Even as discussions about tax reform are continuing in D.C., the reality that reform might not be accomplished soon is beginning to set in. Sure, we need a simpler and more efficient tax system, and we also need additional tax revenues that can be gained from closing loopholes. However, considering the ongoing impasse in Congress, how do we get there?
Part of the answer might be forced by the negotiations on increasing the nation’s debt limit, which will/must be addressed by the end of July. However, the chances that both parties will come together anytime this year to forge meaningful tax reform are seeming more remote.
But even though the timing for tax reform is completely uncertain, CompTIA has identified three basic tech tax principles. We believe it is important to establish these principles, so that we will be prepared to determine whether anticipated reform proposals address the needs of our members.
- Tax reform must promote capital investment. For small businesses, the most successful boost to investment has been the small business expensing provision, know as section 179; for 2011, a small business can write off as much as $500,000 of investment in buildings and equipment. While we understand one of the goals of tax reform is to streamline our system of taxation, any proposal must continue to encourage capital investment, which is vital to small technology companies.
- Tax reform must promote technology investment. Recently, there have been suggestions that some tax provisions, such as the R&D tax credit, could be dropped in exchange for a lower overall tax rate. This proposed trade-off must be considered carefully. Advances in technology fuel the American economy, and it is essential that tax reform continue to encourage advances in technology.
- Tax reform must promote work force investment. Especially in view of the current unemployment rate, we must continue to promote workforce investment. For example, small technology companies are seeing substantial growth in demand for healthcare IT installations, as fueled by the incentives that began this year under the HITECH Act. It is vital for both our industry and for our national economic recovery that tax reform promotes the growth and training of this critical technology workforce, which will result in sustainable, high-wage employment.
Establishing these three basic principles is our way of defining the territory we need to protect in what will likely be a long and difficult debate. Everyone – including Congress – knows that we need tax reform, but getting there is going to require a lot of effort. Of course, we would certainly like to hear more of your thoughts about tax reform, and in particular, what tax issues are most important to your business.
