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Washington Watch - January 18, 2012

Wednesday, January 18, 2012

NASE Celebrates Cabinet-Level Status For SBA

On Friday, January 13, 2011, the President announced his request for Congress to reinstate Presidential authority to reorganize and consolidate the federal government. The President aims to create government organizations that are in line with the 21st century economy.

Ahead of Congressional approval, the President also elevated the Administrator of the Small Business Administration, Karen Mills, to a cabinet-level position effective immediately.

Under the authority, the President proposes to consolidate six agencies that focus primarily on business and trade in the federal government: U.S. Department of Commerce, the Small Business Administration, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation, and the U.S. Trade and Development Agency.

Consolidation of these six major departments along with other related programs that are currently housed in different agencies would create a Department focused on helping spur job creation and grow the U.S. economy.

The NASE notes that the re-organization could have a significant impact on sole proprietors and micro-businesses, the backbone of our nation’s economy. Immediately, the newly created Department would bring together all of the core agencies and programs that support small businesses by streamlining all of the programs and providing a one-stop location for current and future self-employed individuals with the tools and resources to navigate their way through the sometimes challenging process of starting their own business.

However, the merging of organizations can be a difficult path and at a time when small business growth is critical to our nation’s economy and future.  The first challenge is the approval of Congress to provide the President with the authority to reorganize and consolidate. Given the politically charged nature of 2012, this could be difficult.  Second, the actual creation and merging of the departments and agencies into a cohesive organization and the management of the expectations of the new agency.  As related to small business owners, will the new Secretary be knowledgeable and engaged leader on the issues that are so important to the small business community?

The NASE supports any efforts to streamline the programs to provide access and services to current and future small business owners and we look forward to working with Administrator Mills, congressional leaders, and our partners, to ensure that the new Department is focused on creating an environment fruitful for our members.


IRS Raises Tax Gap Levels To $385 Billion

The Internal Revenue Service recently released a new set of tax gap estimates. The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time. In the past, the NASE has commented to lawmakers that the self-employed and micro-businesses have been unfairly targeted regarding tax gap narrowing efforts.

The new tax gap estimate represents the first full update of the report in five years, and it shows the nation’s compliance rate is essentially unchanged from the last review. The tax gap statistic is a helpful guide to the scale of tax compliance and to the persisting sources of low compliance, but it is not an adequate guide to year-to-year changes in IRS programs or to year-to-year returns on IRS service and enforcement initiatives. The voluntary compliance rate — the percentage of total tax revenues paid on a timely basis — is estimated to be 83.1 percent. The voluntary compliance rate is statistically unchanged from the most recent prior estimate of 83.7 percent calculated. 

The NASE has long noted that the tax code should be simplified to help prevent unintentional errors. Vague rules and poorly defined regulations understandably result in mistakes. Efforts to address the tax gap and compliance must focus on overall simplification, eliminating issues of inequity within the tax code, and enhancing taxpayer education and outreach. The majority of small business taxpayers want to comply with existing tax laws, thus making tax regulations easier to understand is the most effective and equitable way to improve compliance and to reduce the tax gap.

According to the IRS, the tax gap can be divided into three components: non-filing, underreporting and underpayment.

As was the case in past studies, the underreporting of income remained the biggest contributing factor to the tax gap. Under-reporting across taxpayer categories accounted for an estimated $376 billion of the gross tax gap, up from $285 billion. Tax non-filing accounted for $28 billion, up from $27 billion. Underpayment of tax increased to $46 billion, up from $33 billion in the previous study.

The NASE believes that the IRS has made positive changes over the past years through enhancement of taxpayer education and outreach efforts, which have had positive effects. The NASE’s concern is with the shifting of resources from taxpayer education and services to enforcement. During the Obama Administration, the IRS reallocated funding for enforcement services and the IRS has shifted manpower from education to enforcement.


Health Reform Law To Supreme Court: How Will It Affect Your Business?

The Supreme Court has set dates in March for oral arguments on the consitutionality of the health reform law's individual mandate. The self-employed and micro-businesses will likely move to purchase their coverage through health insurance exchanges when they are operational in 2014. Currently, many states have moved to set up exchanges. 

Read more about the NASE perspective on how the small-business focused programs will work on our blog, Self Made.


Washington Watch Online

Visit NASE Advocacy to view archived editions of Washington Watch. While you’re there, read the latest updates from the Washington, D.C. office, write your Congressperson, and find out how you can join the fight for micro-business.