[Congressional Record Volume 157, Number 31 (Thursday, March 3, 2011)]
[Senate]
[Page S1237]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SENATE RESOLUTION 88--EXPRESSING THE SENSE OF THE SENATE THAT
BUSINESSES OF THE UNITED STATES SHOULD RETAIN THE OPTION TO ORGANIZE AS
THOSE BUSINESSES CHOOSE, INCLUDING THE FLOW-THROUGH ENTITIES, AND NOT
BE FORCED TO REORGANIZE AS C CORPORATIONS
Ms. SNOWE submitted the following resolution; which was referred to
the Committee on Finance.
S. Res. 88
Whereas the tremendous growth in businesses organized as
flow-through entities, including S corporations, has resulted
in the number of flow-through entities far exceeding the
number of C corporations;
Whereas there are more than 26,000,000 businesses operating
as flow-through entities in the United States, representing
82 percent of all United States businesses, relative to just
5,900,000 C corporations;
Whereas these flow-through and small businesses create 70
percent of all new jobs and are responsible for 44 percent of
the total private payroll in the United States;
Whereas under the Internal Revenue Code of 1986 as in
effect in March 2011, these job-generating businesses are
taxed at individual tax rates based on the individual income
of the business owners, making these businesses highly
sensitive to changes in individual tax rates;
Whereas as of March 2011, 50 percent of all income above
$250,000 is attributable to flow-through businesses;
Whereas, if individual tax rates increase after 2012 in
accordance with the proposals set forth by the President,
flow-through businesses will face a massive aggregate tax
increase, potentially in excess of $800,000,000,000;
Whereas the Secretary of the Treasury has proposed forcing
flow-through entities to reorganize as C corporations to make
them subject to double taxation as a way to impose more taxes
on these businesses in order to pay for the budgetary
policies of the President; and
Whereas forcing corporate reorganizations for purely tax-
driven reasons represents a misguided incentive, a
misallocation of precious business resources, and a serious
threat to job creation: Now, therefore, be it
Resolved, That it is the sense of the Senate that--
(1) the Federal Government should preserve the
organizational options available for businesses to operate as
the businesses choose, including as flow-through entities;
(2) raising taxes on businesses that create jobs will be
detrimental to the economic recovery of the United States;
(3) generating increased tax revenue on the backs of the
small businesses of the United States is inconsistent with,
and will impede, job creation; and
(4) any legislative approach to comprehensive fundamental
tax reform should include a debate on the individual rates at
which most businesses in the United States should be taxed,
rather than narrowly focusing on corporate tax rates or
forcing small business owners into corporate status for tax
purposes.
Ms. SNOWE. Mr. President, I rise to submit a sense of the Senate
resolution that clarifies my opposition to tax increases on the job-
creating sector of our economy--small business.
It is becoming increasingly clear, and increasingly concerning, that
the administration is proposing to raise taxes on America's small
businesses, either by forcing them to reorganize as subchapter C
corporations solely for tax reasons and be subjected to new and
additional taxes, or, by allowing them to remain organized as flow-
through entities, where they will face massive increases after 2012
when current tax rates expire. Our Nation simply cannot afford an
impending tax increase of over $800 billion. Subjecting small
businesses to the double taxation of corporate-entity status would be a
major mistake.
There has been tremendous growth in the number of flow-through
entities--that is, non-C corporations--over the past 30 years and this
growth has only accelerated in the last decade. Since 1997, S
corporations have outnumbered C corporations. Fifty percent of all
income above $250,000 currently is attributable to flow-through
businesses. By 2007, only 5.9 million out of a total 32.1 million U.S.
businesses, or just 18 percent, were C corporations, meaning the
overwhelming number of businesses in this country organize as flow-
through entities.
The administration is proposing to eliminate choice and require C
corporation formation purely to generate revenue. C corporate form
helps generate revenue because it is inherently a double tax, first at
the entity then at the individual shareholder level. The Treasury
Secretary said that this proposed change could subject up to $3
trillion to new and additional income taxes.
In this regard, the administration is proposing to raise taxes on
America's small businesses: either by forcing them to reorganize as C
corporations solely for tax reasons and be subjected to new and
additional levies, or if the administration deigns to let them remain
organized as flow-through entities, then they will be hit with massive
increased taxes after 2012 when current tax rates expire--an impending
tax increase of over $800 billion that job creators cannot afford.
Individual income tax rates absolutely affect these businesses. The
growth in the number of flow-through businesses is critical to
understanding why the increase in individual rates is so damaging to
small business job generation.
When we talk about flow-through entities what we really mean are
America's small businesses. A discussion of tax reform must not ignore
the small businesses that make up the backbone of America. The
administration continues to talk about corporate tax reform but it
should be talking about business tax reform, which of necessity must
include a real discussion of individual tax rates.
Many of America's small businesses choose the flow-through option to
avoid double taxation. Forcing them to convert to C corporate status is
simply another way to increase their costs and raise their taxes. This
would hurt job creation since 70 percent of our good American jobs are
created by these businesses.
I urge my colleagues to review my proposal and join me in telling
those who would raise taxes on the millions of businesswomen and
businessmen we are counting on to create the jobs we need to put the
recession firmly behind us--no thank you.
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