[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]





                                 


 
TAX DAY: EXPLORING THE ADVERSE EFFECTS OF HIGH TAXES AND A COMPLEX TAX 
                                  CODE

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON SMALL BUSINESS
                             UNITED STATES
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD
                             APRIL 10, 2024

                               __________

              [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]             
                               

            Small Business Committee Document Number 118-046
             Available via the GPO Website: www.govinfo.gov
             
             
                           
                         ______
  
               U.S. GOVERNMENT PUBLISHING OFFICE 
   55-250            WASHINGTON : 2024
 
             
             
             
             
                   HOUSE COMMITTEE ON SMALL BUSINESS

                    ROGER WILLIAMS, Texas, Chairman
                      BLAINE LUETKEMEYER, Missouri
                        PETE STAUBER, Minnesota
                        DAN MEUSER, Pennsylvania
                         BETH VAN DUYNE, Texas
                         MARIA SALAZAR, Florida
                          TRACEY MANN, Kansas
                           JAKE ELLZEY, Texas
                        MARC MOLINARO, New York
                         MARK ALFORD, Missouri
                           ELI CRANE, Arizona
                          AARON BEAN, Florida
                           WESLEY HUNT, Texas
                         NICK LALOTA, New York
                          CELESTE MALOY, Utah
               NYDIA VELAZQUEZ, New York, Ranking Member
                          JARED GOLDEN, Maine
                         KWEISI MFUME, Maryland
                        DEAN PHILLIPS, Minnesota
                          GREG LANDSMAN, Ohio
                  MARIE GLUESENKAMP PEREZ, Washington
                        SHRI THANEDAR, Michigan
                       MORGAN MCGARVEY, Kentucky
                       HILLARY SCHOLTEN, Michigan
                          JUDY CHU, California
                         SHARICE DAVIDS, Kansas
                      CHRIS PAPPAS, New Hampshire

                  Ben Johnson, Majority Staff Director
                 Melissa Jung, Minority Staff Director
                            C O N T E N T S

                           OPENING STATEMENTS

                                                                   Page
Hon. Roger Williams..............................................     1
Hon. Nydia Velazquez.............................................     2

                               WITNESSES

Dr. Aaron Hedlund, Associate Professor of Economics, Purdue 
  University, Columbia, MO.......................................     5
Mr. Raymond Huff, President, HJB Convenience Corporation, 
  Lakewood, CO...................................................     7
Mr. Chuck Wetherington, President, BTE Technologies, LLC., 
  Hanover, MD....................................................     8
Mr. Walter Rowen, President of Susquehanna Glass Co., Co-Chair of 
  Small Business for America's Future, Lancaster, PA.............     9

                                APPENDIX

Prepared Statements:
    Dr. Aaron Hedlund, Associate Professor of Economics, Purdue 
      University, Columbia, MO...................................    33
    Mr. Raymond Huff, President, HJB Convenience Corporation, 
      Lakewood, CO...............................................    43
    Mr. Chuck Wetherington, President, BTE Technologies, LLC., 
      Hanover, MD................................................    49
    Mr. Walter Rowen, President of Susquehanna Glass Co., Co-
      Chair of Small Business for America's Future, Lancaster, PA    56
Questions for the Record:
    None.
Answers for the Record:
    None.
Additional Material for the Record:
    Small Business Majority......................................    60


                    TAX DAY: EXPLORING THE ADVERSE 
              EFFECTS OF HIGH TAXES AND A COMPLEX TAX CODE

                              ----------                              


                       WEDNESDAY, APRIL 10, 2024

                  House of Representatives,
               Committee on Small Business,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:04 a.m., in Room 
2360, Rayburn House Office Building, Hon. Roger Williams 
[chairman of the Committee] presiding.
    Present: Representatives Williams, Stauber, Meuser, Van 
Duyne, Molinaro, Alford, Bean, Lalota, Velazquez, Landsman, 
McGarvey, Gluesenkamp Perez, Scholten, Thanedar, Chu, Davids, 
and Pappas.
    Chairman WILLIAMS. I want to welcome everybody here today, 
and before we get started, I want to recognize Congressman Bean 
from the great state of Florida to lead us in the pledge and 
the prayer. Would you please stand?
    Mr. BEAN. Thank you very much, Mr. Chairman. Let us pray. 
Heavenly father, we are grateful for this day. The gift of 
today. What are we going to do with it? We ask for energy and a 
sense of purpose and direction. Lord, we give thanks for small 
business, the people that put America to work and have created 
one of the greatest systems of economic stability. We ask those 
hands that are first to show up at work, last to leave and last 
to get paid, that just--we bless them. We know that they are 
the engine of putting other people to work and putting dinner 
on the table. We ask a blessing on our country, our leaders, 
and our defenders. And everybody said together, amen.
    Join me in the pledge, ladies and gentlemen. I pledge 
allegiance to the flag of the United States of America. And to 
the Republic for which it stands, one nation under God, 
indivisible, with liberty and justice for all.
    Chairman WILLIAMS. I now call the Committee on Small 
Business to order. Without objection, the Chair is authorized 
to declare a recess of the committee at any time. I now 
recognize myself for my opening statement.
    Good morning to all of you, and welcome to today's hearing, 
which will focus on how tax policy significantly impacts our 
nation's small businesses. I would like to start off by 
thanking our witnesses for joining us today, and your 
attendance is greatly appreciated, and we value your input and 
expertise on these issues. As our nation's job creators 
continue to face harsh economic headwinds, we must ensure the 
Tax Code works for them, not against them.
    And in 2017, Congress passed the Tax Cuts and Jobs Act, the 
most significant changes in the Tax Code in decades. The TCJA 
lessened the tax burden on small businesses and provided much 
needed relief for all Americans. When small businesses get to 
keep more of their money, they put it to work in either their 
business or their communities. I believe that the cuts 
fundamentally provide how cutting taxes is good for small 
businesses, good for all Americans, and good for our economy.
    You don't have to just take my word for it, though. The 
year following the tax laws enactment, businesses revenue went 
up and generated the highest single year increase in government 
revenue since 1977. This bill also helped families. In the 2 
years following the TCJA's enactment, the median household 
income increased by $5,000. Unfortunately, some of the main 
provisions in this law are starting to expire, which will make 
it harder for businesses to continue their operations. The 
House of Representatives acted in January and passed a 
bipartisan bill to extend some of these key provisions 
affecting the small business community. But unfortunately, this 
bill is still waiting for Senate action.
    I hope the stories from our witnesses here today will help 
spark action by impressing the bill's benefits and the time 
sensitive nature of these tax policies. This morning, higher 
than expected inflation reading shows that President Biden's 
tax and spend policies continue to hurt everyday Americans. Not 
only that, with inflation remaining stubbornly high, it will 
likely force the Federal Reserve to keep interest rates high, 
which will make it more challenging for businesses to access 
capital. As the small businesses continue to deal with 
inflation, labor shortage and onslaught of burdensome 
regulations, it is imperative that we don't allow the Tax Code 
to further penalize success.
    In addition to larger tax liabilities, if these provisions 
expire, business owners are facing a new, troubling reality. 
Statistics show that small businesses are receiving audits at 
an alarming rate. On average, small businesses owners will pay 
over $1,000 per year to have a CPA firm prepare their taxes, 
and that is money they don't have. This is just another cost 
that a business owner has to write off as a loss when those 
dollars could help build on their core business model. We in 
Congress must make small businesses--are not forced to play 
defense against an overly aggressive IRS. Unfortunately, we 
also saw in the President's budget that he wants to increase 
taxes on many small businesses. We can't tax our way into 
economic growth and need to let our job creators do what they 
do best and generate economic activity for their communities 
and everybody.
    I would like to once again thank our witnesses for being 
here with us today. I am very much looking forward to our 
conversation. And with that, I want to yield to our 
distinguished Ranking Member from New York, Ms. Velazquez.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. Good morning, 
everyone, and thanks to the witnesses for being here with us 
this morning. Main street businesses are the lifeblood of our 
nation's economy, driving innovation and job creation and 
helping millions of Americans achieve their American dream. As 
such, they are key to our federal tax strategy. When our tax 
system works for them, it brings the most value. However, 
despite their fundamental importance, small firms are often 
used as bargaining chips in the discourse around tax reform, 
while wealthy individuals and large corporations cash in. As a 
result, our tax system has grown increasingly complex and 
uncertain, and Congress is forced to jump from one tax extender 
package to another.
    Meanwhile, our main street firms are left with a convoluted 
and onerous tax code, for which they need to hire outside 
professionals and spend substantial funds. Unfortunately, this 
was especially the case in the Tax Cuts and Jobs Act of 2017. 
While the main priority for this legislation included a 
permanent 40 percent rate cut for the largest, most profitable 
companies in history, small firms got a complex and temporary 
20 percent deduction. While many small companies have 
undoubtedly received benefits from the 199A deduction, nearly 
half of the overall benefits goes to the top 1 percent of 
income earners. My hope is that come 2025, when this provision 
is scheduled to expire, we can work together to provide genuine 
tax relief to millions of small businesses without saddling 
them with another set of complicated and temporary deductions 
that just end up further enriching a wealthy few.
    Meanwhile, Democrats will continue advocating for a tax 
system that is both fair and fiscally responsible. In just the 
past three years, Democrats have successfully delivered tax 
incentives to bring manufacturing back to America, used the 
Child Tax Credit to cut child poverty in half, and established 
a 15 percent corporate minimum tax so multinational companies 
can no longer avoid paying taxes altogether. Through investment 
in the Inflation Reduction Act, we have worked to modernize the 
IRS. Taxpayers no longer have to spend hours on hold, and 
filers are finding it easier to submit electronic forms. 
Similarly, the new direct file program is making tax 
submissions simpler than ever for millions of Americans.
    Additionally, wealthy tax cheats are being held 
accountable, and the IRS has already recovered over $500 
million in unpaid taxes. So, while Democrats fight for a fairer 
system that is easier to use, many of my colleagues on the 
other side have been working, on behalf of tax evaders, to 
defund the IRS. They have also been proposing more tax cuts for 
the rich to pay for their cuts to essential programs like 
Medicare, Social Security, and the Affordable Care Act. Now, as 
we emerge from a cost of living crisis and wages are once again 
outpacing inflation, President Trump is proposing a 10 percent 
tariff on all imports. In my opinion, the contrast could not be 
any clearer.
    With that said, I am encouraged by the bipartisanship shown 
earlier this year when we passed the Tax Relief for Workers and 
Families Act, which not only extended the Child Tax Credit for 
working families but delivered an extension for viable small 
business provision like full and immediate expensing on 
investment in machinery and R&D. Unfortunately, those 
provisions once again face uncertainty as Republican senators 
play politics and aim to kill anything that could be perceived 
as a win for President Biden during an election year.
    I look forward to working with the Chairman to ensure this 
legislation gets passed and I look forward to hearing from our 
witnesses about how best to support small firms using the tax 
code. I yield back, Mr. Chairman.
    Chairman WILLIAMS. Lady yields back, and I will now 
introduce our witnesses. Our first witness here with us today 
is Doctor Aaron Hedlund. Dr. Hedlund is an associate professor 
of economics at the Daniel School of Business at Purdue 
University located in West Lafayette, Indiana, and the research 
director of the American First Policy Institute located right 
here in Washington, DC. Additionally, Dr. Hedlund is a research 
fellow at the Federal Reserve Bank of St. Louis and chief 
economic--economist at the Show Me Institute, the only think 
tank in Missouri dedicated to promoting free markets. Dr. 
Hedlund was the chief domestic economist and senior advisor at 
the White House Council of Economic Advisors, where he helped 
design and execute emergency economic measures during the 
COVID-19 pandemic. Dr. Hedlund earned his bachelor degree in 
economics and math from Duke University and his PhD in 
economics from the University of Pennsylvania. I want to thank 
you for joining us today, even though you had some Baylor 
history, right? And we look forward to the conversation ahead.
    Okay, our next witness here with us today is Mr. Raymond 
Huff. Mr. Huff is the president of HJB Convenience Co-op--
Corporation located in Lakewood, Colorado. Mr. Huff founded HJB 
Convenience Corporation in 2004, purchasing the chain of 
Russell's Convenience Stores, were all located in high-rise 
office buildings. He is also the principal of Tenderfoot 
Software which created the software used by Russell's 
Convenience Stores. Prior to owning his company, Mr. Huff was 
president of Trans Pacific Stores Limited, where he opted 
Russell's Convenience Stores--where he operated Russell's 
Convenience Stores. He currently serves as Vice Chair of the 
CONXSS Advisory Board. Mr. Huff earned his degree in accounting 
and business management from Howard University and thank you 
for joining us here today, Mr. Huff. We look forward to the 
conversation ahead.
    Our next witness today is Chuck Wetherington. Mr. 
Wetherington is the president of BTE Technologies located in 
Hanover, Maryland. For over 2 decades, Mr. Wetherington has 
served as president of BTE Technologies, a small manufacturing 
firm which produces medical device equipment. Since buying the 
company in 2001, Mr. Weatherington has brought new products to 
the market while dealing with ever changing and burdensome 
regulations. Mr. Wetherington is a board member and former 
Chair of the Small and Medium Manufacturers Group for the 
National Association of Manufacturers. He also serves as the 
Governor's Workforce Development Board for the state of 
Maryland. Mr. Wetherington holds degrees in engineering from 
both the University of Illinois Urbana-Champaign and Vanderbilt 
University. Thank you for joining us here today.
    We appreciate and look forward to the conversation ahead 
and I now recognize the Ranking Member from New York, Ms. 
Velazquez, to briefly introduce our last witness appearing 
before us today.
    Ms. VELAZQUEZ. Thank you, Mr. Chairman. Our final witness 
today is Mr. Walt Rowen. Mr. Rowen is the President of 
Susquehanna Glass Company, a 113-year-old family owned business 
in Columbia, Pennsylvania. Since 1995 he has been the third-
generation family owner of the business and has scaled the 
company to sell consumer products to many of the nation's best 
known retailers, employing between 35 and 60 people. Mr. Rowen 
is also the Co-Chair for Small Business for America's Future, a 
national coalition of business owners and leaders working to 
provide small businesses a voice at every level of government. 
Thank you for being here today, and welcome.
    Chairman WILLIAMS. Thank you, and we appreciate all of you 
being here today. Very much so. Now, before recognizing the 
witnesses, I would like to remind them that their oral 
testimony is restricted to 5 minutes in length. We stick with 
that, okay? If you see the light turn red in front of you, it 
means your 5 minutes have concluded and you should wrap up your 
testimony. And what you will hear--you will hear this to just 
help you remind, okay? And also, you are going to see Members 
coming in and out, we may have a full house. We may have not so 
full house. No reflection on you. There is other committees 
happening so people will come and go and that is normal as we 
proceed.
    So, with that in mind, I now recognize Doctor Hedland for 
5-minute opening remarks.

    STATEMENTS OF DR. AARON HEDLUND, ASSOCIATE PROFESSOR OF 
ECONOMICS, PURDUE UNIVERSITY; MR. RAYMOND HUFF, PRESIDENT, HJB 
CONVENIENCE CORPORATION; MR. CHUCK WETHERINGTON, PRESIDENT, BTE 
    TECHNOLOGIES, LLC.; AND MR. WALTER ROWEN, PRESIDENT OF 
SUSQUEHANNA GLASS CO., CO-CHAIR OF SMALL BUSINESS FOR AMERICA'S 
                             FUTURE

    STATEMENT OF DR. AARON HEDLUND, ASSOCIATE PROFESSOR OF 
    ECONOMICS DANIELS SCHOOL OF BUSINESS, PURDUE UNIVERSITY

    Mr. HEDLUND. Good morning, Chairman Williams, Ranking 
Member Velazquez, and Members of the committee. It is truly a 
privilege to engage with you today on this issue of taxes and 
not college basketball. My name is Aaron Hedlund. I have been 
an economics professor for more than a decade, and from 2020 to 
2021, I had the privilege to serve as the chief domestic 
economist and senior advisor at the White House Council of 
Economic Advisors. The views expressed today are my own.
    Before jumping in, I would like to establish some economic 
context for our discussion. Put simply, America is in the midst 
of a policy induced cost of living crisis. One way to describe 
inflation is as too much money chasing too few goods, which 
means there are two basic ways to end the crisis. The first is 
to address the too much money part by withdrawing excess 
demand. The most natural way to do this would be to stop 
Government overspending. But with the reckless fiscal policy of 
the past few years, the Federal Reserve has had to step in with 
its own painful medicine of interest rate hikes to tame demand. 
The other avenue to reduce inflation is to address the problem 
of too few goods by putting in place pro-growth policies that 
expand supply and create affordable abundance. This recipe has 
succeeded in the past. The 1980s supply side revolution of 
simple, low, and fair taxes, coupled with regulatory reform and 
sound money, put an end to stagflation. The second major 
success of this approach occurred starting in 2017, following 
years of failed attempts by its predecessor at a stimulus 
driven growth strategy.
    The Trump administration, along with Congress, took a 
different approach when they unleashed the beginnings of a 
second supply side revolution with the Tax Cuts and Jobs Act, 
or TCJA, as one of its centerpieces. The TCJA had three primary 
goals. One, make the U.S. competitive on the world stage and 
repatriate earnings from abroad by reducing what was one of the 
highest corporate tax rates in the developed world. Second, 
reverse the stagnation of living standards that families had 
been facing since 2007 by simplifying taxes through lower 
marginal rates and doubling the standard deduction. Third, 
boost small businesses and unleash investment across the 
country by lowering tax rates, creating the 20 percent Pass-
through Deduction, and enacting opportunity zones.
    The results were a resounding success as the economy vastly 
outperformed the official forecast made in 2016. Unemployment 
and poverty rates hit record lows, income gains reached record 
highs, and 10 of billions of dollars of net new investment 
flowed into high poverty communities. The typical American 
families saw their income jumped by more than $5,000. Contrast 
that with the $4,000 decline they saw between 2019 and 2022, 
driven by inflation. In short, TCJA unleashed a blue collar 
boom with the biggest gains at the bottom.
    These accomplishments are notable, but Americans still 
crave further progress towards taxes that are simple, low, and 
fair. Simple. Tax complexity costs Americans hundreds of 
billions of dollars in accounting and compliance headaches, 
resources that should be going to productive economic 
activities, not paperwork and bureaucracy. Tax simplification 
is deregulation. Make the Tax Code simpler and people won't 
have to contend with so many IRS regulations. Low. One myth 
about tax cuts is that they deprive the government of needed 
funds. The truth is that the government does not have a revenue 
problem, it has a spending problem. Federal receipts as a share 
of GDP have been stable for decades, and in 2022 they reached 
their second highest level since world War II. Meanwhile, 
spending had averaged 20 percent of GDP for 50 years prior to 
COVID, but is now forecasted to be 23 percent to 24 percent 
over the next decade and rising from there. Fair. Everybody 
wants a fair Tax Code, but class warfare mythology about the 
rich paying less in taxes than everyone else obscures the true 
sources of unfairness. The truth is that while the top 1 
percent earn about 20 percent of total income in the economy, 
they pay over 40 percent of total taxes. And by the way, 
corporate CEO's don't pay personal checks when the corporate 
tax is getting paid. Workers and consumers bear most of that 
burden.
    So what actually makes taxes unfair? It is unfair that the 
complexity of the Tax Code advantages those with the resources 
to hire teams of lawyers, accountants, and lobbyists. And it is 
unfair that high effective tax rates disproportionately punish 
people aspiring to climb the economic ladder to enter the 
middle class and start small businesses. True tax fairness 
pursues a level playing field, not level incomes. Equality of 
opportunity, not equality of outcomes. And more private 
investment, especially in human capital, not less. Extending 
TCJA should be the foundation upon which to build a Tax Code 
that is simple, low, and fair. But I encourage Congress to be 
bold and not stop there.
    Thank you for the opportunity to speak with you about this 
important matter. I look forward to answering your questions.
    Chairman WILLIAMS. Thank you, Dr. Hedlund. I now recognize 
Mr. Huff for his 5-minute opening remarks.

     STATEMENT OF RAYMOND HUFF, PRESIDENT, HJB CONVENIENCE 
                          CORPORATION

    Mr. HUFF. Good morning. Thank you, Mr. Chairman, Ranking 
Member, and Members of the committee for allowing me to talk to 
you today about the 199A Tax Deduction. My name is Raymond 
Huff. I am president of HJB Convenience, an S Corp. I have been 
in the convenience industry since 1988. Today I operate seven 
convenience stores and have 16 employees. I am here today on 
behalf of myself and the National Association of Convenience 
Stores.
    In the United States, the convenience industry includes 
more than 150,000 stores employing 2.44 million people. It is 
truly an industry of small businesses. 60 percent of the 
industry is comprised of single store operators. The industry 
handles about 165 thousand--65 million transactions each day, a 
number equivalent to half of the U.S. population. Today, I will 
focus on Section 199A of the Tax Code, which provides a small 
pass-through business--provides small pass-through businesses, 
like mine, a deduction of a taxable income to help bring us 
into rough parity with C Corporations. From a tax perspective, 
I will cover the need for tax fairness for small businesses, 
the benefits of the provision for the economy, and the 
importance of making 199A permanent.
    Initially, the reduction in tax burden for section 199A 
allowed me to reinvest in my business, expand to open new 
stores, and hire more employees. It did what it was intended to 
do. It created a level playing field, and that level playing 
field is better for my employees and my customers. Then came 
COVID. My stores are located in commercial office buildings and 
these employees are now working from h Prior to 2020, I had 23 
stores operating in major cities but had to close two-thirds of 
those stores due to low or no off--office occupancy. The 199A 
tax deduction and other provisions of the law allowed me to 
invest in technology that allowed me to keep some of those 
stores open.
    However, other than in 2018 and 2019, I have not made a 
profit and have not been able to use Section 199A. I am not 
alone. I have seen many other businesses located near mine, in 
the central business districts, struggle for years. My main 
message to you is do not pull the rug out from under me just 
when I am finally starting to recover. My--many small 
businesses, including mine, need the 199A tax provision to 
stick around so we can get healthy again. This prospect of 
losing the benefits of this tax law is very troubling. If my 
business is faced with a significant tax increase at the end of 
next year, it would set my business back in a way I really 
can't afford or plan for. A 20 percent or higher increase will 
require me to slow or cancel my store reopening's hiring plans 
in the future.
    This is just the stimulus that 199A in bonus depreciations 
were meant to spur. They allow small businesses to invest, 
expand, hire, and compete with the big boys. The Tax Code 
should not favor my larger competitors. Without 199A, those 
large competitors would have a better effective tax rate and 
would be able to invest those funds, allowing them to have an 
unfair advantage in the marketplace. That is not right. I can 
hold my own, but I do need a level playing field, and 199A for 
the first time leveled that field. That is we should all want 
that.
    Small businesses are the backbone of the U.S. economy. I 
urge the Members of this committee and all Members of Congress 
to recognize the urgency of this pending tax increase and take 
action to allow for proper business planning. The business 
community needs certainty, especially small businesses like 
mine. Waiting to resolve this issue would certainly not be as 
beneficial as extending and making those tax provisions 
permanent now. Thank you for your time today. I welcome your 
questions.
    Chairman WILLIAMS. Thank you, Mr. Huff. I now recognize Mr. 
Wetherington for his 5-minute opening remarks.

      STATEMENT OF MR. CHUCK WETHERINGTON, PRESIDENT, BTE 
                       TECHNOLOGIES, LLC

    Mr. WETHERINGTON. Good morning, Chairman Williams, Ranking 
Member Velazquez, and Members of the committee. My name is 
Chuck Wetherington. I am president of BTE Technologies, a 40 
person medical device manufacturer near Baltimore. I appreciate 
the opportunity to testify about the importance of pro-growth 
tax policy for manufacturing in America. This is actually my 
second time appeared before this committee. My first appearance 
was almost 6 years ago at a hearing on how trade policy affects 
small manufacturers. Thank you for having me back.
    I am pleased to see that this committee is still focusing 
on policies, specifically tax policies, that are impacting 
small manufacturers throughout the country. The most important 
message I want to leave you with today is that small 
manufacturers need consistency from Washington. 
Straightforward, predictable tax laws means I don't have to 
spend time locked away with my accountants trying to figure out 
the rules of the road. Instead, I can get out on the shop floor 
and focus on growing my business and creating quality jobs in 
our community.
    In 2017, Congress was able to take stale, outdated Tax Code 
and update key provisions to reduce taxes on small 
manufacturers. Tax reform put the U.S. on a path towards years 
of consistent, predictable tax policy. The Tax Cuts and Jobs 
Act was a new wave--drove a new wave of economic activity and 
industrial expansion. BTE and many of our peers in the industry 
experienced historic growth in the years between tax reform and 
the pandemic. But as we saw with COVID, the world in which 
small manufacturers operate can change in an instant. In 2020 
and 2022--21, shutdowns and material shortages for our 
suppliers had a direct impact on BTE. We were able to survive 
and maintain operations, but many weren't so lucky.
    Now, tax increases are harming BTE and others in our supply 
chain. Over the past two years, critical tax incentives that 
drove growth in our sector have expired. The most damaging tax 
policy change for BTE has been the new requirements that we 
amortize our R&D expenses, and about face for more than 70 
years of immediate R&D expensing in the U.S. Bringing a medical 
device to market is extremely risky and takes years and 
millions of dollars. But now BTE cannot immediately express 
those costs, reducing the working capital I have available to 
invest in my business and my employees. This R&D change has 
delayed projects to redesign and improve BTE's flagship 
products.
    As a result, our growth plans have stalled, delaying 
expansions that would have allowed BTE to increase our employee 
headcount by 50 percent. We are feeling the pain from the loss 
of full expensing and new, stricter interest deductibility 
standard as well. Capital equipment is now more expensive and 
we face new barriers to operating our equipment rental 
business, which enables smaller medical practices to have 
access to high quality made in America healthcare equipment. 
BTE and other small manufacturers are all experiencing these 
tax increases.
    Worse, more tax increases are coming our way at the end of 
next year. Most of BTE's suppliers are pass-through businesses. 
They will lose the 20 percent Pass-through Deduction at the end 
of 2025, and their tax rates will go up. Many also face 
increased estate taxes. Higher taxes in the manufacturing 
supply chain will directly increase BTE's operating costs. And 
small businesses like ours will face uncertainty as Congress 
debates how and if Congress will address the full suite of pro 
individual, corporate, and international provisions set to 
expire next year.
    Fortunately, the House has taken the first step to stave 
off this uncertainty. I want to thank every Member of this 
committee who voted for the Tax Relief for American Families 
and Workers Act, common sense bipartisan legislation to restore 
R&D expensing, and other expired 2017 provisions. But a larger 
tax policy reckoning is looming. Smaller manufacturers are 
depending on Congress to prevent damaging tax increases before 
the end of next year. We deserve a Tax Code that promotes 
innovation and demonstrates to the rest of the world what our 
values will be for the next decade and beyond. It is urgent 
that Congress deliver on that promise. Manufacturers like BTE 
are ready to work with all of you on pro-growth tax policies 
that allow us to create jobs, innovate, compete globally, and 
provide a better future for all Americans. Thank you.
    Chairman WILLIAMS. Thank you, Mr. Wetherington. And also, 
now, we want to recognize Mr. Rowen for his 5-minute remarks. 
Thank you.

  STATEMENT OF WALTER ROWEN, PRESIDENT/CO-CHAIR, SUSQUEHANNA 
       GLASS COMPANY/SMALL BUSINESS FOR AMERICA'S FUTURE

    Mr. ROWEN. Good morning, Chairman Williams, Ranking Member 
Velazquez, and Members of the committee. My name is Walt Rowen 
and I am president of Susquehanna Glass Company in Columbia, 
Pennsylvania, and I am Co-Chair of the Small Business for 
America's Future, a national coalition of small business owners 
and leaders dedicated to providing the strong voice for small 
businesses at every level of government. SPAF has long 
advocated for tax reforms that benefit small businesses and is 
committed to ensuring that policymakers prioritize the needs of 
main street, by promoting an economic framework that supports 
small business owners, their employees, and the communities 
they serve.
    Susquehanna Glass is a family owned business in the glass 
decorating industry and we have been operating for 114 years. 
Think about that. We have survived multiple economic upheavals, 
two world wars, one Great Depression, recently the COVID-19 
pandemic, and our business is still here. We currently employ 
about 35 employees and are proud to provide good jobs and 
economic activity to our local community since 1910. We are 
actually 114 years old, not 13. However, our ability to weather 
these storms has not solely been due to our own efforts. During 
times of crisis, government programs like the pay--Paycheck 
Protection Program and the Small Business Administration's EID 
loans have been crucial lifelines that have allowed us to keep 
our doors opened. I am sure all of our businesses have 
recognized that.
    That is important because the success of my business like 
that of all small businesses, is inextricably linked to the 
success of my community. America's 30 million small businesses 
are responsible for nearly half of all private sector 
employment and have been the primary source of job creation for 
decades. We need investments and policies that create an 
economic climate that allows small businesses to thrive, which 
in turn will lead to thriving communities.
    However, the current Tax Code, particularly the Tax Cuts 
and Jobs Act, has not adequately addressed the needs of most 
small businesses. A recent survey by the Small Business For 
America's Future shows that the vast majority of small business 
owners, somewhere around 75 percent of them, said the TCJA did 
not help them hire, raise salaries, or invest in their 
businesses. This failure to support small business growth 
represents a missed opportunity to create jobs, raise wages, 
and empower entrepreneurs to contribute to the vitality of 
their communities. To support, truly support small businesses, 
there must be a comprehensive approach that includes a fair tax 
system and investments in creating economic opportunities and 
building a strong workforce.
    Merely extending the TCJA provisions beyond 2025, would 
lock in a tax system that does not invest in small business 
growth or resilience. Instead, we need to take this opportunity 
to create and pass tax reform that supports small business 
success, closes loopholes, and ensures everybody pays the same 
or fair tax rates. Helpful policies for small business would 
include a tax cut for small business owners hiring their first 
employee to stimulate growth, making the first $25,000 in 
profit for small businesses tax-free, raising the corporate 
rate to 28 percent, and ensuring that billion dollar 
corporations pay at least 21 percent of their income in taxes 
to give lawmakers the means to make impactful economic 
investments.
    And finally, we must simplify tax matters for small 
business owners--you have heard that from the entire panel--as 
the current Tax Code is far too complicated and costly for 
small businesses to navigate. The need for tax reform is 
particularly urgent. The U.S. Census Bureau data shows there is 
a historic surge in new business starts, nearly 16 million 
since 2021, which is an 85 percent increase in the average 
compared to 2004 to January 2021. This wave of entrepreneurship 
represents a tremendous opportunity to build a more robust 
economy. Smart tax reform and ensuring the taxes rightly owed 
are collected will open pathways to address the challenges that 
small businesses and their employees face. Supporting policies 
that help small businesses will build a prosperous economy.
    In conclusion, the current tax system and TCJA have failed 
small businesses. The expiration of key provisions in that law 
is an opportunity to take bold action to create a Tax Code that 
works for main street because investing in small businesses is 
investing in vibrant, thriving communities where everyone can 
prosper. Thank you for the opportunity to testify today. I look 
forward to your questions.
    Chairman WILLIAMS. Thank you very much. And we will now 
move to Member questions under the 5 minute rule. I recognize 
myself for 5 minutes.
    I have been a small business owner in Texas for over 52 
years. I am a car dealer and understand the many challenges 
facing Main Street America. Over the last few years, it has 
been much harder to find and keep qualified workers, 
regulations are forcing us to play defense, and inflation has 
been cutting our margins and making it harder to keep the 
lights on. Tax policy is the single most important thing we can 
do to help all entrepreneurs facing these challenges. And when 
a business owner is able to keep some of their profits, they 
don't just put in a bank and let it sit there, we spend it. 
They hire additional workers that creates more taxpayers, or 
they buy the extra equipment to keep their business growing.
    So, Mr. Huff, can you discuss how you were able to utilize 
the 199A small business deduction to grow your business and, 
more generally, what you do when you are able to keep more of 
your hard-earned money?
    Mr. HUFF. In my case, I wasn't up on tax law and my CPA in 
2019 called and says you invested in equipment, did a self-
serve store, and the 199A and the bonus depreciation is 
available to you. And I said, what does that mean? He says, it 
means you have more cash. I was shocked. I called that an 
Easter egg. I did not know that that was going to be the effect 
doing that, having that extra funds. I then invested in 2019 in 
additional technology that actually paid to keep my stores open 
during the COVID times. So, the 199A and the bonus depreciation 
helped me tremendously in those two years.
    Chairman WILLIAMS. Competition is what drives the small 
business economy and at the end of the day, your customers will 
tell you if you are doing a good job or not as a business 
owner, we do not need the government telling us that. And if 
you offer superior product at a lower price or better customer 
service, you will keep people coming back and your business 
will survive, and they will tell others. Unfortunately, we have 
been, and we have seen increased government mandates that are 
making it more difficult for businesses to compete. When a 
business owner is forced to hire a compliance officer to ensure 
that they understand the ever-changing web of regulations or an 
accountant to deal with an audit firm, an overly active IRS, it 
is time and resources away from their core responsibilities.
    So, Mr. Hedlund, can you elaborate on how simplifying the 
Tax Code helps both American families and businesses thrive?
    Mr. HEDLUND. Absolutely. This is a critical task and it is 
made more critical by the fact that we are in the midst of this 
cost-of-living crisis, which is entirely artificial. It has 
been created by reckless policy for the past few years. And I 
will return to one of my remarks, which is that tax 
simplification is deregulation. Tax simplification is tax 
fairness. Fairness is about a level playing field where you 
don't have to hire teams of accountants and lawyers to do your 
taxes, but it is a lot simpler. The TCJA helped with that, for 
one, by doubling the standard deduction. So, prior to TCJA, 50 
percent of joint filers itemized their taxes. They had to go 
through and look at all the receipts and look at what gets 
deducted. After TCJA, that fell to 12 percent. That benefits 
small business owners as well. So, this is why we need to start 
with extending TCJA and go further than that.
    Chairman WILLIAMS. Now, I have got a limited amount of time 
here, but Mr. Wetherington, as you have grown your and 
developed your company, how has the R&D tax credit contributed 
to your success? Because, as you said, you are highly regulated 
and a long way from bringing a product to the shelf. So, how 
has the tax credits contributed to your success?
    Mr. WETHERINGTON. So, the key to me in R&D are my technical 
people, my engineers, my software developers, and the clinical 
staff that I have to help in the development of those devices. 
It is key for me to know that some portion of that expense that 
I have that is not current revenue yielding, it is future 
revenue yielding, that I have some return on being able to 
invest that. R&D is inherently risky. I don't get a win with 
everything that we go through making. And it is critical that 
we have that other nations around the world have that. We tend 
to fall behind in how we have done that, particularly with 
moving to amortization. Since we have moved to amortization, 
the rate of growth of R&D in Europe has doubled the rate of 
growth of R&D in the United States. So, it is critical that we 
refocus on that.
    Chairman WILLIAMS. The Chair now yields his time back and I 
now recognize the Ranking Member for five minutes of questions.
    Ms. VELAZQUEZ. Thank you. Mr. Rowen, your organization's 
recent survey found that 72 percent of small businesses say 
that overall, the tax code favors large corporations over small 
businesses. As we consider tax reform over the next two years, 
what can we do to restore trust in the system and deliver 
benefits for true small businesses?
    Mr. ROWEN. Thank you for that question. Everybody knows Tax 
Codes are complicated. They have to be complicated, but they 
don't have to be overly complicated. I believe that things like 
depreciation, quick depreciation, immediate depreciation is 
essential for small businesses to survive. There is no question 
almost everybody in the business community would say that. What 
I think I disagree with is the idea that the Tax Code itself, 
what the rate of taxation is for a business, is the most 
important thing to that business. Because the reality is 
businesses only pay that when they are making profit. So, I, 
for one, since 2020, haven't made any money. So, the tax rate 
that I am paying right now doesn't mean a thing to me. 
Depreciating means a thing to me. Interest rates means things 
to me, but the tax rate doesn't. So, focusing just on tax rate 
doesn't make sense to most small businesses because most small 
businesses actually are not making a lot of money.
    Ms. VELAZQUEZ. Thank you. Mr. Rowen, the Inflation 
Reduction Act provided an additional $70 billion to the IRS for 
customer service modernization and enforcement. Yes or no, do 
you believe the IRS is using this funding to put greater 
scrutiny on small businesses?
    Mr. ROWEN. Absolutely no.
    Ms. VELAZQUEZ. Thank you. Mr. Huff, yes or no, do you 
believe the IRS will use additional funds to target small 
businesses above historical averages?
    Mr. WETHERINGTON. I have no evidence to tell you one way or 
the other.
    Ms. VELAZQUEZ. Okay, Mr.----
    Mr. HUFF. Yeah, I have no evidence of that either. My CPAs 
handle the rules and get back to me on what I should and 
shouldn't be doing.
    Ms. VELAZQUEZ. Thank you. Mr. Rowen, as we know, the IRS is 
using much of their new funds to target people with high income 
that routinely avoid paying taxes. Mr. Rowen, how does it 
benefit entrepreneurs when people who cheat on their taxes are 
held accountable?
    Mr. ROWEN. I have reinforced over and over again that in 
small business community--in small businesses, we live in our 
communities. There are things in our communities that need to 
be helped. Something like childcare, something like health 
insurance, things like overall education. And those are the 
areas that government policies and programs can address. When I 
have people who are absent from work because their child is 
sick, or they simply can't afford childcare, that affects my 
business, my ability to hire, and my ability to have stable 
employment and make a profit.
    Ms. VELAZQUEZ. I guess you are aware Republicans are once 
again proposing cutting Affordable Care Act subsidies to pay 
for more tax cuts for the rich, and so that is something we 
need to keep in mind.
    Mr. ROWEN. That would be catastrophic for my business. We 
absolutely depend upon the ACA.
    Ms. VELAZQUEZ. Mr. Rowen, the current leader of the 
Republican Party, former President Trump, is proposing an 
across the board 10 percent tariff on all imported goods. Yes 
or no, would you raise prices for consumers if this tariff was 
implemented?
    Mr. ROWEN. Yes. We live in a global economy. Half of the 
products that I am decorating and selling are produced here in 
the United States. We would like to make that more, but the 
reality is we have to buy products overseas. Every product we 
buy from overseas that has a 10 percent tariff will be more 
expensive from me to my customer, and therefore to the ultimate 
consumer. So, it is an inflationary policy.
    Ms. VELAZQUEZ. Thank you. Mr. Chairman, I yield back.
    Chairman WILLIAMS. Lady yields back. I now recognize 
Representative Van Duyne from the great state of Texas for five 
minutes.
    Ms. VAN DUYNE. Thank you very much, Mr. Chairman, for 
holding this important hearing. There is no doubt that the TCJA 
helped supercharge the economy and provided much needed relief 
to small businesses. The economic success of the 2017 tax 
reforms was undeniable. Small business optimism peaked, and 
investments in research and development hit record highs. Small 
businesses finally felt untangled from an impressive Tax Code, 
and it is great to hear these stories from our witnesses today. 
In 2025, Congress will be facing an important choice. Continue 
the success of the TCJA, looking at new ways to be competitive, 
such as continuing the work that we have done, in my 
subcommittee, by finding new ways for small businesses to 
access capital or go back to taxing job creators at record 
levels. If we do not take action, the small business deductions 
will expire, and small businesses will be faced with a tax rate 
of 43 percent, compared to the 20 that they now pay. And don't 
be fooled, in the absences of higher taxes, Democrats are 
finding new ways to burden small businesses across the country. 
Not only are agencies such as the SBA creating regulatory 
burdens, but every day, the IRS under President Biden is 
growing and expanding. It is expanding its reach into American 
wallets and small business ledgers. Lastly, we also have an 
opportunity to get things right the first time, with new 
opportunities when it comes to digital assets in 
cryptocurrency. Mr. Huff, I am curious. You have heard that 
some of the criticism on the TCJA was just a bailout for 
wealthy corporations and one percenters. You have talked about 
how it has benefited you. Do you feel like your business falls 
into either one of those two categories?
    Mr. HUFF. Which were the categories again?
    Ms. VAN DUYNE. Well, that you are a wealthy corporation or 
a wealthy one-percenter.
    Mr. HUFF. No, I am definitely not either. I am a small 
business owner who goes to work every day trying to make a 
dollar and pay my employees and grow my business. I would like 
one day to be wealthy in those things.
    Ms. VAN DUYNE. But it is great to hear that we actually are 
hearing from small business owners, mom-and-pop shops and 
others who have actually been able to take advantage of the 
TCJA. Mr. Hedlund, I am going to ask you. President Biden's 
budget proposal contains many new tax provisions. Does any 
particular proposal stick out as being the worst for small 
business?
    Mr. HEDLUND. There is a lot of bad options to pick from. It 
is hard to pick one of them. But I say the worst thing we could 
do for the economy right now is to hike taxes when people have 
already been paying the inflation tax and the regulatory tax. 
This would not--that would make the cost of living crisis 
worse, make our growth worse, and not be good for the economy.
    Ms. VAN DUYNE. So, you have heard President Biden 
repeatedly state that he is not going to tax anyone making less 
than $400,000. Is that accurate?
    Mr. HEDLUND. Well, that promise has already been broken. As 
I mentioned, the inflation tax. The typical American family has 
seen their real income fall by $4,000 because of inflation, and 
that will just be compounded by the expiration of thousands of 
dollars' worth of tax cuts to them if that were to be allowed 
to happen.
    Ms. VAN DUYNE. I appreciate that. Mr. Wetherington, what 
would you do differently if the R&D provisions of the Tax Code 
had not changed?
    Mr. WETHERINGTON. So, for me, I would be hiring more 
engineers, more software developers. I would have a higher 
level of certainty over what the Codes were and what my 
expenses would be and what my liabilities would be associated 
with doing that development. It would yield me getting to new 
products faster, which helped me not only in selling products 
to the United States, but I export to over 40 countries around 
the world, including China. And it is important for us to bring 
out, to beat other competitors around the world who also make 
medical devices by being innovative and being on the leading 
edge. R&D tax credits is a key tool in us being able to do 
that.
    Ms. VAN DUYNE. Tell me also, how would higher taxes impact, 
because you talked about how we are competing with other, with 
other countries and other businesses outside of America. Can 
you tell me how higher taxes impact manufacturing?
    Mr. WETHERINGTON. So, the vast majority of small and medium 
manufacturers are actually suppliers to larger employers. So, 
even though we may be not necessarily main street, but small 
industrial parks around the United States, that higher tax rate 
has a ripple down, a trickle-down effect. And we have seen a 
real renaissance in reshoring of manufacturing in the United 
States. And I think the Tax Code has been a big piece of that. 
Not only the supply chain problems for the pandemic, but it was 
already starting before then, in 2018 and 2019, because of the 
improved Tax Code.
    Ms. VAN DUYNE. Outside the Tax Code, can you talk about how 
the regulations have been hurting your business? And we have 
got 10 seconds.
    Mr. WETHERINGTON. My regulatory expenses have gone up over 
460 percent in the last eight years and not done anything to 
make the products better or safer.
    Ms. VAN DUYNE. Wow, that is impactful. Thank you very much 
for your testimony.
    Mr. WETHERINGTON. You are welcome.
    Ms. VAN DUYNE. I yield back.
    Chairman WILLIAMS. Lady yields back. And now I recognize 
Representative Scholten from the great state of Michigan for 
five minutes.
    Ms. SCHOLTEN. Thank you so much, sir. Thank you to our 
witnesses for being here today. What an incredibly important 
conversation. Small businesses make up over 99 percent of 
private sector employers, employing nearly half of the 
workforce and creating two thirds of all new jobs. In my home 
state of Michigan, nearly 1 million, over 900,000 small 
businesses employ 1.9 million people. To that end, it is 
incumbent on Congress and us here in this committee to help 
create a tax system that is both easy for our small businesses 
to use, and one that promotes fairness.
    This question is for Mr. Rowen. In your experience 
navigating our tax system at a small business for nearly 50 
years, what programs or policies have made that experience 
easier? And can you speak to any changes that you would like to 
see specifically?
    Mr. ROWEN. Boy, I am not quite sure how to respond to 
easier. We are a large enough company that we employ an outside 
accountant. And he is bringing all the complexities of the tax 
laws to us. We don't have to employ. We have bookkeepers that 
do our books. But the Tax Codes. But there have been. I mean, 
they are just crazy.
    Ms. SCHOLTEN. And I am not meaning to interrupt, none is a 
perfectly appropriate answer.
    Mr. ROWEN. None.
    Ms. SCHOLTEN. If that is your genuine answer.
    Mr. ROWEN. Yes, that is my answer.
    Ms. SCHOLTEN. What can we do?
    Mr. ROWEN. So, one, and it has been said by everybody 
today, let us create a tax system that everybody believes is 
fair, is consistent, and stays stable. Because every year, if 
we, every two or three years, we change, that throws all of us 
into chaos.
    Ms. SCHOLTEN. Absolutely. And you just said it yourself, 
you hire an outside accountant. Right?
    Mr. ROWEN. Yes.
    Ms. SCHOLTEN. Not many small businesses have that luxury, 
right? This Congress, we have heard from a lot of small 
businesses about labor shortages and supply chain issues 
impacting their ability to grow and thrive. I hear about that 
back home in West Michigan as the number one concern. Maybe 
number two, only to access to capital. Mr. Rowen, again, as we 
continue to bounce back as a country, can you describe how you 
think we could potentially use the Tax Code as a leverage to 
alleviate the workforce shortages that small businesses have 
been struggling with in recent years? What changes would you 
like to see? What avenues are already there? And how can we use 
this to our advantage?
    Mr. ROWEN. So, I think some of the things we have talked 
about today that actually are still in the TCJA, I would 
absolutely encouraged to stay in. So, things like having the--
being able to write off quickly, things like--but the two 
things that are the most important things for me with employees 
is healthcare and childcare.
    Ms. SCHOLTEN. Yeah.
    Mr. ROWEN. If we could have better healthcare and childcare 
programs, that would make an enormous difference for the vast 
majority of small businesses that I am familiar with.
    Ms. SCHOLTEN. Heard. Thank you so much. I yield back.
    Chairman WILLIAMS. Lady yields back. I now recognize 
representative Bean from the great state of Florida for five 
minutes.
    Mr. BEAN. Mr. Chairman. Thank you, Mr. Chairman, a very 
good morning to you. Good morning, Small Business Committee. To 
our witnesses, glad to have you here. Welcome to your nation's 
capital. I have only been in Congress 15 months, a little over 
a year, and I have learned that Bidenomics is taking its toll 
on main streets in northeast Florida, where I represent, and 
really all across America. In fact, with the exception of Joe 
Biden, I don't believe there is one single American who 
objectively believes that our nation is headed in the right 
direction.
    To all of you small business owners that have been 
struggling with Bidenomics, I want to tell you something, there 
is a light at the end of a tunnel. Now many small business 
owners will say, is it a train? It is not a train. It is the 
potential tax relief in the Tax Relief for American Families 
and Workers Act. The House has already passed it, a bill that 
is both family friendly and business friendly. And we are 
poised to deliver big, momentous change in Washington and all 
across America. The provisions of this bill have a track record 
of increasing wages, providing more job opportunities, and 
helping American businesses become more competitive, more 
productive, more innovative, and in turn, generating a 
tremendous economic boom in their communities, whether you are 
in research and development or in the convenience store 
business. As Americans continue to suffer under back-breaking 
inflation with an uncertain economic future, I believe the 
bill, the Tax Relief bill, the Tax Relief for American Families 
and Workers Act, will provide much relief, opportunity, and 
certainty.
    So, let us get to the questions. In 2017, Congress passed 
and President Trump signed into law the Tax Cuts and Jobs Act, 
which was the first major reform in the U.S. Tax Code since 
Ronald Reagan did it in 1986. Sweeping reform updated the Tax 
Code to benefit individuals and companies of all sizes. This 
tax cuts was incredibly successful and provided much needed 
relief for Americans. Unfortunately, the bill passed under 
reconciliation, which bypasses the 60-vote threshold. And now 
the program was temporary. We are soon to see all of that 
great, the great work expire.
    So, my question, Dr. Hedlund, if Congress allows the 
provisions of the job--Tax Cuts and Jobs Act to expire, what 
will be the impact on American businesses?
    Mr. HEDLUND. That is a great question. And it would be a 
very damaging impact because we saw what positive progress that 
law provided. $5,000-plus in income gains for the typical 
family with bigger gains at the bottom, people with less formal 
education, people with non-managerial jobs, people at the lower 
end of the income distribution had faster gains than at the 
top. So, if we let the TCJA expire, we can expect to see less 
investment, lower wages and lower overall prosperity.
    Mr. BEAN. Very good. Thank you very much. And to Mr. 
Wetherington, can we agree America has always been on the 
forefront, cutting edge of inventing things, making the world 
better, making quality of life for everybody? And that comes 
with research and development. Is it true that our Tax Code now 
is, is punishing people who do research and development? And if 
we don't make changes, we are going to see America fall further 
behind the rest of the world and research? What do you say to 
that Mr. Wetherington?
    Mr. WETHERINGTON. That is absolutely true. Manufacturers 
are inherently problem solvers. But we want to focus our 
problem solving on things about what we are manufacturing. We 
don't want to focus our problem solving on a new Tax Code or on 
changes. So, it is predictability and consistency that we 
really need out of Washington; allows us to focus on the job we 
need to do not only in creating new products through R&D, but 
also on the daily building, making, shipping, supporting 
products that we make to help people get better in our 
healthcare system.
    Mr. BEAN. Ten-four. So, we have got to act or we are going 
to go further behind the rest of the world?
    Mr. WETHERINGTON. The priority is urgent.
    Mr. BEAN. Amen. No. Thank you for saying that. Mr. Huff, I 
just want to say thank you and congratulations to you. Seven 
stores. I know your family is proud. Sixteen people are getting 
a paycheck. They are putting dinner on their table because of 
you. Is crime a problem at convenience stores right now?
    Mr. HUFF. Not in my stores, but generally crime is, I 
think, coming down. But I am not sure about that. The--if I 
could speak to----
    Mr. BEAN. Hold on one second. My final question, we are 
going to flip it back to you.
    Mr. HUFF. Okay.
    Mr. BEAN. The Inflation Reduction Act, Dr. Hedlund, has 
been poised even at this Committee how great it is for small 
business. Isn't it true that spending $1.3 trillion under the 
Inflation Reduction Act has greatly enhanced inflation in these 
United States of America?
    Mr. HEDLUND. Yes. It should be called the Inflation 
Creation Act.
    Mr. BEAN. Thank you very much Mr. Huff, we will get back to 
you next time. Thank you all for coming forward. I yield back, 
Mr. Chairman.
    Chairman WILLIAMS. Gentleman yields back. I now recognize 
Representative Chu from the great state of California for five 
minutes.
    Ms. CHU. Mr. Rowen, I would like to ask you a question. I 
also serve on the Ways and Means Committee, which has 
jurisdiction over the Tax Code. And I so appreciate your small 
business perspective on how a Tax Code geared towards 
corporations and the wealthy does not trickle down to small 
businesses and workers. In fact, that is why Democrats have 
fought to end trickle down policies and instead invest directly 
in workers and small businesses. And that is why we continue to 
advocate for expanding their Earned Income Tax Credit, or EITC, 
and the Child Tax Credit. These are two of the most powerful 
tools at our disposal for not only reducing poverty, but also 
helping more Americans enter the workforce. Unfortunately, 
Republicans' Tax Cuts and Jobs Act did nothing to strengthen 
the EITC. And Republicans in the Senate are refusing to 
consider even a modest improvement to the Child Tax Credit that 
the House did pass on a bipartisan basis.
    So, can you talk about why it is important that the Tax 
Code support workers and families instead of just corporations 
and the wealthy? What benefits might small business owners and 
prospective entrepreneurs experience if Democrats EITC and CTC 
expansions under the American Rescue Plan are made permanent?
    Mr. ROWEN. So, in the small business world, believe it or 
not, taxing is not one of the most important issues that we 
deal with day to day. It is employees, it is consumers, it is 
how do we get our products out. But more than anything else, 
primarily as a manufacturer, we have to have employees. And if 
we don't have consistent, dependable employees, we don't have a 
business. And if we have--I am an entry level, low skilled--I 
have a lot of those jobs. I am hiring a lot of young, new 
family members. And hey, guess what? They have kids. And when 
they have kids and their kids don't, they don't have childcare, 
they are not going to be dependable employees. So, those kinds 
of programs, health insurance is another one. If I have an 
employee that is going to get sick and doesn't have health 
insurance, they are not going to go to the doctors. And the 
consistency, dependability of our employees is something that 
is vital to us. Those programs are necessary.
    Ms. CHU. Thank you for that thoughtful answer. I would like 
to follow up with talking about the impact of the Tax Cuts and 
Jobs Act on small business. As a Member of the House Ways and 
Means Committee, I was there in 2017 when Republicans pushed 
through their rushed partisan Tax Cuts and Jobs Act, and I saw 
firsthand that the goal was simple, to lower taxes for the 
wealthiest individuals and the largest corporations. That is 
why the TCJA made the corporate tax cut permanent, while the 
provisions for small businesses and individuals were made only 
temporary. But even though Republicans said that some of these 
temporary provisions were targeted at main street, like the 20 
percent qualified business income deduction for pass-throughs, 
also known as the Section 199A deduction, we know that the 
majority of the benefits have gone to the wealthiest 
businesses. In fact, the Joint Committee on Taxation estimates 
that in 2024, 61 percent of that benefit will go towards the 
top 1 percent; and, businesses in the bottom two-thirds of 
income will only get 4 percent of the benefit. That is in part 
because the TCJA created a number of complex rules that made it 
harder for small businesses to navigate the Tax Code and 
actually take advantage of these potential deductions.
    So, Mr. Rowen, you indicated in your testimony that we need 
meaningful tax reform to help small businesses, but that simply 
extending these expiring TCJA provisions is not the answer. Can 
you expand upon some of the challenges that small businesses 
faced in navigating the TCJA's provisions? How would small 
business owners, and especially the smallest and most 
underserved, stand to benefit if Congress finally moves past 
the TCJA and instead pursues a fairer tax system?
    Mr. ROWEN. So, we can talk about what fair means. And I 
think that we believe, as small business owners, that if 
everybody is doing the same thing and paying the same amounts, 
that is fair. The fact is that the corporate tax rate had been 
at between 30--the top rate had been around 35 percent to 39 
percent, and a 40 percent reduction took it to 20 percent, 21 
percent. The small business community only got a 20 percent 
deduction as a pass-through. And you just look at those numbers 
and any economist and any lay person can be, can understand 
that that wasn't fair. And the fact that one was permanent, and 
one----
    Chairman WILLIAMS. The gentlelady's time is up.
    Mr. ROWEN.--was not permanent was also not fair.
    Chairman WILLIAMS. You yield back?
    Ms. CHU. Thank you. I yield back.
    Chairman WILLIAMS. Thank you. I now recognize Mr. Meuser 
from a state that is represented well here today, the great 
state of Pennsylvania, for five minutes.
    Mr. MEUSER. Yeah. Thank you Mr. Chairman, very much. Thank 
you all. Great discussion. Really important. A lot of different 
ideas, but you can have a lot of different ideas, but facts are 
facts, I guess, right. When the Tax Cut and Jobs Act went into 
effect, yes, the corporate tax rate came down. You know, for 
some reason, we want to beat up on, you know, small businesses 
that, you know, become large businesses. That would happen. All 
large businesses were once small businesses, and they grow. As 
Mr. Huff said, that is the whole idea. When the corporate tax 
rate came down to 21 percent, the whole world got far more 
competitive than the United States of America. That is why 
right afterwards we saw almost a trillion dollars in 
repatriation come back. And by the way, many small businesses 
have large businesses as their, either their suppliers or their 
customers. So, it all needed to be reviewed. Now we are the 
Small Business Committee, so that is in fact where we want to 
focus.
    So, let me just ask you this, Mr. Wetherington, and we had 
some past business similarities. I was in the home medical 
equipment business. So, when you receive your 20 percent 
reduction and you had your 100 percent R&D deduction and 
carried interest could be written down, when you were showing 
more revenues, in the end, more net income, what did you do 
with it?
    Mr. WETHERINGTON. It went right back into business.
    Mr. MEUSER. Of course. I would have bet and knew exactly 
what you were going to say; went right into the business. You 
hired, you invested, you grew, you became stronger, more built 
to last. Okay? That is where employment comes from. From a 
business that is figuring out how to not only sustain itself 
but also have some level of profitability. And that is, by all 
means, what the TCJA did. I mean, there is no question about 
it. You know, the 20 percent reduction, the R&D reduction. Now 
the idea is it was a bipartisan vote here in the House, but 
that this is going to be, you know, removed. I mean, it is not 
being taken up in the Senate and President Biden showing no 
interest in and carrying it on. And they are not carrying it on 
because the messaging continues to be that this did nothing but 
help billionaires, right, and the super-rich. And yet I go to 
more chamber meetings as a former small business person that 
grew into a somewhat larger business and I never have one 
person out of a group of 150 say to me, boy, that Tax Cut and 
Jobs Act really was detrimental to me, I am sorry it happened. 
No. They are saying bring back the R&D, bring back the bonus 
depreciation, keep our 199A in effect.
    Mr. Huff, let me ask you something. What if after COVID and 
everything else, you know, when you are speaking of the 20 
percent reduction: A, what if that never occurred and B, how 
devastating is going to be if that gets eliminated?
    Mr. HUFF. Well, I can testify today that for the first time 
the 199A actually brought funds to my corporation that I was 
able to invest. And I believe that if I didn't have that, I 
would not be here sitting here today as a business person. It 
gave enough funds that I was able to invest in technology and 
open up self-serve stores that are still currently operating.
    Mr. MEUSER. Yeah, great, thanks. Mr. Wetherington. R&D tax 
credit. Very important. I was looking at your products. Of 
course, a lot goes into that. Design engineers, all types of 
engineers, electronic EEs. That gets reduced or even now with 
the, with the 20 percent over a five-year period. How has that 
affected your business, your profitability, your hiring, your 
growth, and your R&D investment?
    Mr. WETHERINGTON. Well, as I stated in my testimony, this 
is slowing us down from bringing out major redesigns of our two 
flagship products that represent 80 percent of our product 
revenue. Our expectation is that we are going to grow by 50 
percent once those launch, but we continue to have to push 
those out because of the inability to cover the expenses 
without the assuredness of having the R&D tax credit. It is 
back to predictability and consistency in what the Code is.
    Mr. MEUSER. Absolutely. Amen to that. Mr. Hedlund, you in 
your work and you working on the TCJA, just related to 
inflation. When the former administration, Trump Administration 
was talking about tariffs and, and getting to zero percent 
tariffs and reciprocal tariffs, was there inflation back in the 
Trump days because of that?
    Mr. HEDLUND. Leaving 2020, inflation was under two percent. 
It wasn't until 2022 that we got to 40-year high inflation.
    Mr. MEUSER. Thank you very much. I yield back, Mr. 
Chairman.
    Chairman WILLIAMS. The gentleman yields back. I now 
recognize Representative Landsman from the great state of Ohio 
for five minutes.
    Mr. LANDSMAN. Thank you, Mr. Chair, and thank you all for 
being here and your testimony. The bill that we just passed was 
a bipartisan bill, and it put back on the books and or expanded 
a number of things that I think we all in this room would agree 
were hugely important. And the Senate should pass what we 
already passed. The President is very supportive of this, of 
course, is the R&D piece of all of this, which we have been 
pushing for in this committee in a bipartisan way. And thanks 
to the Ways and Means folks, for getting it done and getting it 
to the floor.
    Being able to deduct the interest payments when interest 
payments are so high right now, it has been such a burden for 
small businesses, families in general. So, being able to do 
that was really important. The Child Tax Credit, hugely 
important to help families pay all their bills. And oftentimes 
those dollars end up back with our small businesses. So, it is 
really good that they are in the pockets of our families as 
opposed to up here or somewhere else. It also included the 
LIHTC expansion and making sure that this tool for helping to 
build more affordable housing. So, these are all really smart 
bipartisan tax endeavors, again, passed here and then went over 
to the Senate. Hopefully they will pass it.
    The issue, and the question for me is, we know what 
bipartisan tax reform looks like. We just passed it. The 
challenge is that almost all Americans know that the tax system 
is rigged for the super wealthy, right, that especially because 
of the Trump tax giveaways to millionaires and billionaires and 
these big corporations. If all of the companies and 
millionaires and billionaires, the super wealthy, were to pay 
all their taxes on all their income and wealth, wouldn't we 
have the money to invest in healthcare and childcare, which are 
at the core of successful small businesses? Wouldn't we have 
the resources to invest in additional tax relief for small 
businesses?
    So I am curious. I will start with you, Mr. Rowen, your 
thoughts on that. I mean, it just seems that fixing the tax 
system is, for small businesses and families, is the next big 
moment of truth for this economy and for the country, for this 
Congress. And it does seem pretty straightforward, and the 
American people are clear, make those who are super wealthy pay 
all their taxes on all their income and wealth, and then put us 
in a position where we can invest in childcare and healthcare 
and more tax relief for small businesses.
    Mr. ROWEN. We keep going back to bipartisan tax reform and, 
gosh, all of us would like that to happen. The question becomes 
what is fair. And again, what I say is the small business 
community that we represent is not coming today to say we don't 
want the changes that the TCJA gave to the small business 
community in deductions in the pass through 20 percent. It is 
not like we don't want those, those were helpful, absolutely. 
We all accept that.
    Mr. LANDSMAN. Exactly.
    Mr. ROWEN. But the bottom line is that the small business 
community is basically being taxed at about a 28 percent rate. 
And we also know that the corporations are being taxed at the 
21 percent rate.
    Mr. LANDSMAN. If, if, if.
    Mr. ROWEN. If. And the average corporate tax rate is closer 
to 10 percent.
    Mr. LANDSMAN. Correct.
    Mr. ROWEN. So, that is not, in the American eye, fair. We 
know that tax policy can incentivize business development. We 
know that. We just have to figure out how to do it. And 
things--small business people recognize that childcare, health 
insurance, making our communities stronger, government policies 
that do that do help small businesses, and we grow when those 
programs are working.
    Mr. LANDSMAN. Anyone else?
    Mr. WETHERINGTON. The TCJA wasn't perfect, but it did 
create a manufacturing boom and it created a beginning of 
onshoring that only continued once we started into the pandemic 
and having the supply chain issues. I think it is still very 
important that we make that permanent and we stop the 
additional provisions from expiring in 2025.
    Mr. LANDSMAN. Thank you. And I yield back.
    Chairman WILLIAMS. The gentleman yields back. I now 
recognize Representative Alford from the great state of 
Missouri for 5 minutes.
    Mr. ALFORD. Thank you, Mr. Chair. Good to see you back. And 
thank you to our witnesses for being here. I know it is a 
little bit of a sacrifice to come here away from your 
businesses, but we thank you for the investment because I think 
this is a very important hearing.
    I want to start with four simple truths today. Number one, 
cutting taxes is good for American taxpayers and their 
businesses. Number two, President Biden's new budget reveals 
his intention to tax Americans families into oblivion. Fact 
number three, complying with President Biden's war on small 
business, including over regulation, is a tax within itself. 
And number four, the IRS is now targeting more small businesses 
as it looks to claw away money to fund the radical agenda of 
this administration. My message to President Biden is, sir, end 
your war on small businesses now.
    The Federal Tax Code currently sits at over 75,000 pages, 
including guidance from the IRS. For context, if you were to 
stack 75 pages up, take a look at the ceiling right now, guys, 
this is about a 16-foot ceiling. The Federal Tax Code and all 
the guidance that goes along with it would be twice the height 
of this ceiling. That is crazy.
    Next week, hundreds of millions of Americans will be 
required to comply with all that paper, 32 feet high worth of 
regulations, and contend with the President's new 87,000 IRS 
agents. He hired those new IRS agents for a reason: to execute 
the extreme taxation policy laid out in his 2025 budget. The 
President's budget includes a staggering $4.9 trillion in new 
taxes, alongside allowing $2 trillion in tax savings from 
President Trump's Tax Cut and Jobs Act to expire. Allowing 
these pro-growth tax policies to expire and increasing taxes 
will not only further hurt the competitiveness of your small 
businesses and all small businesses in America, it will crush 
them, the jobs they provide, the communities they serve.
    Mr. Huff, one of the most important pieces of the TCJA was 
a small business deduction. It allowed a 20 percent deduction 
for pass-through business owners, allowing them to keep more of 
their own money and invest it in their businesses and in their 
employees. It has led to an estimated $66 billion in tax 
savings for small entities. Mr. Huff, what will happen to your 
small business if the small business deduction expires next 
year, sir?
    Mr. HUFF. I will not be able to invest in my planned 
reopening of my stores. I have stores that are actually 
mothballed and planned to reopen as the office buildings fill 
up.
    And just one other thing I would like to--the 199A was the 
first time that I actually felt that the Tax Code affected me 
as a small business person. I am grateful to have it.
    Mr. ALFORD. These savings that you are realizing under the 
tax cuts now, you are not taking fancy trips to Tahiti or 
anything like that, are you, with the money?
    Mr. HUFF. Actually, I am going to go to Tahiti, but not 
because of the Tax Code.
    Mr. ALFORD. You are investing this in your business and the 
people who work for you.
    Mr. HUFF. That is absolutely correct. We reinvest in our 
business. And I actually have to do that because I would like 
to get back to 23 stores across the United States.
    Mr. ALFORD. Mr. Hedlund, our farmers are the backbone of 
our nation, working sun up to sundown. In Missouri, we had, 5 
years ago, 95,000 farms in Missouri. Now we are down to 87,000. 
Our food security is our national security. We are losing 1,000 
farms a month in America. And a key policy keeping these 
businesses, these family farms going is the stepped up basis 
which allows a son or daughter to inherit their family farm 
without paying the devastating tax bill.
    President Biden wants to do away with this in his budget, 
and it is going to hit two-thirds adversely, two-thirds of the 
family farms. What impact will that have on our ag industry, do 
you think?
    Mr. HEDLUND. It would be a very damaging impact. We have 
seen overall prices go up by 20 percent and food prices have 
gone up by more than that. And that is just part of a trend. 
This administration has also talked about taxing unrealized 
gains, which would be similarly devastating to the economy.
    Mr. ALFORD. Well, I appreciate your answers. Mr. Huff, have 
a good time in Tahiti. I appreciate--I wish I could go with 
you, but I just got back from spending a week in Israel, and I 
am telling you what, we need to pray for those people in Israel 
and support them.
    Thank you so much. Mr. Chair, I yield back.
    Chairman WILLIAMS. The gentlemen yields back. I now 
recognize Representative Thanedar from the great state of 
Michigan for 5 minutes.
    Mr. THANEDAR. Thank you, Mr. Chair. And I have a couple of 
questions for Mr. Rowen.
    You know, when I ran a small technology business in 
Michigan, buying equipment was very critical, keeping up with 
the new technology so that I can provide better service to my 
customers, create more jobs. And so often I used my profits, so 
to speak, to buy equipment and invest in my own business, so I 
can grow, grow the business. And at times, you know, I had some 
tax benefits that helped me.
    Now, we have a bill, I am sure you are familiar, that is 
being with discussed in the U.S. Senate. And in terms of 
providing some tax benefits, especially able to write off 
entirely the purchase of equipment. What would you advise the 
senators to do on this particular bill?
    Mr. ROWEN. There is no question in my mind, it is the 
experience I have had with my business, that every time I can 
expense something like a piece of equipment in the year that I 
purchase it, it helps my business. It is an absolutely vital 
component of what I think should be a fair tax policy and tax 
reform, so it should be included in tax reform.
    Mr. THANEDAR. All right. The 199A deduction benefits many 
small businesses that operate as pass-through, but 50 percent 
of the benefits go to the top 1 percent. What can we do to 
cater benefits more towards the average small business owner 
who makes closer to $70,000 a year?
    Mr. ROWEN. So, one of our proposals is to take the first 
$25,000 worth of income on a business and make it tax free, 
give small business owners who begin to hire employees a credit 
for new hires, things like that. So, when you are down at the 
level where all entrepreneurs start, at the bottom and build 
up, give better tax breaks and incentives that way.
    Mr. THANEDAR. All right. Finally, you know, what specific 
policies you recommend that would help the small businesses? 
Often when we have tax breaks, tax incentives planned, we see a 
lot of that benefit go to the top 1 percent who really don't 
need those incentives. It is the small businesses which are 
struggling, the mama-papa businesses, small businesses trying 
to grow. You know, they can benefit more. How can we design 
policies that benefit more of the lower end, smaller businesses 
and not so much of it goes to the top 1 percent?
    Mr. ROWEN. I believe, our organization believes that 
government is not necessarily always the bad, evil part, and 
taxing is how we fund our government. We have just experienced 
4 years', 5 years' worth of a pandemic that would have crushed 
most businesses. My business would not be here today, I would 
bet you these two gentlemen sitting next to me, their 
businesses very possibly would not be sitting here today, be in 
business, if we didn't have the protections like the PPP 
funding and the Small Business Administration EIDL loans. Those 
are the things that backstop the American economy and that is 
what America needs to be. We need to strengthen that.
    Mr. THANEDAR. Thank you, Mr. Rowen. And Mr. Chair, I yield 
back.
    Chairman WILLIAMS. The gentlemen yields back. I now 
recognize Representative LaLota from the great state of New 
York for 5 minutes.
    Mr. LALOTA. Thank you, Chairman, for your leadership and 
for getting us together to today to hear about the challenges 
that small businesses face regarding our Tax Code and the 
uncertainty in it. I want to thank our witnesses for being here 
today.
    I want to spend my 5 minutes today addressing an issue that 
is paramount to my Long Island constituents, and that is the 
state and local tax deduction, otherwise known as SALT. Long 
Island is already one of the most expensive places in the 
country to live due to incredibly high state and local taxes. 
Specifically, New York State has the dubious distinction of 
having the highest effective income, sales, and property tax 
rates in the country. It is not even close how bad we are in 
our state.
    Now, that is a problem mostly created by Albany politicians 
and nobody in this town, thankfully. Nevertheless, the complex 
Federal Tax Code presents challenges to small businesses and 
individuals, like many of my constituents. And to help provide 
relief to that problem, many of my colleagues and I are working 
to increase or eliminate the SALT deduction cap to help support 
our constituents.
    One of the first bills I introduced in Congress was my SALT 
Fairness and Reduction Act, which would increase from $10,000 
for individuals to $60,000 for individuals, $120,000 for 
married couples, and would also index that for inflation. This, 
many think, is commonsense legislation that provides tax relief 
to those who need it, specifically small businesses and middle 
class families, who are having to cut costs every day.
    I made a promise to my constituents that I wouldn't support 
any tax package here in the House without a reasonable SALT 
fix. And since day one, I have made that clear to every one of 
my colleagues. Unfortunately, earlier on in this Congress, the 
Wyden-Smith tax package did not have any reasonable fix for 
SALT, and I was forced to vote no on that package.
    I am not giving up, however. Many of my New York Republican 
colleagues and I then fought tooth and nail to ensure that a 
vote on a SALT increase got to the floor. We proudly introduced 
the SALT Marriage Penalty Elimination Act that would remove the 
marriage penalty and raise the SALT deduction cap to $20,000 
for joint filers who have an adjusted gross income of $500,000 
or less.
    Sadly, this dysfunctional town, every single House Democrat 
who previously said they were very much in favor of an increase 
in the SALT deduction, and specifically 14 New York House 
Democrats, voted against that and blocked that bill from even 
coming to the floor. It was pro family, pro worker, pro 
American legislation and the dysfunction of this town, the 
partisanship of this town prevented that from moving forward.
    This leads me to my first question. Mr. Hedlund, I see you 
are from Purdue. Sorry about the game the other night. A vast 
majority--you guys finished second in the world. That is very 
good.
    Mr. HEDLUND. A lot better than last year.
    Mr. LALOTA. Yes, sir. A vast majority, I understand, of 
small businesses are pass-through entities, meaning income is 
reported on from the business owner on their individual taxes 
and is taxed under the individual income tax. Is that correct?
    Mr. HEDLUND. That is correct.
    Mr. LALOTA. This means the limitation of the personal 
income tax code, like the SALT cap, directly negatively impacts 
the business. Is that correct?
    Mr. HEDLUND. They are affected by that provision.
    Mr. LALOTA. And it is a negative impact. They get to deduct 
less?
    Mr. HEDLUND. They get to deduct less.
    Mr. LALOTA. Which means they have to pay more?
    Mr. HEDLUND. Sure.
    Mr. LALOTA. And does anybody want to pay more?
    Mr. HEDLUND. No one I have encountered.
    Mr. LALOTA. We agree on that. Would you agree, moving on, 
would you agree that a double tax, where the federal government 
and then later on the state and local governments tax the same 
income, that a double tax is unfair?
    Mr. HEDLUND. So, I would take a little bit of a different 
view there. I would say if there is a federal taxpayer living 
in Texas and one living in New York and they have the same 
income, that the one in Texas should not have to pay a higher 
federal tax because of the bad decisions that New York 
government is making.
    Mr. LALOTA. Great point. I have heard that from some of my 
colleagues. Now, what would you say about return on investment? 
If you are going to analyze, in your words, that a Texas 
taxpayer, God bless Texas, shouldn't have to subsidize the 
largesse of Albany politicians, I generally agree with that 
concept. But what would you say if the analysis then said that 
this town sends more back to Texas and some other states than 
they send back to New York based upon the revenue it collects 
from those? Specifically, New York State is a donor state, 
meaning that for every dollar a New York taxpayer sends to the 
federal government, we get a mere 85 cents back. In many of 
those same states who claim they are subsidizing my state's 
largesse, they are getting $1.25, $1.50, and $2. Would you say 
that is unfair, sir?
    Mr. HEDLUND. I would say that the money going back to a lot 
of these states, no one is really feeling the benefits of it. 
Government is way too big. So, I am 100 percent on board with 
you about we need to reduce the tax burden on everybody.
    Mr. LALOTA. Great. Let's talk about the marriage penalty 
real quick. So, certain parts of the Tax Code disincentivize 
marriage, and specifically with respect to the most recent 
adjustment in the SALT code, the limitation is $10,000 
regardless if you are an individual or you are married. So, one 
person gets to deduct $10,000 from their taxes, but two people 
who happen to be married get to deduct the same 10,000, not 
20,000. Is that fair, sir?
    Mr. HEDLUND. I am definitely against marriage penalties.
    Mr. LALOTA. Great. With that, I yield back, Mr. Chairman.
    Chairman WILLIAMS. The gentlemen yields back. I now 
recognize Representative McGarvey from the great state of 
Kentucky for 5 minutes.
    Mr. MCGARVEY. Thank you, Mr. Chairman. Appreciate this 
hearing today, especially given that Monday, let's not forget, 
is Tax Day. So this is everybody's friendly reminder it is 
coming, whether we want to admit it or not.
    Mr. Wetherington, I appreciate your statement that the Tax 
Code must be simple, consistent, and must support job creation 
here in America. I couldn't agree more. We need a Tax Code that 
is accessible to every American. And I think everyone needs to 
pay their fair share. It is not viable and I think it is 
certainly not fair that the top 10 percent of earners are 
oftentimes taxed at far less than teachers and firefighters and 
people below.
    And let's look at what the Tax Code and what has happened 
recently. Trump's tax plan was a massive windfall for large 
multinational corporations. By implementing a flat 21 percent 
tax rate, President Trump gave some of the largest, most 
profitable corporations up to a 40 percent break on their 
taxes. But this is the deal. We are in the Small Business 
Committee. They did this while subjecting the smaller 
businesses and C corporations, who were previously taxed at 15 
percent, a tax increase. So that 21 percent tax rate that they 
imposed, a flat tax, it lowered it for the biggest 
corporations, it raised it for many small businesses.
    I have got twins at home, and so I say this all the time, 
it can be fair, right? It can be equal without being fair. And 
that is what has happened. They made the tax rate equal, but it 
is not fair to our small businesses and our entrepreneurs who 
are trying to grow their businesses.
    It is not hard to see why, right? When signing his 
corporate tax giveaway into law, President Trump said, 
``Corporations are literally going wild over this.'' You heard 
that quote correctly. Not people are going wild over this, not 
main street is going wild over this. Our largest corporations 
are going wild over this. And unfortunately, under the plan, it 
is not just people and programs that will suffer. The 
Congressional Budget Office estimates that with a full 
extension of the Trump corporate tax giveaways, deficits will 
rise up to $3.5 trillion, the highest percent of GDP outside of 
a war or a recession. We simply can't afford to do that, and it 
will be a wasted opportunity to improve our Tax Code if we do.
    With that being said, we have a great opportunity to extend 
the parts of the tax cut that helped people, like doubling the 
standard reduction and the child tax credit. And we can work 
together to create a reformed tax system that is simple to 
understand, helps small businesses, promotes commerce, and 
enhances the welfare of everyday Americans.
    Mr. Rowen, what are some of the previous--what are some of 
the provisions in the Tax cut and Jobs act that helped small 
businesses that you would like to see continued in a new tax 
package?
    Mr. ROWEN. Well, I do think the 199A 20 percent reduction 
was good. I think the 100 percent amortizing, you know, taking 
those deductions right away, those are good. There is a lot of 
provisions. Anything that simplifies the Tax Code would be 
great.
    But again, we do believe that if you simply leave this law 
in place and keep the corporate rate at 21 percent and give 
back to the small businesses their 20 percent reduction, you 
are still creating this uneven balance where small businesses 
are effectively being taxed at somewhere around 28 percent and 
corporations are still at 21 percent.
    Mr. MCGARVEY. In my brief time remaining, we talked about 
deficits. We talked about that. We heard Mr. LaLota talk a 
little bit about recipient states and that sort of thing. I can 
tell you, I am from Kentucky. And last week, a few weeks ago, 
there was a study by the Republican Committee that proposed 
budgets that would cut Medicare, Social Security, and 
Affordable Care Act. In Kentucky alone, there are almost a 
million people enrolled in Medicare, more than 500,000 
receiving both Social Security and ACA benefits. How do 
programs like these alleviate the workforce shortages that 
small businesses have been struggling with in recent years?
    Mr. ROWEN. We can't compete with big businesses that can 
give health insurance to their employees. We just can't. We 
have finally fallen below 50 employees, so we don't have to 
have our own health insurance, which we had to carry for years 
and very few people in my company were actually able to afford 
it.
    Chairman WILLIAMS. The gentleman's time is up.
    Mr. MCGARVEY. Mr. Chairman is being nice. I see my time has 
expired. I yield back.
    Chairman WILLIAMS. The gentlemen yields back. I now 
recognize Representative Molinaro from the great state of New 
York for 5 minutes.
    Mr. MOLINARO. I apologize to the witnesses that you had to 
get double teamed by New Yorkers, although my colleague 
adequately divided the two of us and said Trump as many times 
as he could, and I appreciate the fear in which he expected to 
instill upon all of you. But let me offer that, Mr. Chairman, 
we appreciate the time at today's hearing, and certainly to 
each of you.
    This is an important moment for small businesses. As we 
know, we are going to have to advance a tax policy that assists 
American families and American small businesses. Now, I was 
actually, as a New Yorker, very proud to vote for the Tax 
Relief for American Workers and Families Act. This bill, I 
think, is the first step to delivering relief to millions of 
Americans, and I was encouraged to see it come together in a 
bipartisan way. I trust and hope the Senate will take action 
soon.
    I also am proud to introduce the Think DIFFERENTLY Small 
Business Accessibility Act. This bipartisan bill will expand 
the existing disability--excuse me, disabled access credit, 
which helps small businesses invest in accessibility for 
customers and employees of every ability. Now, these bills are 
proof that there is common ground to be had on tax policy, but 
there is a long road ahead to secure long-term extensions of 
the essential tax provisions that will deliver relief for 
families, farmers, and small businesses across the United 
States.
    Dr. Hedlund, you outlined what you refer to as the blue 
collar boom in the immediate aftermath of adoption of the Tax 
Cuts and Jobs Act, actually quite a big benefit to small 
businesses and entrepreneurs across the country. According to 
your testimony, workers without a bachelor's degree saw a 130 
percent acceleration in earnings from January 2017 to February 
2020, a big benefit for small businesses and entrepreneurs. For 
a district like mine, in which less than half of the workforce 
has a bachelor's degree or higher, the impact of this growth 
cannot be understated.
    So, could you highlight for us some specific industries 
that saw the most growth after the 2017 adoption, and then just 
speak to sectors where you foresee continued growth if we can 
come together on extending these important provisions?
    Mr. HEDLUND. Absolutely. Well, I mean, the great thing 
about tax relief and a more competitive Tax Code is that it 
advantages all industries. There are too many policies where, 
unfortunately, the government ends up picking winners and 
losers and would go for this industry, not that industry, but 
what we actually saw was all industries gaining. We saw a lot 
of investment throughout the country and, as you pointed out, 
it benefited especially blue collar workers. And that is the 
thing with tax policy. It is not just the immediate dollars 
that the tax cuts themselves put in the pockets of people. It 
is the fact that it creates growth and that growth has massive 
benefits.
    Mr. MOLINARO. I appreciate you saying that. And for 
countless small businesses, and those who, by the way, often 
feel like they have the skill and the capacity, but not 
society's expected level of education, to show the ability to 
succeed and to have policy that supports them, critically 
important.
    Mr. Huff, good to see you again. I hope you enjoyed the 
cherry trees around Washington yesterday.
    Mr. HUFF. I could not find a sole, so we are good.
    Mr. MOLINARO. Okay, fair enough. Don't want you taking one 
home. Now, you highlight the importance of the 199A tax 
deduction in your testimony. As you know, over 95 percent of 
businesses in the United States are what we call pass-through 
entities, which means the TCJA helped millions of small 
businesses in New York and across the United States in the form 
of the 20 percent pass-through deduction. In fact, over 47,000 
business owners in my district alone, small businesses, 
benefited and claimed the deduction in 2020. For this reason, I 
proudly cosponsor H.R. 4721, this is the Main Street Tax 
Certainty Act, with 169 other Members of the House. The bill 
would seek to permanently extend the 199A deduction. If that 
deduction were to expire today, and I know you have talked 
about this, so let's reinforce it, if that deduction were to 
expire at the end of next year, could you speak to the impact 
on your business and some of the decisions you would have to 
make should that sunset?
    Mr. HUFF. If this, the 199A and the bonus depreciation, 
changes, based upon my projections, rather than opening nine 
stores in the next 3 years, I will be only able to open one or 
two stores in the next 3 years.
    Mr. MOLINARO. Massive benefit to businesses like yours. 
Now, Mr. Wetherington, the data shows that in 2018 alone, 
manufacturers added over 200,000 new jobs, the best year for 
job creation in manufacturing in 21 years. The same year, 
manufacturing production grew 2.7 percent, with December 2018 
being the best month for manufacturing output. I will run out 
of time, but could you--without question, the impact of tax 
reform on manufacturing is clear. Can you just elaborate in 10 
seconds or less the impact to your sector?
    Mr. WETHERINGTON. Thank you for that. Policies have 
consequences. When there is a high tax rate, large employers 
moved offshore their manufacturing jobs. The lower tax rate, 
large employers started reshoring. It was going great before 
COVID. With COVID came the supply chain issues. It continues to 
go strong. We have got to keep these Tax Codes where they are.
    Mr. MOLINARO. Mr. Chairman, the Tax Cut and Jobs Act helps 
small businesses, and we have got to come together to ensure 
they continue to get our support. And with that, I yield.
    Chairman WILLIAMS. The gentleman yields back. I now 
recognize Representative Gluesenkamp Perez from the great state 
of Washington for 5 minutes.
    Ms. GLUESENKAMP PEREZ. Thank you, Chairman Williams, and 
thank you to our panel of witnesses for being here today.
    So, I own an auto repair and machine shop with my husband. 
And actually I have spent a lot of time reading, you know, 
books on tax savvy for small businesses and the kinds of things 
that make you want to crawl into a sleeping bag under your desk 
and never come out. And it is actually very frustrating and 
alienating for me to hear from--I will just be candid. I am 
grateful you are here. It is hard for me to hear people in ties 
tell me that, like, this is helping the trades because I feel 
like people in my world will never--we don't have the power to 
lobby for the tax cuts that would actually--right. We want a 
level playing field, we want a clear policy, we want to see a 
return to high-quality manufacturing, not just fueling 
consumption.
    And I appreciate, you know, the testimony, Mr. Huff, 
particularly you were making about the investment in things 
like coolers, machinery. And I am thinking particularly, I am 
hoping you could expand, because my experience is if you can 
buy the nice thing, if you can buy the work boots that will 
last 3 years, you have got a real asset, right? You know, if 
you have got to buy the cheap thing because you are thinking 
about your depreciation schedule, not only does American 
manufacturing hurt, but we hurt in the middle class.
    So, I wonder if you could talk about that, talk about your 
experience with your capacity for hiring and retaining 
employees.
    Mr. HUFF. Yes, I can. The purchasing coolers, fixtures, 
point of sale systems, all of those create jobs and things like 
that. But for me specifically, it creates an environment where 
I can grow, I can make money and grow my business. And the 199A 
and the bonus depreciation actually allowed me to do more than 
I planned to do.
    Ms. GLUESENKAMP PEREZ. I appreciate that and I think it is 
important that we are able to invest in high-quality equipment. 
But I, also, when I think about the sort of stuff versus people 
dichotomy, I think it is really important that our communities 
and our small businesses are able to invest in fixing their 
roof, putting more insulation in their shop, things that are 
investing in the capital. That is how communities actually 
build wealth in the long term. Grow your tax base, right? Make 
it so my shop isn't 107 degrees in the summer, things like 
that.
    And one of the things that we see a lot is--I mean I have 
customers who tell me all the time like I didn't really want to 
buy a dually, but I needed to get above 6,000 GVW to qualify 
for the first year depreciation. And I am like, let me tell you 
how much it costs to replace a set of tires on a dually, you 
know. And so really thinking about ways that we can encourage a 
tax policy that prioritizes investment in human capital, in 
people, and not just a churn of stuff. And I am wondering, you 
know, to that end, who could speak on what they have seen that 
does prioritize investment in people and tradespeople.
    Mr. HEDLUND. I would say that human capital investment is 
one of the most important types of investment, and it is not 
talked about enough. We need a Tax Code that is overall pro 
investment. And the challenge with steep tax penalties that are 
better now than they used to be, but we can make them even 
better, is that they discourage people from investing in 
themselves, because work is not just the paycheck you are 
immediately earning, it is the investment in your own future 
capacity. So if we have simple, low, and fair taxes, we can get 
a lot more of that.
    Mr. ROWEN. And something like a small business tax cut for 
the first employee that they hire or if they send one of their 
employees to schools or you are just training somebody onsite, 
there used to be programs for workforce development years ago 
that had tax incentives. There is all sorts of things that can 
be done that small business folks will take advantage of.
    Mr. HUFF. As I open stores, I have to hire a manager, an 
assistant manager, I have to hire associates. It is really 
critical that we continue to come up with tax policies that 
allow small businesses to grow because that is where the growth 
in employment is really happening, is in the small businesses.
    Ms. GLUESENKAMP PEREZ. A workforce that is nimble, that 
has, you know, prioritizing the critical thinking, the sort of 
skills that you can take to any business, that allow you to 
open your own businesses, these are the kinds of investments 
that I think we need to see. We want to see shop classes in our 
high schools thriving and competitive. But I thank you for your 
time here.
    Thank you, Chairman. I yield back.
    Chairman WILLIAMS. Lady yields back. And we have come to 
the end of our hearing today. I want to thank all of our 
witnesses for the testimony, for appearing before us and 
coming, leaving your home and your business to do this.
    Without objection, Members have 5 legislative days to 
submit additional materials and written questions for the 
witnesses to the Chair, which will be forwarded to the 
witnesses.
    Again, I want to thank all of you for being here. We are 
the backbone of this great country.
    And if there is no further business, without objection, the 
Committee is adjourned.
    [Whereupon, at 11:49 a.m., the committee was adjourned.]
    
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