[Congressional Record Volume 143, Number 86 (Thursday, June 19, 1997)]
[Senate]
[Pages S6008-S6009]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           RECOGNITION OF THE 34TH ANNUAL SMALL BUSINESS WEEK

 Mr. FRIST. Mr. President, I rise today in support of America's 
small businesses and in recognition of the 34th annual Small Business 
Week. As a member of the Small Business Committee, I understand that 
small business is truly the engine of economic growth in America. 
Ninety percent of all U.S. businesses have less than 20 employees and 
99 percent have fewer than 500 employees. These small businesses employ 
more than half of our Nation's workforce and create a large majority of 
our new jobs. In fact, 40 percent of our Nation's goods and services 
are produced by small businesses--making America's entrepreneurs the 
world's third greatest economic power, trailing only the production of 
the entire United States economy and Japan.
  We celebrate Small Business Week every year to recognize those people 
on the front lines of our economy. I would like to take a moment to 
specifically recognize Tennessee's 1997 Small Business Person of the 
Year--Bob Pap--the president of the Accurate Automation Corp. in 
Chattanooga. Accurate Automation is an aerospace/computer systems 
company doing research and development in hypersonic aircraft design 
and the emerging technology of neural networks. Accurate Automation 
began in 1988 as a two-person company located in a 450-square-foot 
office. Today, it has 33 employees, 5 consultants, and a 13,000-square-
foot office facility. Bob Pap's corporation is a great example of how 
hard work and ingenuity can lead to small business success.
  The work of a small business owner never ends. Therefore, Congress 
should not stop working for small business after Small Business Week. 
We must reduce or eliminate the restrictive taxes, unfunded mandates, 
and burdensome regulations plaguing small businesses. Many Federal 
bureaucrats and lawmakers do not understand that small businesses do 
not have the money and personnel to cope with regulatory paperwork. 
They do not understand that small firms lack a corporate legal 
department to guide them through a maze of regulatory compliance. And, 
most importantly, they do not understand that each new tax, mandate, 
and regulation stifles business expansion, job creation, and economic 
growth.
  Fortunately, Congress is taking action to foster a healthier 
environment for entrepreneurs. Reducing the capital gains tax rate is 
vital to creating jobs and expanding economic growth. Through high 
capital gains rates the Federal Government penalizes people who take 
risks and invest their hard-earned income in homes, savings accounts, 
mutual funds, small and large businesses, or family farms. In addition, 
this high tax rate threatens American leadership in the global 
marketplace. The United States has the highest capital gains rate of 
any major industrialized nation in the world. We cannot expect to 
remain competitive if we are not on a level playing field with other 
countries. Lowering the capital gains rate is essential to maintaining 
a strong economy and supporting the cause of America's small business 
men and women.
  The bipartisan balanced budget agreement cuts the capital gains tax 
rate for individuals in the 15-percent tax bracket to 10 percent and 
for individuals in the 28-percent bracket to 20 percent. It also 
provides for the exclusion of gain on the sale of a home and indexing 
for inflation.
  Estate tax reform is also a high priority. Confiscatory estate tax 
rates are extremely detrimental to small businesses. They depress 
national savings, discourage entrepreneurial risk, and limit economic 
growth. Too often, family farms and small businesses are forced out of 
business after the death of a key family member because the family 
cannot afford to pay the estate tax. We need to make sure that there is 
an incentive for entrepreneurs to start small businesses and that there 
is a way for these small businesses to flourish after an important 
family member dies. The bipartisan balanced budget agreement also 
includes a phased-in increase in the unified estate tax credit 
equivalent to $1 million and inflation indexing.
  While capital gains and estate tax relief have been a major focus of 
our tax agenda, there are other important small business issues that 
deserve attention. One of those issues is electronic tax filing. Under 
a 1993 law, small businesses were required to submit their Federal tax 
payments electronically beginning this July. However, due to inadequate 
education and implementation by the Internal Revenue Service (IRS), 
more than 1 million small businesses were very confused about how to 
transition to the new system, concerned about the possibility of fines 
and penalties, and frustrated overall with the mandatory nature of this 
new requirement. Fortunately, relief is on the way. I voted for the 
supplemental appropriations bill that included an extension of the 
electronic tax filing deadline from July 1, 1997 to the end of this tax 
year, December 31, 1997. And the President has already signed this 
provision into law.
  On another tax issue, I have cosponsored S. 460, the Home-Based 
Business Fairness Act of 1997. Home-based businesses are one of the 
fastest growing sectors of the economy. There are currently more than 
14 million individuals earning income from out of their own homes. As 
owners of a majority of home-based businesses, women, in particular, 
have enjoyed astonishing success in this area. There are currently 
eight million women-owned U.S. businesses which produce $2.3 trillion 
in sales. Women-owned businesses employ one quarter of all U.S. 
workers. In light of these trends, we need to open more opportunities 
for home-based and other entrepreneurial ventures to start, grow, and 
create jobs.

  The Home-Based Business Fairness Act targets three particular areas. 
First, it provides 100 percent deductibility for self-employed health 
insurance costs. Large corporations are currently allowed to deduct the 
health insurance costs of all of their employees. This bill will allow 
the self-employed to take advantage of full deductibility as well. A 
fair and competitive business environment is impossible as long as 
large corporations have this unfair advantage.

[[Page S6009]]

  Second, the Home-Based Business Fairness Act will restore the home-
office deduction and make it available to all business owners who 
perform their essential administrative and management functions only in 
their homes. This portion of the bill will clarify the ambiguities 
resulting from the 1993 Supreme Court decision, Commissioner v. 
Soliman. This decision required the customers of a home business to 
physically visit the home office and the business owners income to be 
generated within the home office itself in order to qualify for a 
deduction. This bill would expand and clarify the home-office deduction 
by allowing those who perform their services outside the home to 
benefit from the deduction as long as they use their home for all 
billing and recordkeeping activities.
  Third, S. 460 clarifies the independent contractor definition. Under 
current law, small businesses and the self-employed must rely on a 
complicated and ambiguous 20 point test of IRS guidelines to determine 
how to classify their workers and what taxes must be paid. The IRS can 
penalize firms who use self-employed contractors and force them to pay 
retroactive taxes and fines if they disagree with the worker's 
classification as an independent contractor. The Home-Based Business 
Fairness Act will establish a general safe harbor to provide more 
certainty in determining the independent contractor status and protect 
against retroactive reclassifications, fines, and penalties.
  On the regulatory front, I have cosponsored the Mandates Information 
Act of 1997 to help reduce the burden on America's economy of 
Congressional mandates. In the past, Congress has often acted without 
adequate information concerning the costs of private sector mandates. 
These costs are borne by consumers in the form of higher prices and 
reduced availability of goods; workers, in the form of lower wages, 
reduced benefits, and fewer job opportunities; and small businesses, in 
the form of hiring disincentives and stunted growth.
  The Mandates Information Act contains two key provisions to prevent 
imposition of new mandates on the private sector. First, it establishes 
an additional procedural hurdle, or shame vote, against any bill 
containing private sector mandates exceeding $100 million a year. 
Second, it directs the Congressional Budget Office (CBO) to prepare a 
small business impact statement to inform Members of Congress about a 
bill's effects on consumer costs, worker wages, and the availability of 
goods and services. I believe this initiative will help stop the spread 
of mandates at their source--allowing small businesses to take risks 
and create new jobs without the added pressure of unfunded Washington 
requirements.
  Mr. President, during Small Business Week and every week, Congress 
needs to listen to the men and women who are running Main Street 
businesses. Today, I speak for only a few minutes to honor the small 
business owners and employees who spend hours every day trying to 
fulfill their American dreams. I want to let them know that their 
elected officials are making some progress on their agenda, but we 
still have a long way to go. I urge my colleagues not to rest in our 
efforts to support American free enterprise.

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