[Congressional Record Volume 143, Number 156 (Saturday, November 8, 1997)]
[Extensions of Remarks]
[Page E2227]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




              THE SMALL BUSINESS INVESTMENT AND GROWTH ACT

                                 ______
                                 

                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                        Friday, November 7, 1997

  Mr. CRANE. Mr. Speaker, I rise to introduce the Small Business 
Investment and Growth Act which will provide much-needed tax relief to 
small business in America.
  As a member of the Ways and Means Committee, I strenuously objected 
to the tax increases of 1990 and 1993, knowing of the severe negative 
economic impact these taxes would have on American small businesses and 
their employees. I realize that, in macroeconomic terms, the U.S. 
economy is quite strong in spite of those tax increases--however, we 
could do much better. Americans are facing record-high tax burdens. 
Every year, taxpayers are working more days for Washington and its 
bureaucrats and fewer days for themselves and their families. For small 
businesses, the greatest creators of jobs and economic growth in 
America, high tax rates have hampered their ability to sustain high 
rates of growth and prosperity.
  To understand how small businesses are struggling with taxes, allow 
me to explain the consequences of the 1990 and 1993 attempts to get the 
wealthy in America to pay their fair share of the Federal tax burden. 
With those tax increases, the maximum marginal tax rate for individuals 
was raised from 28 percent to 39.6 percent. However, what was lost on 
these ``soak the rich'' policy wonks is that small businesses owners 
pay their business taxes as individuals. In other words, a typical 
struggling small business owner will pay himself a salary, pay his 
employees and all his other business expenses, and then pay taxes on 
the combination of his salary and the profits of the business. In the 
case of S corporations, the shareholders of the company, typically 
family members who work for the business, each pay the taxes for the 
business at their individual tax rates.
  Now keep in mind that the highest marginal individual tax rates are 
36 percent, while the corporate tax rate for similar-sized businesses 
is 34 percent. The maximum corporate tax rate is 35 percent. So, thanks 
to the ``soak the rich'' tax policies, small businesses pay higher tax 
rates than better financed corporations. In fact, a Joint Economic 
Committee report found that President Clinton's 1993 tax hike fell 
disproportionally on small businesses, not the wealthy. And in surveys 
of S corporations since their shareholders' tax rates increased, they 
report that they cannot reinvest as much money into their companies as 
they did before the tax hike. Reinvesting translates into more jobs. In 
fact, successful American small businesses have been able to create 
three to four new jobs for every additional $100,000 they retain in the 
business.
  The Small Business Investment and Growth Act proposes to end this 
government-created inequity. My bill has simple goals--to promote S 
corporation reinvestment, to generate economic growth--i.e., jobs--and 
to provide for tax rate reductions for all S corporation owners, 
including qualified personal service corporations.
  To accomplish these goals, the bill will lower the Federal tax rates 
paid by S corporation shareholders to no more than 34 percent when the 
S corporation reinvests its earnings in the business, or when the 
earnings are distributed to the shareholders for the purposes of making 
tax payments. This lower tax rate would be applicable only to the first 
$5 million in taxable income of the S corporation.
  This bill is a similar, but expanded, version of a bill I introduced 
in the last Congress. Although this latest version will provide tax 
relief to more S corporations, I want to make it clear that I would 
prefer to provide tax relief to all businesses. In fact, I see these 
taxes as just another cost of doing business which is passed along to 
the individual consumer/taxpayer. Thus, it is a secondary tax which 
should be eliminated.
  This legislation takes an important first step toward reducing 
burdensome taxes on small business and encouraging S corporation owners 
and managers to reinvest income into their business, thereby creating 
more jobs and expanding economic growth. I strongly encourage my 
colleagues to cosponsor it.

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