Five hundred employees.
    Mr. KING. Thank you, Mr. Chairman.
    Chairman CHABOT. So about 10 percent, approximately, of 
what is considered a small business in America. And when we 
talk about there being 29 million approximately small 
businesses in America, that is the numbers within which we are 
working.
    The three gentleman that I just asked the question, as 
compared to last year at this time, do you feel your business 
is better off today with the Tax Cuts and Jobs Act being in 
place?
    Mr. Treppendahl?
    Mr. TREPPENDAHL. Yes, sir. I do. I think that we have to 
work as hard or harder but I am investing back in my company 
because I think that we are on the right track. I would not ask 
my daughter to come back and work with me--she has an 
accounting degree and I would not ask her to come back and work 
with me if I did not.
    Let me explain. When you say a small grocery store, we are 
a small grocery store on a scale of the big people. We had a 1-
day meat sale. And on our 1-day meat sale, we did really good. 
We sold over $50,000 that one day. Now, you realize, I went to 
work at 4:30 in the morning and I got home at 8 o'clock that 
night. And of that $50,000, our profit was 1 percent to 2 
percent. So that is $500 we made for that. So any kind of break 
or any kind of cut that can help small businesses. And I am 
saying small business. We have got 1,200 people in our town, 
and it is 1-mile square. We are little bitty in the scope of 
the big boys. But yes. I am 69 years old. I would be retiring 
if I did not have faith.
    Chairman CHABOT. Thank you.
    Mr. Czentye, are you better off today as a result of the 
Tax Cuts and Jobs Act?
    Mr. CZENTYE. Yes. And even I feel better.
    Chairman CHABOT. Thank you.
    Mr. CZENTYE. So this is from huge optimist. It is a very 
general good feeling where you go and you talk with people and 
they have companies, how positive they see it. Usually, the 
entrepreneurs, they have to go first, not after, or cannot be 
followers. So once we see the opportunity, our job is to go and 
spend and do stuff and try to do stuff because with a good 
backup you can make 50 percent profit. And it is one chain. 
Even some critics at the big companies, I love them. Why? 
Because if they spend money, they are going to buy stuff from 
me, I have to make stuff, and I have to buy stuff from others. 
And this by the way is one side because it is not just small 
companies, not big companies. We are related. I have my 
forecast, 80 percent big companies are going to buy stuff from 
me. And what they did, they purchased one unit, now I have 
five, six, seven, which is between $5,000 and can be $25,000-
$30,000. It is a big difference. So it is one chain, which I 
love. It is not just a small company. It is one good example. 
That is why I am here. But I had the chance to be here. But it 
is not just that. Even the big corporations, they have one huge 
inference over us and help us because they buy stuff from me.
    Chairman CHABOT. Thank you.
    Mr. CZENTYE. They buy stuff from me.
    Chairman CHABOT. Yeah, I am going to run out of time. So I 
want to get to Mr. Ellerhorst.
    Mr. Ellerhorst, let me mention one thing.
    Mr. ELLERHORST. Yes.
    Chairman CHABOT. Are you better?
    And then secondly, I think you mentioned that you are in a 
group of 37 other small businesses. And what are you hearing? 
And what kind of businesses are those? And what are you hearing 
from them, too?
    Mr. ELLERHORST. I am absolutely better off, and will 
continue to be better off as time goes. I am a member of 
Vistage CEO Group and another chamber.
    Chairman CHABOT. What was the name of that again?
    Mr. ELLERHORST. Vistage. It used to be Tech. At another CEO 
roundtable with 26 other businesses, and they range anywhere 
from banking to restaurants, complete wide gamut, and there is 
not a single one, whether they like the president or not, that 
will not say that they absolutely are benefitting from the tax 
bill. Not a one.
    Chairman CHABOT. Okay. Thank you. My time is expired.
    The Ranking Member is recognized for 5 minutes.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman.
    We held a subcommittee hearing on entrepreneurial 
development, and we have a table and witnesses just like this. 
There were three Republican witnesses and one Democratic 
witness. That day, when asked by a member of the other side if 
the Republican tax bill benefited them, each one of them 
replied in the negative. I was not here. It was on the 
subcommittee but I watched the proceedings.
    So a postcard filing form was touted as the game changer of 
tax reform. This is the card that Speaker Ryan used to show 
that it was going to be easy. You know, a small business person 
would be able to file their taxes on a postcard like this. Yet, 
it is becoming more apparent that this is not just reality, 
especially for small businesses. In fact, these are the draft 
forms that we have seen. I have to get up because it is this 
long.
    So after seeing the draft forms, would you consider filing 
your own taxes since it is so much easier to file now, Ms. 
Senseman?
    Ms. SENSEMAN. No. When I have consulted with my 
accountants, they have said here is our best guess as to how 
things will be interpreted by the IRS because we do not have 
any regulations yet. And this law in no way made anything 
simpler. It completely flipped the way that LLCs and S 
corporations are taxed. So two businesses making the same 
amount of money could have widely differing tax results. So no, 
I would certainly not do my own taxes, nor advise any of my 
clients to do their own taxes.
    Ms. VELAZQUEZ. More than 90 percent of taxpayers now e-
file, which also helps a cash-strapped IRS process returns more 
efficiently. Does it make sense that we are moving backwards in 
that respect?
    Ms. SENSEMAN. No. It certainly does not. One of the things 
that happens with the IRS is that if you have any changes or 
need to communicate any things that stand out from one tax year 
to the other you cannot e-file. We could not e-file last year 
because we were switching from being an S corporation back to a 
partnership. And so I would imagine that most accountants who 
are concerned about how taxes will be viewed or construed will 
air on the side of caution because that is what accountants do, 
and they will paper file rather than e-file to be able to send 
in notes.
    Ms. VELAZQUEZ. Every time we held hearings on this 
Committee about taxes, there were two areas that the witnesses 
raised--complexity and uncertainty. This chart, prepared by the 
Democratic Ways and Means staff shows the steps to calculate 
the pass-through provision.
    So my question to you is--by the way, my colleague 
Congressman Doggett said it is pass-through purgatory.
    Ms. Senseman, can you explain some of the unknowns and 
confusions surrounding section 199A?
    Ms. SENSEMAN. Absolutely. Section 199A is the new pass-
through 20 percent deduction that was added to the bill after 
there was some backlash and some pushback from organizations, 
including the NFIB. What it basically says is that pass-through 
entities will have this 20 percent deduction, but then it goes 
on to cut into that will only be on their qualified business 
income, that will only be for income under a certain amount, 
that will only be in certain--in specified trades which are 
very broadly defined, you will have a phase out. And so the 
uncertainty of how these defined terms will be interpreted, the 
uncertainty of whether a business owner's--whether what they 
are bringing home is qualified business income or not, all of 
these things are brand new uncertainties that they never had to 
deal with before. Not that was noncomplex before but these are 
all uncertainties bred from the new section 199A.
    Ms. VELAZQUEZ. Thank you.
    I see my time is up.
    Chairman CHABOT. The gentlelady's time is expired.
    The gentleman from Iowa is recognized for 5 minutes.
    Mr. KING. Thank you, Mr. Chairman. I appreciate this 
hearing and the testimony of each one of you.
    I would like to start out with Mr. Treppendahl. The 
introduction that was delivered by Mr. Harper was interesting 
to me and I did not commit it all well enough to memory, but 
what I wanted to ask you first, and it is a little off topic, 
is was your grandfather, his name was tagged and the address 
was tagged inside his jacket, did I get that right?
    Mr. TREPPENDAHL. Yes, sir.
    Mr. KING. And it was 1904?
    Mr. TREPPENDAHL. Yes, sir.
    Mr. KING. And how old was he when that happened?
    Mr. TREPPENDAHL. Twenty-four.
    Mr. KING. And he was sent from?
    Mr. TREPPENDAHL. From Denmark. He came from Denmark to New 
Orleans and caught the train from New Orleans with the shipping 
tag that said, ``Ship me to Woodville, Mississippi. I do not 
read or write English.'' And when he got up here, I do not know 
if anybody knows Jerry Clower, but that was Jerry Clower that 
would tell that story. But when he got to Woodville, the 
gentleman had closed his business. It was a neighbor of his 
from Denmark. And so Grandpa had to do a little bit of 
everything and we had every kind of store. And then finally we 
ended up with a grocery store.
    Mr. KING. He went by ship from Denmark to New Orleans?
    Mr. TREPPENDAHL. He went from Denmark to Liverpool, 
England, and caught a boat at Liverpool, England, and came in 
straight to New Orleans.
    Mr. KING. With a shipping tag inside his jacket?
    Mr. TREPPENDAHL. And shipping tag. It was on his lapel.
    Mr. KING. You know, that is not the only story like that I 
have heard. The reason I focus on it is because I have heard a 
good number of them.
    Mr. TREPPENDAHL. Yes, sir.
    Mr. KING. Including a former member of Congress, Tom 
Tancredo's grandfather who was shipped across the continent and 
ended up in Colorado with a tag on his jacket. And the orphan 
trains that went across this country, and the destiny of family 
after family was changed by these pretty exciting stories of 
people that are faced with adversity but they do not know that 
at the time.
    Mr. TREPPENDAHL. They do not know.
    Mr. KING. It is opportunity to them.
    Mr. TREPPENDAHL. Yes, sir.
    Mr. KING. And how would he know? Or he would not be able to 
know at this day what you have accomplished.
    I am also impressed that a town of 1,200 people, and I have 
got a couple of hometowns in the 1,100 and the 800 category, 
and I am looking at the grocery stores in there. Fifty people 
employed in a grocery store that serves 1,200 people is a 
pretty good sized employment list.
    Mr. TREPPENDAHL. Yes, sir. It is. You know, we are still a 
complete grocery store but we still carry out. You do not have 
to carry your groceries when you come to Treppendahl's. So if 
you get busy up here you can come on down and we will carry 
your groceries out.
    Mr. KING. You are a marketer, too. But you must reach out 
quite a long ways outside the community----
    Mr. TREPPENDAHL. Yes, sir.
    Mr. KING.--to have 50 employees serving.
    Mr. TREPPENDAHL. Woodville is in the southwest corner of 
Mississippi, and we have small surrounding towns.
    Mr. KING. So they come to you.
    Mr. TREPPENDAHL. And we are 8 miles from the Louisiana 
line, so we catch some people from Louisiana, too.
    Mr. KING. Okay. And I did not catch in your testimony, did 
you have a hard number on what this tax cut does to your 
company--for your company?
    Mr. TREPPENDAHL. Not a hard number, but I can tell you, our 
store, in the last 3-1/2 years, we have paid over $466,000 in 
taxes.
    Mr. KING. Thank you, Mr. Treppendahl.
    And I go to Mr. Ellerhorst because you had a hard number. 
And I heard the testimony here that you guys, the three of you 
are the exceptions not the rule on beneficiaries of this tax 
policy. What about your associates? Your number was $64,000 
annually on about a million dollars of net income. Did I hear 
that right?
    Mr. ELLERHORST. Yes, sir. That was from our accountants. 
They told us that is what we could expect the difference to be 
putting everything in. And it only took them about 10 minutes 
to give me that number. So there did not seem to be a whole lot 
of confusion.
    Mr. KING. Any of your friends and associates that are 
business people as well, what are you hearing?
    Mr. TREPPENDAHL. A gentleman send me an email, ``We 
definitely feel the tax changes will enable us to free cash 
that can be used to grow the business. Additional jobs have 
been on the fence, adding more now going through. Additionally, 
the increase in deductions allow for new equipment buys. Have 
made equipment expansions easier to justify. Finally, the 
project activity from our customer base has rocketed this year, 
capacity being moved, expansions being pushed through.'' That 
is from a member of my Vistage group who owns a manufacturing 
business in Cincinnati.
    Mr. KING. And one of you testified as to the regulatory 
relief that is part of all this, too. I know that President 
Trump as a candidate said that for every new regulation, 
eliminate two old ones. And they gave us a report. I think it 
was in February of this year, that for every new regulation 
they eliminated 22 old ones. That was pretty interesting to me. 
But then my first question was, why in the world did we have 
any new regulations?
    I wanted to also, and I think this is pretty well 
established, and I would say that the business I started in 
1975, my oldest son owns that completely today and they do not 
even ask me for advice. I would have to pay them to give them 
some, but they are doing okay. And they run it through the 
software package of their accountant as well and his numbers 
look very, very good. I didn't give him a thought actually on 
this tax piece, but they are very, very good. And I am hearing 
it a lot of places.
    I wanted to turn back to Mr. Treppendahl and ask a quick 
question about child labor laws within the grocery store 
business. Can these young people that are going to be 18 years 
old tomorrow, they are only 17 today, can they walk into the 
cooler and haul some of that----
    Mr. TREPPENDAHL. Yes, sir.
    Mr. KING.--$50,000 worth of meat out of there?
    Mr. TREPPENDAHL. Oh.
    Mr. KING. Can they even go in the cooler at age 17?
    Mr. TREPPENDAHL. No. They cannot go in the cooler or the 
deli or any place where saws or anything like that are.
    Now, as far as out there in the store itself, yes, sir.
    Mr. KING. They can do dry goods?
    Mr. TREPPENDAHL. Yes, sir.
    Mr. KING. But they cannot do produce or meat?
    Mr. TREPPENDAHL. They can do produce.
    Mr. KING. Can they go in the cooler to get it?
    Mr. TREPPENDAHL. No, sir.
    Mr. KING. You have to get it out for them?
    Mr. TREPPENDAHL. Yes, sir.
    Mr. KING. And they can carry it the rest of the way. And 
then can they mow the lawn outside the store?
    Mr. TREPPENDAHL. I do not have them doing that.
    Mr. KING. You cannot do that either?
    Mr. TREPPENDAHL. No, sir.
    Mr. KING. I just make this point. Some time, Mr. Chairman, 
I think we ought to have a hearing in this Committee about the 
child labor laws that keep the young people, let's say 16 years 
old, that get into a car and can drive anywhere in the country 
they want to go, stay up as late as they want to, cannot work 
after 7:00 on a school night and they cannot do these silly 
things here and many others. And they are not learning the work 
ethic that they need to learn.
    Mr. TREPPENDAHL. Mr. King, you have got a good point.
    Mr. KING. And so that is my request, Mr. Chairman. And I 
appreciate your support of that idea. I appreciate all of you 
and I yield back the balance of my time.
    Chairman CHABOT. I think it is a good suggestion.
    The gentleman's time is expired.
    And the chair would just note for the record, when we have 
been talking about the postcard, in general, we are not 
referring to that postcard for businesses to file their taxes 
on. It is the vast majority of individual taxpayers. Now, 
businesses are probably still going to have to file business 
forms, and they might be complicated. And wealthy individuals 
are probably going to itemize in many instances, too. But it is 
the folks who got their standard deduction doubled and the 
child tax credit doubled that are less likely to have to file a 
complicated tax form now that could use the postcard in many 
instances.
    Ms. VELAZQUEZ. Let's roll the videotape.
    Chairman CHABOT. Which videotape?
    Ms. VELAZQUEZ. Speaker Ryan holding a postcard.
    Chairman CHABOT. Yeah, but he is not talking about Proctor 
and Gamble that is headquartered in my district or these folks. 
They are talking about individuals.
    Ms. VELAZQUEZ. He talked about simplicity.
    Chairman CHABOT. Which is the vast majority of people.
    Ms. VELAZQUEZ. That is what he talked about. And what I 
have shown you is not simplicity.
    Chairman CHABOT. I do not think anybody said that small 
businesses were going to have their tax forms dramatically 
simplified or that big corporations were. Or that wealthy 
people were. You know, they still have to get tax accountants 
oftentimes and that sort of thing. But in any event, we can 
agree to disagree.
    And the gentlelady from California, Ms. Chu, is recognized 
for 5 minutes.
    Ms. CHU. Ms. Senseman, thank you for being here today. In 
addition to my position on this Small Business Committee, I am 
also fortunate to be a member of the House Ways and Means 
Committee, which has jurisdiction over tax issues. In fact, I 
joined the Committee just last year as republicans began to 
tout the grand promises of the highly anticipated tax plan. And 
they repeated said that the plan would boost economic growth, 
increase wages, and reduce complexity.
    While I did get a close-up view of how this law came to be, 
it was a very rushed and hasty process. It created more 
loopholes, complexity, and increased compliance costs for small 
businesses in particular. And you have seen this famous 
postcard. Yes, actually, I was in the Committee, and that 
postcard was held up over and over again as the promise for 
what this tax plan would be.
    And instead, just let's take one, you know, Ms. Velazquez 
showed this as the tax purgatory process for the pass-through 
element of the Small Business Plan. And I actually went and 
tried to go through the different loopholes here. You have to 
go through each phase and determine where you are in this. And 
example, just one of these loopholes, determine taxpayer's 
combined qualified business income. I will just read it.
    ``CQBI equals the sum of the amounts determined under 
199A(b)(2)(A), 20 percent of QBI for each qualifying trade or 
business, plus 20 percent of qualified 12:09:15xxx partnership 
income of the taxpayer for the tax year.'' That is one 
loophole.
    So that does not sound like simplicity on a postcard to me.
    And so there actually a very serious question about the 
fate following small businesses. And first of all, it is about 
the estimated tax withholding. I mean, you really have to be 
sure that you have the correct estimated amount or you pay the 
penalty. So has the uncertainty surrounding the pass-through 
provision created difficulties for small businesses trying to 
estimate their quarterly filings of business taxes? I am very 
concerned that some small businesses will ultimately under 
withhold due to the confusion and be subject to late payment 
penalties.
    Ms. SENSEMAN. Yes. That is a very real concern. As you have 
mentioned, if you under withhold and do not pay the IRS enough 
for the earnings that you made you can face a penalty. Those 
penalties can incur interest if you cannot pay them all at 
once. There is no way to know until we have regulations from 
the IRS how they will define something like qualified business 
income or specified trades and industries.
    If you have ever seen a hard copy of the IRS Code, there 
are two to three books that are the code and there are seven to 
eight books that are the regulations. Tax accountants, tax 
attorneys, business attorneys do not really spend a lot of time 
in the code. They spend a lot of time in the regulations 
because it often does not matter what the code says; it matters 
how the IRS is going to interpret it. And so you do have 
business owners right now who are making their quarterly 
estimated payments as best they can but certainly may end up 
finding out that they thought they were eligible for the 20 
percent QBI deduction but that they were not and that they now 
owe 20 percent more in income taxes.
    Ms. CHU. And that is a pretty penny there.
    In fact, are more small businesses investing in tax 
professionals since the passage of the tax law? Do your small 
business clients feel that the costs associated with claiming 
the deduction will ultimately be worth it for their businesses?
    Ms. SENSEMAN. Yeah. I mean, I think there are certainly 
small businesses that cannot afford tax advice and will never 
take advantage of that 20 percent. They will never know that 
they have it so they will overpay. But certainly, more of the 
small businesses we work with who had a fairly simple, 
straightforward tax situation before--LLCs and pass-through do 
not have a separate tax form. Just to clarify what they were 
talking about with forms. They do not have their own form. It 
is just a schedule on the individual's form. So if the 
individual were to have a postcard, I suppose the business 
owner should have a postcard with a schedule at the very most. 
But they certainly are having to consult with tax advisors to 
just tell them how to understand whether they even have a 
change or can expect a change.
    Ms. CHU. And how much do you think this would cost?
    Ms. SENSEMAN. I mean, for us, there are, you know, three of 
us and not a very large business, and we paid nearly $1,000 
each. I mean, I think that you could see, you know, for those 
business owners who make a median of $49,000 a year, I think 
you could see up to 5 to 10 percent of their income being spent 
just to figure out what they are going to owe and what they 
need to withhold.
    Chairman CHABOT. The gentlelady's time is expired.
    The gentleman from South Carolina, Mr. Norman, is 
recognized for 5 minutes.
    Mr. NORMAN. I just want to thank each one of you for coming 
up and taking your time to testify.
    You know, you are in the small business. You are running a 
business. Most of the critics have never run a small business, 
know the tax plan, or really what we face. I am a small 
business owner. I run a development company. You are in it. 
Congressman Chabot played college football. He was in it. He 
can describe what it means to play college football. So you 
need to be in the real world of what we are doing rather than 
just saying it does not work.
    My first question, Mr. Treppendahl, you mentioned--I think 
your quote was, ``If these cuts were to be reversed, I would 
not feel comfortable reinvesting in my store.''
    Are there certain provisions in the tax reform that lead 
you to say this? Or is it the entire package that you are 
thinking about?
    Mr. TREPPENDAHL. Well, in discussing with my accountant, 
and as I said, we added 12 doors of frozen food, and that we 
are able to take off right now. We can put our money to use. 
And we think it would be very advantageous to continue. He also 
said, his old saying, he said, ``You make the money and I will 
worry about the taxes.'' But he said, ``We have got to worry 
about this.'' And I think anything we can get to help us, and 
as we said, 1 and 2 percent in the grocery business is not a 
whole lot of profit. So if we can save a little bit here and a 
little bit there, it will give me a little bit of confidence to 
go ahead and spend the money and put the money back into the 
store, in the community, employ the people, I think it will 
help us.
    Mr. NORMAN. So in your statement, you mention if the tax 
cuts were reversed you would not feel comfortable reinvesting?
    Mr. TREPPENDAHL. Not completely. I would just feel--I just 
feel better now.
    Mr. NORMAN. Okay. Right.
    Mr. Czentye, in your testimony you state until last year, 
many companies, including us, did not want to spend their 
money. Why was this the case? And what about overregulation for 
the last 8 years that have been reversed now, has that played a 
part in your success?
    Mr. CZENTYE. My understanding, that is one big picture 
regarding the tax cuts. And small companies, and maybe the big 
companies, too, like more to be free than have a bunch of 
regulations and do not be able to move freely just because 
there are so many paperwork. And these regulations remind me 
from communist country that I am coming from, that was one big 
problem to have lots of regulations and people were not able to 
do nothing. So for us, I enjoy that and I really like this kind 
of freedom and less regulation than more regulations.
    Mr. NORMAN. Okay.
    Next question, Mr. Ellerhorst, you are from Harrison, Ohio. 
How is the business climate in your city and state? Are folks 
more optimistic than they used to be?
    Mr. ELLERHORST. Extremely. For many, many reasons. One 
being the economy and on the individual basis, the tax cut is 
just a part of that. But in general, the economy.
    I would like to say, I hope I am a better businessman than 
Chairman Chabot was a football player.
    Mr. NORMAN. He was pretty good.
    Chairman CHABOT. Point of personal privilege, we went to 
rival high schools and, yeah, and I think Gary played at Elder 
and I played at LaSalle. And so, in any event.
    Mr. ELLERHORST. Yes, so.
    Chairman CHABOT. Thank the gentleman for yielding.
    Mr. ELLERHORST. Yeah, I think the overall is very, very 
high. I think there is a lot of pent up things that have just 
kind of been released with a lot of the promises that have been 
kept since the election as far as reducing regulation and 
things. I know we lost our relationship. We were a big fish in 
a small pond. We are a very small local bank, but due to Dodd-
Frank, we had a banker in our CEO group that said if you are 
not excised, you will not be able to survive the additional 
oversight that has been required. And so we are now with a 
decent bank, but again, that whole situation was disastrous in 
our banking. And now there is much more capital involved. It is 
just interesting, all this talk about unwritten rules and 
regulations where Dodd-Frank just tied up the whole banking. 
And by the time we started dismantling it, I still do not think 
the regulations were written. So there is a real example of 
tying up, locking up the banks because they still had no idea 
what the rules were going to be. Just though it would be worth 
bringing up.
    Mr. NORMAN. Thank God we are cutting most of those, trying 
to on Dodd-Frank.
    Mr. ELLERHORST. Yes, sir.
    Mr. NORMAN. I want to complement each one of you for 
staying active in your local chamber of commerce. You need to 
keep the pressure on all politicians. We need to spend less 
money on government and give it back to the taxpayer who has 
earned it.
    So I thank you for taking the time, and I yield back, Mr. 
Chairman.
    Chairman CHABOT. Thank you. The gentleman's time has 
expired.
    The gentlelady from North Carolina, Ms. Adams, who is the 
Ranking Member of the Subcommittee on Investigation's, 
Oversight, and Regulations, is recognized for 5 minutes.
    Ms. ADAMS. Thank you, Mr. Chairman. Thank you, Ranking 
Member Velazquez. And thank you for your testimony.
    In the 1980s, the republicans touted trickledown economics, 
claiming that cutting corporate taxes would allow big 
businesses to invest in workers and expand the economy. 
Instead, income inequality drastically expanded and now the 
Center on Budget and Policy Priorities point to the pass-
through, benefitting the wealthiest households significantly 
more than the rest of the country.
    Ms. Senseman, how would the continuation of trickledown 
economics help small business this time around?
    Ms. SENSEMAN. I do not know that it would. As I pointed out 
with kind of the seminal case in why corporations exist, they 
exist to bring money to their shareholders. That is their 
primary goal. And as a shareholder, you can bring a 
shareholder's suit if you think the management is not doing 
that. I do not think that trickledown economics is going to 
work. I think there are studies that have shown that 61 percent 
of the benefit through this new pass-through deduction will go 
to the wealthiest 1 percent and that 4 percent of it will go to 
the bottom two-thirds of earners who earn money through pass-
through. So that is a 15 to 1 ratio of going to the top 1 
percent versus the bottom two-thirds of owners. I mean, no 
matter your economic theory, the end result is that businesses 
exist to make money for the shareholders, not to pay it out as 
Mr. Ford was hoping to do. To do that, there are some states 
where you can organize as a benefit corporation but your 
traditional corporations and pass-through entities are designed 
to make money for the business and for the owners.
    Ms. ADAMS. Thank you.
    As you know, the tax law will cost a total of $1.9 trillion 
over the next 10 years, a deficit that is harmful to our 
society as a whole. But I am particularly concerned about how 
the outrageous deficit hurts our nation's youth. I am 
disappointed that the tax law does nothing to really address 
their needs, like providing families with greater child tax 
credits or dependent caregivers.
    So Ms. Senseman, if Congress passed laws to address 
education rather than giving corporate tax breaks, how would 
the Nation's small businesses be impacted?
    Ms. SENSEMAN. Well, our youth will become the employees of 
our small businesses, and they already are and will continue to 
be the customers of our small businesses. And so the more we 
can invest in young people, such as folks who Mr. King wanted 
to work in the freezers, the more educated they are, the more 
we have invested in them, the more that they have what they 
need to survive, the more we will have a stronger workforce in 
our businesses. And so education is a key component for small 
business owners because you need an educated, well-funded 
educational workforce so that they can be your future 
employees, your future customers, and the future owners of 
businesses that will do business with you.
    Ms. ADAMS. Thank you.
    Mr. Ellerhorst, in your written testimony you alluded to 
the fact that it is not just the tax law helping your business, 
it is also the general healthy state of the economy. We have 
been hearing from small businesses in a wide variety of 
industries that the tariffs brought on by trade war will wipe 
out any tax reform benefit. So as a manufacturer in China, is 
there any concern that you have that your industry will be 
impacted?
    Mr. ELLERHORST. I do not fear that at this point. In my 
opinion, I would rather intellectually analyze the results 
rather than to emotionally respond to the process. I do believe 
this is a process. I do not believe there will be a tax war. I 
believe as a businessman, our president is very well aware of 
the negatives of a tax war. He also believes that we are in a 
very strong position to take this stance and that the net 
result will be a reduction of tariffs on our goods going to 
countries. I testified maybe 10 years ago on free trade 
agreements, and I believe in those, but they have go to be 
fair. I mean, we cannot say, okay, we will reduce all of our 
barriers and you keep yours. I think that is what the president 
is after, and that is what he stated he is after. I do not 
believe in a trade war, but I do not believe the president 
believes in a trade war either, but we are in a position of 
strength with our economy. Now is the time to negotiate from a 
position of strength, and I do believe the results are going to 
be, eventually, a reduction in tariffs on U.S.-made goods into 
some of these other countries.
    Ms. ADAMS. Thank you for your opinion, sir. I yield back.
    Chairman CHABOT. Thank you very much. The gentlelady yields 
back.
    The gentleman from Iowa, Mr. Blum, who is the Chairman of 
the Subcommittee on Agriculture, Energy, and Trade is 
recognized for 5 minutes.
    Mr. BLUM. Thank you, Chairman Chabot. And thank you to our 
panelists for being here today. And I would be remiss if I did 
not compliment my colleague, Ms. Adams, on her hat today. 
Absolutely outstanding.
    Mr. Czentye, I believe you said in your testimony something 
about being optimistic, which reminds me of my favorite 
definition of entrepreneurs, of which I am one, that we go from 
one failure to the next with the greatest of enthusiasm.
    Mr. CZENTYE. That is our job.
    Mr. BLUM. I just want to address a couple things before I 
question. I hear over and over again that tax cuts cost our 
government, and I look at this, first of all, letting people 
keep more of the money that they earn is not a cost to the 
Federal government, unless you believe all money belongs to the 
Federal government and 435 sitting here in suits decide how 
much of your money you get to keep.
    Secondly, tax cuts add to our debt. Totally and patently 
untrue. 1964, John F. Kennedy cut--taxes were cut. He was 
assassinated in 1963. His tax cuts were passed in 1964. Huge 
tax cuts. What happened to Federal tax revenues in the next 10 
years? They doubled. 1986, Ronald Reagan cut taxes. Big tux in 
1986, the last one we have had. And what happened to tax 
revenues, the Federal government, they doubled over the next 10 
years. In fact, a half a percent increase, half a percent 
increase in gross domestic product (GDP) growth rate over a 10-
year period produces $1.5 trillion in Federal revenue. Half a 
percent produces $1.5 trillion in revenue. Our GDP growth rate 
under President Obama, 2008 to 2016 averaged 1.8 percent 
growth. Okay? 1.8 percent. The last five quarters we have 
averaged 3.1 percent. I do not want to bore you with 
statistics, but that is greater than a half a percent. So these 
tax cuts and the rollback and regulations on businesses and the 
tax cuts to Americans is working. We are producing a higher GDP 
growth rate, and it is not costing the Federal government a 
penny. In fact, it would be reducing our deficit right now. It 
would be reducing our deficit right now. Federal tax revenues 
to our government are at all-time record high. All-time record 
high. Never before has this government taken more money out of 
the pockets of Americans. Never before. So as Ronald Reagan 
said in the 1980s, ``We do not have large deficits because we 
tax too little.'' Reagan said, ``We have large deficits because 
we spend too much.''
    So I just wanted to make that clear that the tax cuts are 
going to reduce our deficit. They are not going to increase the 
Federal deficit.
    Mr. Czentye, in your testimony you said until last year, 
many companies, including us, did not want to spend their 
money. And I am an entrepreneur; I get that. But can you 
explain that? Why would not small businesses until last year 
not want to invest their money?
    Mr. CZENTYE. Well, once the deregulation is a big step, the 
second maybe before that is the tax cut. And once you can save 
from an extra 15 percent, you can afford, if you are in 
business, an entrepreneur, you have to go and reach for that 
because that is the sign you have to do that step. And then 
once this optimism is on me, on you, and on others, this will 
be one chain. And then you are going to decide to buy something 
from me, not because of my accent, because I have something. I 
am going to buy something from him. It will be one cycle. 
Therefore, you are going to do more, I am going to do more, he 
is going to do more. For some reason, after 6 months you are 
going to say, wow, we are doing well. Almost everybody. So I 
really think the tax cut gives us that huge optimism and this 
optimism works for all the entrepreneurs who really want to do 
something.
    And I just want to tell you something. Somebody here said 
if somebody in small business, they are going to have $500 
profit, they prefer to have some help from the government.
    I escaped from Romania. I am from a communist country. I 
want to tell you my story is different. I am happy for the $500 
if I can do it. And if I cannot make $500, I close the company, 
I do not know what I am doing, and I am going to work for you.
    Mr. BLUM. Well said, well said.
    I would like to ask one of the entrepreneurs here with the 
little time I have remaining, oftentimes here in Washington I 
hear about one-time stimulus packages, so it is a one-time 
spending versus a 10-year tax cut program that you, as business 
people, can plan on is going to be there for 10 years versus a 
one-time stimulus. Give me your thoughts on that and how that 
impacts your uncertainty.
    Mr. ELLERHORST. Businesses rely on consistency and knowing 
what the future is going to be in order to make investments. I 
know politicians like to change their terms from expenditures, 
now they are called investments. Well, an investment requires a 
certain outlay with an ROI over a period of time. So it is very 
easy to take that investment and say, oh, that is an expense. 
No, if it is truly an investment, then you do not take that 
number in and of itself and say, oh, it is going to hit the 
deficit like this. You have to wait to see what the return on 
investment is. You will get much greater return on investment 
over time on a much more consistent, steady, stable--we can 
plan on. And so if they really want to count them as 
investments, then give us a chance to give you some return on 
investment before we start talking about what it is going to 
cost.
    Chairman CHABOT. The gentleman's time is expired.
    So Mr. Treppendahl, if you can answer very quickly.
    Mr. TREPPENDAHL. I agree with him.
    Chairman CHABOT. Okay.
    Mr. TREPPENDAHL. I like stability. I like to know what is 
going on. I do not like change.
    Chairman CHABOT. Thank you. The gentleman's time has 
expired.
    Mr. BLUM. I yield back.
    Chairman CHABOT. Thank you. The gentleman yields back.
    The gentleman from Pennsylvania, Mr. Evans, who is the 
Ranking Member of the Subcommittee on Economic Growth, Tax, and 
Capital Access is recognized for 5 minutes.
    Mr. EVANS. Thank you, Mr. Chairman.
    Mr. Ellerhorst, I want to deal with something you said a 
few minutes ago.
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. On the words of semantics about investment 
versus spending. You would consider infrastructure what? What 
would you consider infrastructure?
    Mr. ELLERHORST. It would be an investment.
    Mr. EVANS. Okay. Then there is a direct connection between 
infrastructure and economic growth; would you not agree with 
that?
    Mr. ELLERHORST. There is an impact, whether it is dollar 
for dollar, but there absolutely is. There absolutely is.
    Mr. EVANS. Right. Because you have to transport whatever 
you have, may it be on roads, ships, airlines. You have to 
transport it; right?
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. Because whatever product you have, it has to be 
transported some way; right?
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. Okay. And that is the only differ I have with 
your comment about, what did you say, politicians, about 
spending and investment, because specifically, I do not think 
you build roads or bridges; am I correct?
    Mr. ELLERHORST. I do not.
    Mr. EVANS. Okay. So you are like a supplier to government 
since you are in the plastics, to the entity called government 
so it can invest in roads and bridges; right?
    Mr. ELLERHORST. Yes. I am also an investor since my tax 
money is being used.
    Mr. EVANS. Correct. Correct.
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. And I thank you. I thank you for what you do 
because I come from that little state next to Ohio, 
Pennsylvania.
    Mr. ELLERHORST. Yes.
    Mr. EVANS. And, you know, we know a lot about, you know, in 
Meadville, and Erie, and all those places. And as a matter of 
fact, I started a company that was called Fame. And the purpose 
was to deal with--we had a company called Crown, Cork, and 
Seal, a packaging company. Are you familiar with that?
    Mr. ELLERHORST. I have heard the name.
    Mr. EVANS. So that is why I am saying I do not think this 
should be an either/or. I do not really think this is democrat 
and republican if you are talking about the economy.
    Mr. ELLERHORST. Right. Yes, sir.
    Mr. EVANS. That is what I am saying.
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. But I am just concerned that sort of the view 
like, you know, democrats think this and republicans think 
this, but the name of the game is to grow the economy.
    Mr. ELLERHORST. Yes, sir. And my comment was not saying 
that no expenditures were investments. It is just that all 
expenditures are not investments. And the understanding of an 
investment is there is an outlay and an expected time of 
return.
    Mr. EVANS. Correct. But Dwight Eisenhower was the one who 
led the charge for the roads.
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. Based on national security and what he did; 
right?
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. We did not have that, obviously, as you take 
Route 76 across Pennsylvania going into Ohio, or Route 80. We 
need that; right?
    Mr. ELLERHORST. Absolutely, sir. Absolutely.
    Mr. EVANS. I just figured I wanted to add that point.
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. I want to go to--I have got a minute. I want to 
go to--one other thing you said, which I think psychologically 
I heard you say you wanted to deal in specifics, particularly 
around the area of trade.
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. And I heard you say--and this is not the 
Agriculture Committee. I am on the Ag Committed.
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. And I know you are not here to defend the 
president, so I want to make that very clear that is not your 
role. You know, when the president on one hand says what he 
says about the tariff situations and then on the other hand 
kind of give a $12 billion initiative; right?
    Mr. ELLERHORST. Yes, sir.
    Mr. EVANS. On the one hand, he is saying $12 billion for 
the farmers, and then on the other hand he is saying we do not 
really want to be in a trade war. So I do not understand, you 
know, the basis.
    Mr. ELLERHORST. Well, I believe that in the process, it is 
not going to be a painless process like everything else. That 
the trade is going to create some pain in some areas short 
term. And what the president is saying is take some of the 
revenues that are generated from the taxes to help out those 
who are being impacted until the situation is resolved to 
hopefully we eliminate or reduce all barriers, at which point 
in time there is no trade war which there is no longer a need 
for bolstering, but a short-term assistance to those being most 
effectively, or most, I guess, greatly impacted during the 
process, I believe is what he is trying to accomplish.
    Mr. EVANS. Well, you are pretty good if you can figure out 
what he says.
    Mr. ELLERHORST. That is my opinion.
    Mr. EVANS. Ms. Senseman, small firms often have the fewest 
resources to spend on accountants to identify potential tax 
breaks. How does this complexity in the new tax law expand the 
ventures for firms that can devote resources to identify tax 
loopholes?
    Ms. SENSEMAN. Yeah, that is certainly a concern. Small 
companies are generally just at the mercy of how much their 
accountant knows. And if they are dealing with a one or two-
person accounting firm, it is unlikely that they may know. You 
know, I think uncertainty as folks here have said is the enemy 
of any business you want to be able to plan. Larger firms will 
be able to employ larger teams and pay more money to 
accountants and will likely be able to take advantage of the 
many loopholes that are available in the law, and smaller firms 
just will not have that ability.
    Mr. EVANS. I thank you, Mr. Chairman, and yield back the 
balance of my time.
    Chairman CHABOT. Thank you very much. The gentleman yields 
back.
    The gentleman from Illinois, Mr. Schneider, who is the 
Ranking Member of the Subcommittee on Agriculture, Energy, and 
Trade, is recognized for 5 minutes.
    Mr. SCHNEIDER. Thank you, Mr. Chairman, Madam Ranking 
Member. I appreciate the opportunity to have this hearing. It 
is an important issue. Small business, obviously, is the driver 
of our economy. So many small businesses are working just to 
make ends meet on a day-to-day basis, but in doing so they hire 
people, they produce products, they help make our community 
stronger.
    Mr. Ellerhorst, like you, I was a member of Vistage. I 
understand the value that those connections bring.
    I just want to be clear on a couple things.
    Mr. Treppendahl, you may have said this but I believe, is 
your business organized as a pass-through entity?
    Mr. TREPPENDAHL. Okay, you are going to have to----
    Mr. SCHNEIDER. Are you organized as a pass-through? Are you 
an S corp or LLC?
    Mr. TREPPENDAHL. An S corp.
    Mr. SCHNEIDER. S corp. So the income that shows on your 
business is included with your personal income.
    Mr. TREPPENDAHL. Yes, sir.
    Mr. SCHNEIDER. And Mr. Czentye, how about you? Is your 
business a pass-through entity or C corp?
    Mr. CZENTYE. We are C.
    Mr. SCHNEIDER. You are a C corp. Okay.
    And Mr. Ellerhorst, you said in your testimony you guys are 
an S corp?
    Mr. ELLERHORST. Yes, sir.
    Mr. SCHNEIDER. Ms. Senseman, you are a law firm. A little 
bit different than a partnership, but also I assume a pass-
through entity?
    Ms. SENSEMAN. Yes.
    Mr. SCHNEIDER. And I know when I had my business it was a 
pass-through. And the money we invested in our business was a 
function of the decisions we were making as a family. And it 
has a real big impact. And impacts on our personal finances 
could impact our business just as much as the other way around.
    I have a firm in my district. It is called Hell's Kitchen. 
It is a small business, catering business that has been in 
business since 1985. Its owner, David Boris, actually just 
testified in this Committee. He would be the first to share 
with you through his work he has been able to create hundreds 
of jobs over the years that they have been in business. They 
are providing jobs, and it is not just for the people who work 
for the company but also people who provide services and 
products to the company.
    Now, Illinois is one of the states that is being hammered 
by the tax bill because of the elimination of the state and 
local tax deduction. And David shares that because of that 
elimination, the new law is not putting any more dollars in his 
business, in his pocket, not investing in his business. 
Whatever benefits he might be getting from the pass-through are 
being wiped out by the elimination of the SALT deduction. And 
as a result, despite the republican talking points, he is not 
going to hire anymore people. He is not going to be able to buy 
anymore equipment. In fact, many of the businesses in my 
community are talking about this. They may be left in a hole, 
not an opportunity.
    So Ms. Senseman, I will ask you. How common from your 
members, how common is the experience I just described?
    Ms. SENSEMAN. In states where you have high state and local 
taxes and that has been capped, I think that is not an uncommon 
experience. There were other things that were taken away in the 
tax bill or things that must now be taxed, such as parking 
benefits for your employees. I could not give a good 
explanation to clients about why this has a change and this 
does not. But I think that you are right. If it is not a state 
like yours where the state and local tax cap is affecting 
business owners, it is paying someone to help them figure out 
what exactly is going on. Or just taking time out of their day 
if they are someone who charges by the hour who provides a 
service, when they cannot be providing that service because 
they are filling out new I-9s for their employees and filling 
out new withholding forms because their employees have 
different deductions now. I think that all of that adds up to 
eat into any benefit, any savings they would see through that 
complicated pass-through 20 percent deduction.
    Mr. SCHNEIDER. And it was mentioned in the conversations 
earlier today, businesses thrive on stability. They thrive on 
the ability to look forward and say, I believe that if I make 
this investment today--Mr. Ellerhorst, you talked about this--
if I make an investment today, I am making that investment 
because I believe I am going to get a return. It is not 
guaranteed. We wake up early in the morning before dawn. We 
will go home at the end of the day. And are going to fight and 
struggle for that $500 profit each day. But if you do it every 
day, hopefully you get rewarded for your hard work.
    I think one of the challenges, and we talked a little bit 
earlier about the process that we went through on this last tax 
cut, it was not a formal process. There were no hearings. In 
fact, there were zero hearings, zero discussions about what 
would be the broader implications of tax return. We need tax 
reform. We need to make sure as a country we are deciding and 
having a debate, where should we be investing? Whether, as Mr. 
Evans said, investing in infrastructure so that we can invent 
things here, make things here, and literally ship them around 
the world to allow companies to prosper. But if we have this 
partisan activities like we saw last year, then the pendulum is 
just going to swing back and forth and create the uncertainty 
that as businesspeople we all worry about. So I hope as we go 
forward there will be a way to work across the aisle--
democrats, republicans, and everyone in between--to make sure 
that we have investments in our future, in our children, in our 
infrastructure, in the business opportunities that will ensure 
the United States cannot just compete on the global stage but 
we can lead and win and ensure our economy is growing for 
everybody. But it has to be done in a way that is sensible, 
done in a way that balances, and done in a way that takes into 
consideration all the impacts. As we talked about here, the 
states that are affected by the elimination, punitive 
elimination of that SALT deduction, are not benefitting from 
this bill. They are really struggling.
    And with that, I yield back.
    Chairman CHABOT. Thank you. The gentleman's time is 
expired.
    And the Chairman would note that he agrees with the 
gentleman that it would definitely be better to work together 
in a bipartisan manner when that is possible. In the Tax Cut 
bill it did not look like that was possible, and I would have 
liked it perhaps when we were dealing with healthcare, the 
Affordable Care Act or the Obamacare, whichever terminology one 
prefers, that there would have been a little bipartisanship 
there. But it didn't happen in either case.
    Mr. SCHNEIDER. Let's agree we have to do it on everything. 
I was not here for the healthcare debate. I was here for this 
tax debate. And we reached out, and I think we can work 
together.
    Chairman CHABOT. And I was not either because I lost in 
2008. So when they passed that--I was going to say horrible 
thing but I do not want to comment on that--I was not here 
during that time.
    Mr. SCHNEIDER. No, but we see when bills do pass, working 
together, as we have done in this Committee.
    Chairman CHABOT. And we are a much better institution since 
you and I are here.
    Mr. SCHNEIDER. Agreed.
    Chairman CHABOT. Okay. Very good. Thank you very much.
    Mr. SCHNEIDER. Thank you. I yield back.
    Chairman CHABOT. Thank you. The gentleman's time is 
expired.
    And I think our last interrogator this morning and now into 
this afternoon, will be the gentleman from Florida, Mr. Lawson, 
who is the Ranking Member of the Subcommittee on Health and 
Technology. You are recognized for 5 minutes.
    Mr. LAWSON. Thank you, Mr. Chairman. And welcome to the 
Committee.
    I have been in business before I came here for the past 36 
years. And so I understand what tax breaks mean to small 
businesses. And from my perspective just coming here, it was 
not an issue with me whether it was democrat or republican. It 
was just what is best for the business, which I thought 
everyone should be concerned about. But sometimes it is not 
like that here. In Washington, it might be who really gets 
credit. But my concern in dealing with a lot of small 
businesses, small businesses, you know, really always like get 
relief because they are concerned about their employees, they 
are concerned about the bottom line, they are concerned about 
escalating costs in different areas, whereas intangible taxes 
or whatever you have to pay.
    Also, so my question would be to all of you is how can we 
reform if there is reform and listen to some of you on the tax 
package that we passed last year to reduce the level of 
complexity in our tax codes for small business? And the reason 
why I say that is in Florida, we had to pay the intangible tax. 
And it used to cost more money for a small business to pay the 
CPA to fill out the form for the intangible tax, and so, you 
know, I filed legislation to really kind of change that because 
they were saying you need to pay attention, but you paid more 
money than it was for the intangible tax. And so if we have 
that same kind of situation coming up, I would like to know, 
what can we do in Congress to alleviate some of the complexity 
that would go along with the tax package? And everyone can 
comment on it.
    Mr. TREPPENDAHL. Well, I think stability. And I think 
uniformity would be, you know, we kind of put out here and 
really not sure what is going to happen, whether it is with the 
Tax Code or the tax era, I do not think we are just really sure 
which way we were going. I operate a lot better--I do not like 
surprises. And I think that if we can just have it where what 
we are doing, and we know from day in to day out, week in to 
week out, and I am sure there is somebody in here that when 
they were a younger boy worked in a grocery store. And you know 
what it is working in a grocery store. It is pushing those cans 
and putting rice on the shelf and then getting it out the door. 
And getting it out. And it is not just a lot of profit in it. 
It is a lot of hard work and a lot of fun. And we have fun with 
our employees. We classify ourselves as a family. Because I 
better be. I am with my employees more than I am with my own 
family. So it had better be.
    Mr. ELLERHORST. If I could answer your question of what you 
all can do, my perspective, and I know the perspective of a lot 
of small business people, and Americans in general, our 
founding fathers set up our dual party system based on 
different means to a common end. In my opinion, in the last 
decade or so, we have lost the common end. It seems like we are 
now at an ongoing philosophical battle about what kind of 
country we are going to be. Are we going to be a democratic 
republic? Are we going to be a social democracy and things? And 
we have completely divided along party lines, which is a shame. 
And that is why there cannot be any cooperation because now you 
are talking about people giving up core beliefs of what they 
think is the right thing to do.
    So if Congress can do one thing, it is to get together and 
decide what our country is going to be and then go back to I am 
a conservative constitutionalist, but I realize I need the 
opinion of every liberal individual in this country as well. I 
am not always right. I am not the smartest person in the room. 
But the only way we are going to ever solve the issues is to 
really come up with a common goal and decide how in our 
differing opinions is the best way to get there. And until we 
get that back, this is going to be a partisan absolutely break. 
And so I would plead, as most of us in America are, tell 
Congress to please decide on what it is that we can work 
together on and what our goals are going to be, because until 
we do that, we are going to be stuck with exactly what we have 
today.
    Ms. SENSEMAN. And I would just say the four of us certainly 
do not have the answers, but neither do all of you. I would ask 
that you consult with experts and you would have studies, like 
the ones that are coming out now, before you take any action, 
not in the months after. I would ask that you look to people 
who do this all the time instead of trying to ram something 
through in 2o months without a single hearing. I think that 
that could only provide you more insight into what effect they 
will have.
    Mr. LAWSON. Mr. Chairman, if I could have one more minute.
    Chairman CHABOT. The gentleman is recognized for an 
additional minute.
    Mr. LAWSON. I just want to say about working in a grocery 
store, as long as I was bagging and getting tips, I was okay. 
When they moved me to produce I did not want to do produce. I 
wanted to get those tips.
    I yield back.
    Chairman CHABOT. The gentleman yields back.
    And we want to thank the panel this morning, and now this 
afternoon. And I think all four did an excellent job in kind of 
explaining their points of view and helping this Committee on 
both sides to deal with this very important issue, which is the 
Tax Code, and did the Tax Cuts and Jobs Act have a positive 
impact on the economy or negative or a combination thereof?
    And Mr. Ellerhorst, as you mentioned, we do need to hear 
each other. And this is one Committee where we actually do 
that. We tend to work in a very bipartisan manner. Last week we 
passed eight bills, all of which were bipartisan. Had 
republican and democratic cosponsors. So this Committee 
operates that way, although we do not always agree on 
everything, like that darn postcard that Ms. Velazquez was 
talking about there. But in any event, we listen and we are 
respectful.
    So again, thank you all for continuing in that line that we 
try to follow here.
    And I would ask unanimous consent that members have 5 
legislative days to submit statements and supporting materials 
for the record.
    Without objection, so ordered.
    And if there is no further business to come before the 
Committee, we are adjourned.
    Thank you very much.
    [Whereupon, at 12:37 p.m., the Committee was adjourned.]
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