[House Hearing, 119 Congress] [From the U.S. Government Publishing Office] PROSPERITY ON MAIN STREET: KEEPING TAXES LOW FOR SMALL BUSINESSES ======================================================================= JOINT HEARING BEFORE THE SENATE COMMITTEE ON SMALL BUSINESS & ENTREPRENEURSHIP OF THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED NINETEENTH CONGRESS FIRST SESSION __________ HEARING HELD APRIL 8, 2025 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 119-008 Available via the GPO Website: www.govinfo.gov ______ U.S. GOVERNMENT PUBLISHING OFFICE 60-081 WASHINGTON : 2025 ======================================================================= HOUSE COMMITTEE ON SMALL BUSINESS ROGER WILLIAMS, Texas, Chairman PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania BETH VAN DUYNE, Texas JAKE ELLZEY, Texas MARK ALFORD, Missouri NICK LALOTA, New York BRAD FINSTAD, Minnesota TONY WIED, Wisconsin ROB BRESNAHAN, Pennsylvania BRIAN JACK, Georgia TROY DOWNING, Montana KIMBERLYN KING-HINDS, Northern Marina Islands DEREK SCHMIDT, Kansas NYDIA VELAZQUEZ, New York, Ranking Member MORGAN MCGARVEY, Kentucky HILLARY SCHOLTEN, Michigan LAMONICA MCIVER, New Jersey GIL CISNEROS, California KELLY MORRISON, Minnesota GEORGE LATIMER, New York DEREK TRAN, California LATEEFAH SIMON, California JOHNNY OLSZEWSKI, Maryland HERB CONAWAY, New Jersey MAGGIE GOODLANDER, New Hampshire Lauren Holmes, Majority Staff Director Melissa Jung, Minority Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Roger Williams.............................................. 1 Hon. Joni Ernst.................................................. 2 Hon. Nydia Velazquez............................................. 4 Hon. Ed Markey................................................... 5 WITNESSES Mr. Tom Click, President, Chief Executive Officer, and Co- Founder, Patriot Industries, Louisa, VA........................ 8 Mr. Preston Brashers, Research Fellow, Tax Policy, The Heritage Foundation, Washington, DC..................................... 10 Mr. Jerry Akers, President, Sharpness Inc. and MOCA Inc., Palo, IA............................................................. 11 Ms. Anna Zimmerman, Founder & Owner, Zimmerman & Co CPAs Inc., Cincinnati, OH................................................. 13 APPENDIX Prepared Statements: Mr. Tom Click, President, Chief Executive Officer, and Co- Founder, Patriot Industries, Louisa, VA.................... 53 Mr. Preston Brashers, Research Fellow, Tax Policy, The Heritage Foundation, Washington, DC........................ 56 Mr. Jerry Akers, President, Sharpness Inc. and MOCA Inc., Palo, IA................................................... 63 Ms. Anna Zimmerman, Founder & Owner, Zimmerman & Co CPAs Inc., Cincinnati, OH....................................... 71 Questions and Answers for the Record: Questions from Hon. Cantwell to Mr. Click and Answers from Mr. Click.................................................. 81 Questions from Hon. Cantwell to Mr. Brashers and Answers from Mr. Brashers............................................... 83 Questions from Hon. Cantwell to Mr. Akers and Answers from Mr. Akers.................................................. 87 Additional Material for the Record: American Council of Engineering Companies (ACEC)............. 89 American University.......................................... 91 Anonymous letter............................................. 98 Associated Builders and Contractors (ABC).................... 99 Atlantic letter.............................................. 101 Biotechnology Innovation Organization........................ 107 Engine....................................................... 109 Fortune...................................................... 113 Innovator Alliance........................................... 114 IntervalZero................................................. 118 National Association for the Self-Employed (NASE)............ 123 National Council of Farmer Cooperatives (NCFC)............... 126 Small Business Majority...................................... 130 Small Software Business Alliance (SSBA)...................... 136 Technology Councils of North America (TECNA)................. 142 U.S. Chamber of Commerce..................................... 147 U.S. Chamber of Commerce - A Matter of Survival.............. 151 Vertex Pharmaceuticals....................................... 168 WMUR TV letter............................................... 169 YahooFinance JP Morgan....................................... 171 HOUSE-SENATE JOINT HEARING PROSPERITY ON MAIN STREET: KEEPING TAXES LOW FOR SMALL BUSINESSES ---------- TUESDAY, APRIL 8, 2025 House of Representatives, Committee on Small Business, and United States Senate, Committee on Small Business & Entrepreneurship, Washington, DC. The Joint Committees met, pursuant to notice, at 10:05 a.m., in Room 210, U.S. Capitol Visitor Center, Hon. Roger Williams [chairman of the Committee on Small Business] presiding. Present: Representatives Williams, Stauber, Meuser, Van Duyne, Ellzey, Alford, Wied, Downing, Schmidt, Velazquez, McGarvey, Scholten, McIver, Cisneros, Morrison, Latimer, Tran, Simon, Olszewski, Conaway, and Goodlander. Senators Ernst, Young, Hawley, Husted, Markey, Booker, Justice, and Hirono. Chairman WILLIAMS. I would like to say good morning to everyone. And as we get started with it, I will lead us in prayer and then Senator Ernst will lead us in the Pledge of Allegiance, so can you stand, please? Bow your heads. Heavenly Father, God of all people, thank you for allowing us to meet today and discuss great things in this country and to do as good a job as we can do under your leadership. We appreciate the opportunity to serve you and to serve this great institution. In your name we pray, Amen. Senator ERNST. Please remain standing and recite the pledge. 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. Good morning, everyone, and I ask unanimous consent to hold today's joint hearing before the House Committee on Small Business and the Senate Committee on Small Business and Entrepreneurship. Without objection, so moved. I now call the joint hearing before the House and Senate Committees 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. I want to thank our witnesses for being here today. Many of you have traveled a long way to share your experiences and perspectives and we deeply value your time and your voice. Additionally, I would like to take a moment to welcome our colleagues from the Senate. Both chambers of Congress coming together to conduct this joint hearing underscores the importance of today's topic. Keeping taxes low for small businesses. Extending small business tax cuts will drive growth on Main Street America. Today's hearing will focus on the importance of making the Tax Cuts and Jobs Act of 2017 permanent to continue to enable main street to thrive by providing much-needed tax breaks to small businesses. As the nation continues to recover from the Biden administration's disastrous economic policies, this hearing could not come at a more important time. Small businesses are the engine of the American economy. In order to excel, they need to be able to put their hard-earned money back into their businesses instead of forking it over to the federal government. This is especially true when those tax dollars fund and anti-small business government like that of Joe Biden over and over again. This committee had heard how the Biden administration's policies have negatively impacted main street. Last Congress, a small oil and gas operator testified that the Biden administration was trying to ruin their industry financially. Can you imagine that? Your tax dollars going towards the salaries of bureaucrats only for them to tell you that they want you to lose your life's work. For the sake of small business owners and entrepreneurs across the nation, we re-elected President Trump. Under his leadership Main Street America is more hopeful than ever and President Trump's 2017 TCJA was the most significant tax system overhaul since 1986, These tax cuts brought rapid growth in job creation, U.S. GDP, and domestic investment. Many of the tax cuts in the TCJA are set to expire at the end of this year. This would devastate small business and the U.S. economy at large. Making the provisions that benefit small businesses permanent is critical in sustaining economic growth and fostering an environment where small businesses can succeed. Just last week, a small business owner testified before the House committee that the TCJA saves his business $11,000 last year allowing him to reinvest those funds back into his business. This is just one example of why we need to extend President Trump's 2017 tax cuts. Small businesses should enjoy a tax system that encourages their success. In turn, we will see the job creation, innovation, and economic growth and when Main Street America succeeds, the American economy succeeds. With that, I now recognize Chair Ernst for her opening remarks. Senator ERNST. Thank you, good morning, and thank you Chairman Williams, and I appreciate your friendship and our ability to work together on behalf of America's small business. I am glad that we can hold this joint hearing of our two committees today to examine an issue that impacts every small business in America. Eight years ago, working alongside President Trump, Congress passed the most significant simplification of our tax code in decades, the Tax Cuts and Jobs Act of 2017, otherwise known as the TCJA. The TCJA provided relief to every American, simplifying and reducing personal income tax and expanding important deductions used by small businesses across the country. These changes have allowed small businesses to thrive and contributed to the incredible growth we saw under President Trumps' first term, which led to strong real wage growth for workers the lowest unemployment rate in 50 years, and annual GDP growth that reached 3 percent. These tax provisions have also allowed small business owners, including our witnesses today, to grow their businesses and reinvest in their communities and their employees. But the reality is these gains are in jeopardy if Congress allows the TCJA to expire, and Americans would suffer the largest tax increase in history. Small business owners will be hit particularly hard if the TCJA expires as over 96 percent of small businesses are structured as pass-through entities that benefit from the qualified business income deduction and the general reductions in personal income rates. The TCJA empowered small business owners to invest in themselves through provisions like bonus depreciation, enhanced business expensing, and the R&D deduction. More importantly, the TCJA enabled small businesses to invest more in their employees. I have heard from small business owners all over Iowa who use that extra money to provide their workers with health insurance, parental leave, and retirement plans. I have also talked to small business owners who hired staff and expanded, but who would have to make hard decisions about who to keep if these cuts were to expire. When I talk to Iowans back home the message is clear. They can't handle a tax hike. Workers are also concerned that if employees have to give more of their revenue to Washington, jobs and benefits will have to be cut, on top of the higher taxes they will have to pay due to the individual rate hikes. The consequences are real to workers and their families. I also want to address a tax policy issue of particular concern to Iowans. The TCJA reduced the death tax, giving families the ability to keep their farms and businesses after a loved one's passing. This change was particularly important in my state, preventing families from being forced to sell off farms or businesses that had been theirs for generations. The bottom line is that America's small businesses need the TCJA along with the certainty it provides. If we let the TCJA expire now, Americans and small business owners will be forced to shoulder another $4 trillion in new taxes. When small businesses grow, the American economy grows. I strongly support making the TCJA permanent and will fight to ensure that the interests of small businesses continue to be a priority in this Congress. I would like to thank our witnesses for being here today and I look forward to your testimony. I yield back. Chairman WILLIAMS. The gentlelady yields back. And I now recognize the Ranking Member and my friend Velazquez for her opening remarks. Ms. VELAZQUEZ. Thank you, Mr. Chairman. Throughout the past 40 years our tax code has been repeatedly adjusted to favor the wealthy and the largest corporations, funneling wealth upward and hollowing the system that built the largest middle class in world history. This time is no different. Americans largely feel that the tax code is built in favor of the wealthy. According to a recent survey, 90 percent of small businesses agree in the belief that the tax system favors large corporations. Now, Republicans and the Trump administration are trickling down. Not only are they proposing to permanently entrench the inequality of the TCJA into our tax code, but the president just last week unilaterally enacted one of the largest middle class tax hikes in history. This will have devastating effects on the economy, particularly for small firms who operate on thin margins and don't have sophisticated supply chain management skills to navigate these complex and onerous tariffs. These tariffs will raise prices in the midst of a cost of living crisis, lower growth, and cause layoffs and business closures across the economy. When President Biden left office the U.S. economy was in a Goldilocks zone, low unemployment, falling inflation, falling interest rates, record business creating, and stocks at all-time highs. Many of the investments we make in infrastructure, clean energy, and reshoring domestic manufacturing were just beginning to work their way through the economy. It was the envy of the world. Yet, in less than 3 months, President Trump has squandered that progress. In the first quarter, American stocks posted their worst performance relative to the rest of the world in 23 years. Banks and analysts are unanimously warning of a recession in the next year while inflation is already jumping and interest rate cuts are paused. This is President Trump's economy. In a time when our nation suffers extreme levels of income and wealth inequality, the Republican plan is to continue to shift the tax burden onto the working class while lavishly cutting taxes for the top 1 percent and adding to the deficit. But what about fiscal responsibility and cutting the deficit? Despite projections that extending the TCJA over the next decade will cost up to $4 trillion, they are using budget gimmicks to say that it costs nothing. According to one of my Republican colleagues, this is fairy dust. I agree. Instead of cutting taxes for small firms and working families, they are proposing to cut vital resources for the most disadvantaged people. From $880 billion in cuts to the Medicaid program, which provides health care to our nation's poor, to hundreds of billions of dollars in cuts to nutrition assistance programs that help families put food on the table. To the extent that they have tax cuts for the working class and seniors, through no tax on tips, overtime, and Social Security, I ask what good is no tax on tips if restaurant margins are erased by tariffs and they are forced to close? What good is erasing taxes on Social Security if the administration is rendered incapable of distributing benefits? The Republican budget and the economic policies of President Trump are a disaster for our country. These policies are the exact opposite of what we need right now. They will raise costs significantly for the working class and cause main street businesses to lay off staff or close altogether. They are spiraling our economy into recession as we speak. We can still work together to deliver genuine relief for main street. We could extend the enhanced premium tax credits to keep healthcare costs from spiking for small businesses next year. We could expand tax credit for childcare, which will grow the workforce and keep small businesses competitive. We could reform 199(a) and ensure the bulk of benefits go to those who need it the most. We have a duty to reject policies that deepen inequality and undermine the future of small businesses and working families. Today's hearing is an opportunity to clearly confront those dangerous choices, stand up for small businesses and fight for an economy that works for everyone, not just those at the very top. My colleagues could stop this carnage at any time. I call on them to reclaim tariff powers along with the power of the purse and return them to Congress and work with Democrats on delivering genuine tax relief for the middle class in a fiscally responsible way. Thank you. I yield back. Chairman WILLIAMS. The lady yields back. And I now recognize Ranking Member Markey for his opening remarks. Senator MARKEY. Yes, thank you, Chairman Williams. Less than 100 days in, this administration has only delivered pain for main street across America. Since Trump's tariff announcement last week, the stock market has lost trillions of dollars and analysts and JPMorgan say it is likely the United States will enter a recession this year. The Commerce Secretary Howard Lutnick said that going through a recession would be, quote, `` worth it.'' Small Business Administrator Loeffler called Trump's tariffs, ``salvation''--for small businesses. Donald Trump posted on Truth Social over the weekend that big business is not worried about tariffs. Meanwhile, small businesses are calling Trump's tariffs salt in the wound that is just now beginning to heal. As a result of these tariffs, small businesses like Clem's General Store in Spencer, Massachusetts, is having to consider hiring freezes or scaling back the store's selections. These reckless tariffs and the impending retaliation will ruin many small businesses. 97 percent of exporters and importers in the United States are small or medium-sized businesses. They do not have the ability to absorb the increased supply chain costs leading to thinner profit margins, forced closures, mass layoffs, and increased costs for customers. Small businesses are having Pepto Bismol moments in the marketplace. They are just holding their stomachs every single day as they see all of this turmoil and uncertainty be introduced into a marketplace. And it is estimated that American households will pay an additional $3,400 in costs. Small businesses in their communities cannot afford this. And it is clear who this administration serves, and it is not small businesses or working people. The budget resolution passed by the Senate this weekend lays out a plan that would send trillions more in tax breaks to big corporations and the wealthiest in our society, all at the expense of essential programs like Medicaid and SNAP and investments in NIH to find the cure for Alzheimer's and cancer and diabetes, but that millions of hardworking Americans are looking to protect their families. And that is unacceptable. The wealthy do not need another tax giveaway. The top 1 percent of the wealthiest households hold one-third of all of the wealth in this country. The three wealthiest men in America, who sat right behind Donald Trump at the Inauguration, Elon Musk, Jeff Bezos, and Mark Zuckerberg, their net worth of those three people is equal to the bottom 50 percent of our entire population combined. And they are going to get massive tax breaks under this legislation? That is just crazy. These three people are absolutely not deserving of another tax break. And that is what the Republicans are doing. Their proposed tax policies would supercharge wealth inequality in our society. Even the Republican's so-called small business tax deduction, Section 199(a), does not primarily help true small businesses. Instead, the vast majority of these tax breaks of what government would spend on this deduction goes to the highest earners. I would support a provision if it was tailored to true small businesses. In fact, according to a 2023 report by the nonpartisan Joint Committee on Taxation, 55 percent of the Section 199(a) benefits go to the top 1 percentile in our country. Those aren't small business people. The upper 1 percentile are not by definition small businesses. They get 55 percent of the tax break in, quote/unquote, `` the small business tax break'' that the Republicans want to put extended into this whole process. We need a small business policy that benefits true small businesses, not the $5.8 trillion in the tax giveaway which they are planning on continuing and putting on the books. We need tax breaks for working families. We need childcare tax breaks. We need to protect Medicaid. We need real tax reform in this country that will propel our economy, not this drain on the limited revenues we have in the country to send more to the upper 1 percentile. That is not the problem in our society right now. I look forward to this hearing and it just feels great to be back here in the House of Representatives where I served for 36 years. And I just love this institution. And I yield back. Chairman WILLIAMS. The gentleman yields back. And I now will introduce our witnesses. Our first witness here with us today is Mr. Tom Click. Mr. Click is the president and chief executive officer and co-founder of Patriot Industries in Louisa, Virginia. And Mr. Click and his wife Sarah founded Patriot Industries in 2010. Prior to that, Mr. Click spent 10 years in the metals industry and most recently as vice president of market development for Norsk Hydro Aluminum and previously as vice president of Marketing and Product Development for Indalex Aluminum. Before entering the metals industry, Mr. Click managed the product management and engineering departments for the Amerock Division of Newell Rubbermaid. Mr. Click is an advisory board member of the GENEDGE Alliance and a member of the Virginia Growth and Opportunity Foundation. Mr. Click holds a Master's of business administration from the Gatton College of Business in economics and a Bachelor of business administration from the University of Kentucky. We appreciate you being here today and your wife. Our next witness with us today is Mr. Preston Brashers. Mr. Brashers is a research fellow in the Heritage Foundation's Grover M. Hermann Center for the Federal Budget in Washington, D.C. Mr. Brashers has been with the Heritage Foundation since 2021. Prior to that, Mr. Brashers was a tax policy specialist in the research and fiscal analysis division of the Washington State Department of Revenue and a transfer and pricing manager at PricewaterhouseCoopers. He also contributed to the analysis for the Heritage Foundation's budget blueprint for fiscal year 2023 and the budget blueprint for fiscal year 2022. Mr. Brashers holds a Ph.D. and Master of Science in economics from the University of Kentucky. Did you all know each other in school? Same? And earned a Bachelor of Science in economics from the University of Washington. I want to thank you for joining with us today. Now, it is my honor to yield to Chair Ernst to introduce our next witness. Senator ERNST. Thank you, Mr. Chair. And I am pleased to have a fellow Iowan with us today. Mr. Jerry Akers is the president of Sharpness, Inc. and MOCA, Inc., and is from Palo, Iowa. Mr. Akers started his journey as a Great Clips franchisee and with the help of his two daughters and son-in-law he now operates more than 40 franchises across three different businesses in both Iowa and in Nebraska. He holds a Bachelor's degree from Upper Iowa University, the Peacocks right? That is right. The Fighting Peacocks. Again, thank you for taking the time and making the trip to Washington, D.C. to share with this committee your perspective on the Tax Cuts and Jobs Act. And thanks to your family as well. Mr. Akers has a fantastic family and I hope to hear about their experience with your business as well. Thank you and I yield back, Mr. Chair. Chairman WILLIAMS. The gentlelady yields back. I now recognize the Ranking Member from New York, Ms. Velazquez, to introduce our last witness appearing before us today. Ms. VELAZQUEZ. Thank you, Mr. Chairman. Our final witness today is Ms. Anne Zimmerman, the Founder and Owner of Zimmerman & Co CPAs, Inc., a public accounting firm with offices in Cincinnati and Cleveland. Since the mid- 1980s she has provided financial and tax services to small businesses and individuals and acts as the off-site CFO for many businesses. She also co-founded and sold a number of businesses, including a large IT cloud company in 2017. She is currently a Co-Chair of Small Business for America's Future, a small business advocacy organization that helps to ensure policymakers prioritize main street by advancing jobs and equitable economic framework that works for small business owners, their employees, and their communities. She holds degrees in both business management and accounting from the University of Cincinnati and Northern Kentucky University. Thank you for being here this morning. Chairman WILLIAMS. The gentlelady yields back. And I want to thank all of you myself for being here today. And before recognizing the witnesses I would like to remind them that their oral testimony is restricted to 5 minutes in length. If you see the light in front of you turn red it means that your 5 minutes is up and concluded and you should wrap up your testimony. If you get around 5 minutes and hear this, you need to stop. Okay? And with that, I now recognize Mr. Click for his 5-minute opening remarks. STATEMENTS OF TOM CLICK, PRESIDENT, CHIEF EXECUTIVE OFFICER, AND CO-FOUNDER, PATRIOT INDUSTRIES; PRESTON BRASHERS, RESEARCH FELLOW, TAX POLICY, THE HERITAGE FOUNDATION; JERRY AKERS, PRESIDENT, SHARPNESS INC. AND MOCA INC.; AND ANNA ZIMMERMAN, FOUNDER & OWNER, ZIMMERMAN & CO CPAS INC. TESTIMONY OF TOM CLICK, PRESIDENT, CEO AND CO-FOUNDER, PATRIOT INDUSTRIES Mr. CLICK. Chairwoman Ernst, Chairman Williams, and distinguished Members of the Senate Committee on Small Business and Entrepreneurship and the House Committee on Small business, thank you for the opportunity to provide testimony on the importance of permanently extending provisions of the Tax Cuts and Jobs Act, TCJA, benefitting privately owned businesses like Patriot Industries and our employees. Since the passage of the 2017 Tax Cuts and Jobs Act, our investments in equipment and workers have increased, fueling economic growth at Patriot. If Congress does not act this year, both our business and our employees will be hit with a massive tax hike. Furthermore, without the extension of Section 199(a), businesses like Patriot are at risk of falling victim to the ongoing consolidation of economic power that is shifting control away from America's main street and further into the hands of a few dominant and oftentimes foreign-owned corporations. My wife Sarah, who is with me here today, and I started Patriot in 2010 with 1,000 square feet of space and one manual conduit threading machine that I purchased on eBay for $5,000. Like so many small businesses in America, we encountered both triumphs and setbacks along the way. In addition to navigating complex tax policies, burdensome regulations, and the high cost of compliance, I faced a life- threatening illness. If it weren't for our entire work family pulling together during that difficult time, Patriot might not have survived. Thankfully, I recovered and together we built a company that epitomizes the American Dream. Today, in 2025, Patriot has three USA-based factories totaling 140,000 square feet and we employ nearly 100 work family team members and we pay our bills on time. While Patriot is successful today, our humble beginnings remind me of how fragile small businesses can be. The 2017 Tax Cuts and Jobs Act was a game changer. It reduced financial roadblocks for small businesses like ours, allowing us to reinvest, expand, and create more jobs. One of the most impactful provisions was the 20 percent deduction for small businesses which gave pass-through entities like ours the ability to grow at a faster pace and compete on a level playing field with larger corporations. Additionally, the expansion of immediate expensing laws allowed us to write off the full cost of purchasing new equipment rather than depreciating it over decades. This change was critical for manufacturing companies like ours, which rely on high-cost machinery. Since 2017, we have invested nearly $4 million in advanced manufacturing equipment. If the law reverts to the old system business expansion will slow and small companies like ours will be forced to delay investments that drive innovation and job creation. Beyond the business benefits, lowering income tax rates across the board meant that every worker kept more of their hard-earned money. The expansion of the child tax credit and the doubling of the standard deduction provided additional relief for working families, allowing them to save more and invest in their futures. If these tax cuts expire our employees will face a direct pay cut through higher taxes, making it harder for them to afford necessities and plan for their financial security. Beyond immediate tax relief, another critical reason Congress must act now is to prevent the devastating impact of the estate tax, or as many call it, the death tax. Personally, I would like to reframe it as the survivor's tax since the people who actually have to pay it are the spouses and their children. Some believe the estate tax is a well-deserved tax on the rich. In reality, it punishes family-owned businesses at the exact moment the company is being passed to the next generation. At Patriot we have spent years growing our company, reinvesting in equipment, expanding operations, and creating jobs. But if I were to pass away unexpectedly, the federal government could demand a 40 percent survivor's tax on the business our family has spent our lives building. To meet that burden, my family might be forced to lay off workers or even sell the business entirely. The real danger comes from how the estate tax applies to non-liquid assets. Patriot maintains over $10 million in inventory across 11 states to mee the needs of our customers. This inventory along with the heavy equipment we use is considered part of the business' valuation when calculating the estate tax. Unlike large corporations with massive cash reserves, small businesses like ours don't have that kind of liquid case available. The estate tax could easily cripple our ability to keep Patriot in the family. To plan for pain, the 40 percent survivor's tax, family businesses must divert money away from hiring, expansion, and innovation and instead use it on attorneys, consultants, and insurance policies, which will ironically be valued as part of the estate that is being taxed. Estate planning should be a part of every company's long- term strategy, not decided by a black swan event. I have seen firsthand the benefits of the TCJA for our family business and work family team. I urge Congress to permanently extend these provisions as well as further reforms, such as the repeal of the estate tax to support family businesses like Patriot Industries, which are the backbone of our economy. Thank you for the opportunity to share my perspective and I look forward to the discussion here today. God bless you and God bless America. Chairman WILLIAMS. the gentleman yields back right on time. I now recognize Mr. Brashers for his 5-minute opening remarks. TESTIMONY OF PRESTON M. BRASHERS, RESEARCH FELLOW ON TAX POLICY, THE HERITAGE FOUNDATION Mr. BRASHERS. Chairman Williams, Chairwoman Ernst, Ranking Member Velazquez, Ranking Member Markey, and Members of the committees, thank you for giving me the opportunity to testify today. My name is Preston Brashers. I am a research fellow for tax policy at the Heritage Foundation in the Grover M. Hermann Center for the Federal Budget. The views I express in this testimony are my own and should not be construed as representing any official position of the Heritage Foundation. It is fitting that the title of today's hearing says, `` Keeping Taxes Low for Small Businesses,'' as opposed to cutting taxes. Some have mischaracterized what is at stake here. The small business tax provisions from the Tax Cuts and Jobs Act have been in place for nearly 8 years and if Congress allows them to lapse, then American entrepreneurs and small businesses would face a tax hike of more than a trillion dollars over the next decade. So, it is worth emphasizing that this is not about cutting taxes. It is about avoiding an enormous tax hike. Indeed, most small business owners would probably reject the notion that their taxes are low in the first place. TCJA included more than just tax cuts but also structural reforms, simplifications, and base-broadening revenue raisers. In addition to some permanent changes, TCJA temporarily suspended certain flawed elements of the tax code that had punished business owners and entrepreneurs who choose to invest in their workers and in the American economy. Those expiring provisions will be the focus of my testimony today. TCJA addressed some of the more egregious problems that existed in the tax code until 2017. For example, it makes no sense to tax income from business investments before a business has actually earned that income, but that is effectively what happens when the tax system forces businesses to capitalize and depreciate such business expenses over many years or decades instead of allowing them to deduct those costs when determining their current taxable income. To address that problem, TCJA implemented full and immediate expensing for capital equipment and machinery. For 5 years between 2018 and 2022, the tax treatment for these formerly depreciable capital assets was corrected but, unfortunately, full and immediate expensing, also known as bonus depreciation, is now gradually sunsetting. One of Congress' top priorities should be to lock in full and immediate expensing not just for another few years but permanently. Similarly, Congress should address one of the unfortunate compromises of TCJA, the 5-year amortization of research and experimental costs. That provision is structured in a way that delays to a later year 90 percent of the value of deductions for expenses related to research and experimental activities, including employee compensation costs, material and supply costs, costs of obtaining a patent and certain operations, management, and travel costs. The resulting short-term financial hit from this artificially accelerated tax liability can be severe for startup companies with limited cash flow and limited access to capital markets. TCJA also expanded death tax exemptions, helping to shield family farms and businesses from a devastating 40 percent federal tax on assets passed down to family members. Allowing the death tax exemption to be cut in half, which will happen if TCJA expires, could be the death knell for some asset rich but cash poor small and mid-sized family businesses. Finally, no other expiring provision in TCJA had a larger impact on the amount of taxes paid by entrepreneurs and small business owners than the 20 percent pass-through deduction, known as Section 199(a). While some reforms or improvements to the design of 199(a) are certainly possible, simply letting the provision lapse would be unthinkable to millions of American business proprietors who claim the deduction. Collectively, the expiring TCJA provisions benefiting small businesses were an indispensable part of the 2017 legislation's success. If lawmakers want to revitalize the economy and ensure that American small business owners and entrepreneurs can thrive, then extending these provisions should be a top priority. Lawmakers could multiply the economic growth associated with these small business-related provisions by ensuring that they are made permanent. Congress also has the opportunity to build on TCJA's success for small businesses by expanding and improving on expensing provisions in the bill, for example, by mitigating the harmful phaseout of the Section 179 small business expensing deduction. Thank you. Chairman WILLIAMS. The gentleman yields back. I now recognize Mr. Akers for his 5-minute opening remarks. TESTIMONY OF JERRY AKERS, PRESIDENT, SHARPNESS, INC., AND MOCA, INC., ON BEHALF OF INTERNATIONAL FRANCHISE ASSOCIATION Mr. AKERS. Good morning, Chair Williams and Ernst, Ranking Members Velazquez and Markey, and distinguished Members of the committee. My name is Jerry Akers, and I am a franchisee business owner of Great Clips and the Joint Chiropractic. I own and operate with my wife Nikki and two daughters Sam and Shelly 32 Great Clips and four of the Joint Chiropractic locations in my home state of Iowa, as well as Nebraska. I am also a co- author of a bestselling book, `` Live It to Own It.'' It is a franchise bootstrap guide book leading to the formation of Z- Dynamics which is tasked with paving the way to success for franchise business owners. I appreciate the invitation to appear before this committee to share my story of small business ownership and discuss the views of local business owners everywhere as it relates to tax policies that support business, our workforce, and our local economies. I have experienced firsthand the remarkable impact that franchise businesses can have on local economies and communities, job creation, and economic growth. My wife and I have created a community of our own employing over 250 team members that have been part of our system over the past several years. These team members are treated as an extension of our family and receive industry-leading wages and Fortune 500 benefits while working for a small franchise organization. Much of our continued success in our business and team members is in part due to the many important provisions of the Tax Cuts and Jobs Act. Many of the individual and small business provisions are expiring at the end of this year and are critical to locally- owned franchise businesses. I appreciate the urgency with which Congress is seeking to address these as the uncertainty created by their looming expiration is giving small business pause as they make investment decisions that will allow them to grow and create jobs. First, much like the rest of the small business owners, the 199(a) tax deduction for qualified businesses' income has been an important lifeline. It has enabled me and almost all franchisees to increase investment in business driving growth and innovation, while the extra financial breathing room has allowed us to hire more employees and provide better benefits to existing team members. More importantly, this deduction has helped level the playing field allowing businesses like mine to compete with larger corporations and provide a level of financial stability that has been valuable. The thought of these hard-earned gains being jeopardized is deeply unsettling. It is not just about numbers. It is about the livelihoods of families, the vitality of communities, and the spirit of entrepreneurship. The TCJA also allows businesses to immediately write off 100 percent of the cost of capital investments in qualified property. For our business, the influx of cash flow is crucial for reinvestment, remodeling, and expansion, and managing operational cost. Unfortunately, bonus depreciation has already begun to phase out. It stands at 40 percent for this year and it will be phased out entirely in 2027 absent congressional action. While the bonus depreciation provision provided a substantial boost to small business, its phase down creates a growing concern about increased tax burdens and potential disincentives for investment. Third, TCJA allowed an increase in the estate tax exemption to $11 million throughout the end of this year. This provision is critical to allowing family businesses like mine to be passed down to the next generation without selling or taking on crushing debt. This is very personal to me. Our daughters are minority partners at this time in our Great Clips location and will eventually own 100 percent of that business. Whether or not they do and that generational transfer can happen, hopefully, will happen here in Congress and may well depend on what Congress does as it acts. Other provisions like the business interest deductibility has been crucial for the franchise community. Prior to 2022, business expense deductions were limited by Section 1630(j) to 30 percent of their earnings before interest, tax, depreciation, and amortization, or IBITDA. Interest deductions are now limited to stricter limitation. This change combined with rising interest rates is proving to make incremental investments by small businesses much more expensive. On average, a business affected by the change could see a threefold increase in its incremental tax burden, facing both higher interest rates and financing improvements and a very high tax rate. The truth is for many small business owners like me, the TCJA provisions have been a lifeline. It has provided a sense of stability allowing me to reinvest in my business, hire new employees and provide better benefits and weather economic fluctuations. The prospect of losing that feels like a rug being pulled out from under me. In the already volatile economic climate, the added layer of tax uncertainty creates a sense of anxiety, especially for those who operate on tight margins. Small businesses are accustomed to taking risk but the threat of a significantly higher tax burden feels like an unfair and unpredictable obstacle in franchising and all small businesses. I am ready to be a resource for this effort and I thank you again for the opportunity to testify. I am happy to answer any questions. Chairman WILLIAMS. The gentleman yields back. I now recognize Ms. Zimmerman for her 5-minute opening remarks. TESTIMONY OF ANNE ZIMMERMAN, FOUNDER AND OWNER, ZIMMERMAN & CO CPAS, INC., SMALL BUSINESS FOR AMERICA'S FUTURE Ms. ZIMMERMAN. Chairman, Ranking Member, and distinguished committee Members, thank you for this opportunity to testify today. I am Anne Zimmerman, president and CEO of Zimmerman & Co CPAs and Co-Chair of Small Business for America's Future, a national coalition of small business owners and leaders. As a tax professional serving the small business community and a small business owner myself, I bring a dual perspective to this discussion. I see firsthand how the tax code impacts our ability to form, grow, and compete in a marketplace increasingly dominated by large corporations. Small businesses are the backbone of our economy representing 99.9 percent of all U.S. firms, employing nearly half of private sectors workers, and contributing 43.5 percent of GDP. Today, these businesses face challenges amid mounting economic uncertainty. The NFIB Small Business Confidence Index shows confidence falling sharply in Q1 2025, largely due to unpredictable tariffs and global trade tensions that have sent markets tumbling, creating fear and uncertainty for planning. A recent survey of our network shows 51 percent of respondents have postponed expansion and hiring until policies stabilize. At this moment of vulnerability, we need a tax code that provides stability and supports our success. As we approach the expiration of TCJA provisions we must honestly evaluate whether they have delivered on their promises. The evidence clearly shows that for most small businesses they have not. The Congressional Research Service found that Section 199(a)'s benefits area skewed. Over half the total dollars went to business owners with incomes above $500,000 who represent less than 5 percent of eligible taxpayers. I see this inequality daily in my practice. I recently prepared a return for a restaurant owner who employs 11 people. He received just $700 in savings from 199(a), hardly transformative for his business. The same day I prepared a return for someone with over $4 million in income who received $6,700 for the same deduction simply because of his investments in real estate partnerships. He employs no one. A survey of small business owners in our network confirms these aren't isolated cases. Only 6 percent increased business investment or raised wages and 3 percent hired more employees. Most telling, 43 percent reported no positive impact at all. So instead of simply extending TCJA provisions that help some but left most behind, here are some solutions that Congress should implement to help Main Stret. Exempt the first $25,000 of small business profit from federal income tax to deliver immediate relief to entrepreneurs in critical early years. Simplify the tax code to remove the financial burden that creates a competitive disadvantage. Create a small business standard deduction to reduce compliance costs for early stage businesses. Establish a tax credit for hiring first employees to help entrepreneurs make the crucial leap to employer status. Look for responsible ways to pay for tax reform that level the playing field for small business without slashing valuable programs like Medicare, Medicaid, and Social Security. Increasing the corporate tax rate from 21 percent to 28 percent would ensure corporations pay their fair share while generating substantial revenue. Close unfair loopholes that disadvantage small businesses. Eliminating just the roundtripping loophole alone would generate nearly $70 billion over 10 years for deficit reduction, healthcare costs, or small business support. Continue IRS service improvement and modernization plans. This is crucial. The IRS was able to collect more than $1.1 billion in unpaid tax debts from the top 1 percent in 2024, up from just $38 million a year prior. Ensuring wealthy individuals and large corporations pay their fair share generates significant revenue to help our communities. The expiration of the TCJA presents a rare opportunity to create a tax code that truly supports all American small businesses and we should seize it. Thank you. Chairman WILLIAMS. The gentlelady yields back. And we will now move to the Member questions under the 5- minute rule. I recognize myself for 5 minutes. Mr. Click, in your testimony you talk about the importance of reinvesting in your business with the money you save with the small business pass- through deduction. This critical provision, Section 199(a), leveled the playing field for small businesses and fueled their growth. So the question is, if this provision expired how would it limit your ability to reinvest and grow your business? Mr. CLICK. Without equipment we would grow slower. We would still be methodical. We would still invest in the company but being able to expense everything in the first year makes it a lot easier to accelerate your plans. So, our 10-year plan might become a 7-year plan, a 5-year plan. Chairman WILLIAMS. Thank you. Mr. Brashers, the 2017 Trump tax cuts allowed small businesses to immediately expense research and development costs which incentivized innovation in the defense industry tremendously. That provision expired in 2022 and here we are a few years later while China and other foreign adversaries are taking advantage and are offering a 200 percent tax credit for the same research and development. So, wouldn't you agree that this has put our national security at risk? Mr. BRASHERS. I think the research and development amortization is a bad policy to have 90 percent of the deduction pushed off after the first year. I think it is especially harmful to small businesses. But, as you say, to any company that is doing research and development it is going to have harmful effects. Chairman WILLIAMS. You know, in terms of U.S. global competitiveness and American security what will the future look like if Congress fails to reinstate immediate R&D expensing? Mr. BRASHERS. I think you are certainly going to see if R&D [expensing] is extended and brought back, because it has expired at this point, I think that will boost the amount of research and development that is happening. I think it is going to be dollar for dollar perhaps the biggest bang for the buck in this package of tax provisions. It is just a very high priority for so many businesses and that it just makes no sense for the tax code to penalize companies for engaging in research and development activities that are going to benefit not just them but their employees and the American economy and others that are going to be able to benefit from those innovations that they come up with. So, I think it is critical. Chairman WILLIAMS. Mr. Akers, as a franchise owner, which I am also a franchise owner, you know how important it is that your equipment and machinery is up to date. You want to be able to deliver and provide the product for your customers but this investment comes at a cost and that is why Congress included a 100 percent bonus depreciation, which we have talked about this morning, in the TCJA. However, that provision that we talked has already begun to phase out, so what did this provision help you buy the tools and equipment needed to make your business a success and give customers the service? Mr. AKERS. Thank you for the question. The bottom line is when you are in a retail-oriented business you have got to be at the top of your game. You have got to be able to have new equipment. You have got to have equipment that is cutting edge. You have got to have things that make an impression. You simply cannot do that if you are held back by not being able to deduct that at the right time. If it is spread over several years we are going to delay those improvements. By the way, that also impacts our throughput which means it hurts employment because we don't need as many employees if we can't be on top of it. Chairman WILLIAMS. Well, if you get a chance to write it off it opens up more cash to buy something else, right, and---- Mr. AKERS. Absolutely and that many times goes back to employees, whether it is increased benefits or increased wages. Because we have got X amount of money to spend we have got to decide where to do it. If we are paying it in, you know, longer deductions it is going to be hard to spend that on the employees. Chairman WILLIAMS. I yield back. And I now recognize Chair Ernst for 5 minutes of her questioning. Senator ERNST. Yes. Thank you, Chairman Williams. Mr. Akers, again, thanks for making the trip out here to Washington, D.C. and for representing Iowa small business. As you know, the TCJA provided significantly higher exclusions from the estate tax for families dealing with the death of a loved one. This is an issue that impacts our farmers, business owners, and capital-intensive industries and owners like yourself who have built a successful enterprise that your family helps to operate today. Personally, I support an end to the death tax altogether. That said, can you discuss how important the estate tax changes from the TCJA are for you and your family, your daughters and son-in-law, and what you have had to do in anticipation of losing the higher exemptions under the TCJA? Mr. AKERS. The bottom line is we are stimulating the economy by hiring really smart CPAs and attorneys to try and figure out a way to do this without letting our daughters lose it. I am very passionate about this. I am a farm boy from Iowa that comes from very little, and we have built up a really good business over the years with one intention and that has to have something to pass down to the next generation. That is going to happen. The only question is what will Congress do to help allow us to make that happen without the kids taking on multi-millions of dollars in unnecessary loans. Senator ERNST. Yes, thank you, Jerry. And, Mr. Click, as well, can you answer that? Do you have any concerns about the estate tax and how that will affect your family? Mr. CLICK. Yes, absolutely. We do have a plan in place but just removing the estate tax, the survivor's tax, would give me a lot more peace of mind. Senator ERNST. Yes, thank you. Mr. CLICK. We have three children just now coming into a phase of their lives where they might be interested in the business. Senator ERNST. We hope they are. Mr. CLICK. I do. Senator ERNST. And, Mr. Click, again, thanks for being here today as well. The changes to bonus depreciation and immediate expensing in the TCJA were transformative and nearly every Iowa-based manufacturer I have spoken to has made it clear how important it is to them in ensuring they can maintain and expand their operations. So, can you give a little more detail to that and why bonus depreciation and immediate expensing are so important to our small businesses in capital-intensive industries like manufacturing equipment? Mr. CLICK. Yes. The equipment is very expensive. It is something that is a great asset for many, many years but it does wear out over time and you need to replace it. You need to repair it. And if you are a business like Patriot where you are intent on expanding, new locations require a completely new set of equipment. Our most recent factory was created down in Houston, Texas. It was about a $2 million investment. Most of that is four Haas CNC Machine Centers, sorry, five Haas CNC Machine Centers and all the other support equipment that goes with that. Being able to deduct that immediately makes it a lot easier for us to look for the next location. Senator ERNST. Yes, 2 million bucks. That is pretty hefty for small business so---- Mr. CLICK. That is a good value. That is a good value. Senator ERNST. Yes, absolutely. Mr. Akers and Mr. Click, as our small business witnesses here I want to know how you and your staff will be affected if the TCJA is not extended? What are the one or two things you will have to do to keep your businesses afloat, and what does that mean for your workers? And, Jerry, we will start with you, please. Mr. AKERS. Yes. As I mentioned before, there is a limited amount of money to go around in a small business like ours so we have to make decisions about it if this is not put back in place, frankly, that money will end up coming from our employees at some point in time in only that it will slow down the improvements in wages and it will slow down the improvements in benefits So again, we want to be able to do both. We want to be able to continue to modernize and grow and expand and then take care of our employees, but we cannot do both without the help of the TCJA. Senator ERNST. Thank you. And, Mr. Click? Mr. CLICK. Yes. The tax hike on them personally is probably the first thing that everybody is going to feel but it will slow down the acceleration of the business. And over the years we have added benefits. When we started we had no health insurance. We had no 401(k). We have both of those now. We have funds set aside for the employees. We pay bonuses every year. There is only one pot of money for this and this is a component that will help make sure that we manage that pot of money appropriately and for the employees and for the work family and for the company. Senator ERNST. And thank you both. And, Mr. Chair, I just want to note that both of them have responded that much of the return that they get from the TCJA they are rolling right back into their employees, whether it is wages, benefits, bonuses. So, thank you both for representing our small businesses today, and I yield back. Chairman WILLIAMS. The gentlelady yields back. I now recognize Ranking Member Velazquez for 5 minutes. Ms. VELAZQUEZ. Thank you, Mr. Chairman. Ms. Zimmerman, the president just unilaterally enacted significant tariffs on virtually every country except Russia. Can you discuss the biggest economic policy blunder in the past century and explain how this will disproportionately harm small businesses? Ms. ZIMMERMAN. Thank you. Absolutely. The small business uncertainty index is higher than it has been, I think the second highest ever, even higher than COVID right now. The uncertainty is killing small businesses. They can't plan. They don't know if they are going to open a new one. And I spoke just recently with the gentleman that owns a coffee shop out west and he was already $50,000 into opening his second location and he is having to put that on hold simply because of the tariffs that have been enacted. He is going to pay it on everything that comes in. He can't negotiate. We as small business, truly small businesses, don't have the negotiating power that a large business has, so for his situation Starbucks can go to their suppliers and say I am 50 percent of what you sell. And they can negotiate. They are not going to get the whole cost of that. But then there is a watershed effect that comes down that we as the small businesses are going to pay even more of it because the suppliers have to make it up. Ms. VELAZQUEZ. Thank you. This is just the beginning. Without the tariffs even in effect the Atlanta Fed has dropped the real-time GDP estimate for the first quarter to -3.7 percent. Consumer sentiment has crashed to the lowest level in years and inflation expectations are higher than they ever were throughout the Biden administration. People understand this will be catastrophic. The share of consumers expecting higher unemployment over the next year is the highest since 2009, and these were all measures taken before Trump's tariff announcement. Ms. Zimmerman, so many Americans feel that the game is rigged and small businesses agree. According to your group's survey, 90 percent of small businesses think the tax code favors large corporations. Based on your conversations with small businesses, what makes them feel this way? Ms. ZIMMERMAN. Well, they don't get--a true small business isn't really truly on a level playing field, so yes, bonus depreciation may be great but we already have 179 that up to $1.2 million you already got to write that off. So, the small businesses I know generally don't buy more than $1.2 million in equipment each year. That is a large one. I mean, there are some very successful business people here but 90 percent, I believe it is, or 75 percent of the small businesses in this country make 75,000 or less. The million dollars is not what they are worried about. Surviving, having an employee, being a part of their community, we as the true main street people can't separate community from employees from our business. Ms. VELAZQUEZ. You know, I find it astonishing that my colleagues act as if the pass-through deduction is the be-all and end-all of small business tax cuts. Sure, everyone who can navigate its complexity gets a little something but with over half of the total benefit going to the top 1 percent we need to seriously consider reform before we can move forward responsively. Ms. Zimmerman, on top of the tax code that favors the wealthy, Republicans are proposing steep regressive tariffs and a new tax cut for the rich paid for by gutting Medicaid by $80 billion, education by over $300 billion, and nutrition programs by over $200 billion. The goal seems to be funneling wealth upwards from the middle class to the rich. What impacts do you think this will have on small businesses on the trust of our institutions? Ms. ZIMMERMAN. An absolutely devastating impact. Ms. VELAZQUEZ. I yield back, Mr. Chairman. Chairman WILLIAMS. The gentlelady yields back. I now recognize Ranking Member Markey for 5 minutes. Senator MARKEY. Thank you, Mr. Chairman. The announcement of President Trump's new tariffs should actually be called obliteration day instead of liberation day. Liberation day for Trump is taking us back to the days of Smoot-Hawley, Herbert Hoover, and the eve of the Great Depression. Foreign countries have already started retaliating with no end game in sight. He is making it up as he goes along. And Trump's reckless actions will raise costs for small businesses and working families. We have already heard from small businesses across the country concerned about how they will weather the impacts from Trump's trade war. For example, in Massachusetts, a small business in the hospitality industry told my office that their suppliers, which include local restaurants, grocers, and other small businesses, have already raised their prices just with the threat of a tariff war. So, Ms. Zimmerman, how will tariffs hurt small businesses, including the ones that you work with? Ms. ZIMMERMAN. It puts them at a great disadvantage. As I said earlier, we don't have the negotiating ability and the negotiating power. We also have thinner margins and so the tariffs are harder for the smaller businesses to take. And the economic uncertainty, I mean, they are on one day, they are off one day, they are on one day. You know, somebody tweets that they might be postponing and then the market jumps. How do you plan? 51 percent of our network said we can't plan. We are going to put everything on hold. Senator MARKEY. And for a small business, a truly small business, that is potentially catastrophic. Is that right? Ms. ZIMMERMAN. It absolutely is. And the numbers in a small business, too, that it would take to put us under is so much different than the big numbers that you all have to deal with in your work every day. You know, if we can save $70 billion by changing the roundtripping, closing up that one loophole, how far would that go for small business? How many individual main street businesses would that keep open? Senator MARKEY. So according to the Urban Institute, in 1963 the top 1 percent had 36 times the wealth of the middle class. Since then that wealth gap has almost doubled with the aggregation of the wealth in the upper one percentile. Entrepreneurship can help close that gap between the ultra- wealthy and everyday Americans, however, policies that grow the wealth gap will hurt entrepreneurs, given that 75 percent of small businesses use personal savings to start their firms. America's tax policy should not provide small businesses with pennies while large businesses and wealthy individuals rake in millions. As I mentioned in my opening, even the so-called small business tax deduction, or section 199(a), does not primarily help true small businesses. The top 1 percent of all earners take home 55 percent of that tax incentive. That is not a small person. You are making over a million. You are not in any need of a tax break right now. Ms. Zimmerman, as an accountant you have helped countless businesses large and small file their taxes. In your experience, what kinds of businesses benefit most from the so- called small business tax deduction? Ms. ZIMMERMAN. Well, obviously, larger small businesses is the first. I can tell you that 43 percent of our small business owners told us they couldn't even figure out if they were eligible for it because they don't have accountants. You know, if you are making $75,000 a year how much do you have for all that tax planning available? You are feeding your family. You are feeding your neighbor's family. The complexity is beyond crazy. It doesn't allow for certain firms. It doesn't allow for this, it is for that. Even I spent a long time trying to weed through it. Senator MARKEY. Yes. So, that is what really bothers me. I see Elon Musk now. He is saying, well, the deficits. It is a huge problem for our country. We have got to destroy the Department of Education, destroy NIH funding. We are going to have to go in and loot Medicaid that serves about, you know, 30 percent of our country. Grandma and grandpa are in nursing homes. 70 percent of people in nursing homes are on Medicaid and half of them have Alzheimer's. He is saying loot all that money. Give it to tax breaks. And who gets it? People who make more than $1 million a year. Can we really afford that because we have to take the money from grandma and nursing homes, kids who need an education? These are just crocodile tears coming from Elon Musk and the Republicans about their concern about deficits even as they call for huge tax breaks for the wealthiest in our society. Chairman WILLIAMS. Next we have Congressman Stauber from the great state of Minnesota for 5 minutes. Mr. STAUBER. Thank you very much, Mr. Chairman. I see my colleagues on the other side of the aisle are bringing out their old, dusty playbooks again. I would just say when we talk about tariffs I represent northeastern Minnesota. President Trump put the 232 steel tariffs that saved the iron range and they were so good that President Biden kept them on. We have to understand the opportunities that we have because the secondary positive effects in northeastern Minnesota because of those tariffs they are still in business today. And remember, northeastern Minnesota mines the iron ore that makes almost 82 percent of this nation's steel, which is a strategic national security issue. So, the tariffs that President Trump put on the steel industry and President Biden kept on worked. They saved the iron range. And as the iron range in northeastern Minnesota go, so does the state of Minnesota. Chairman Williams and Chairwoman Ernst, thanks for holding this meeting today. In northern Minnesota, as I said, small businesses they are not just the backbone of the economy. They are the heart of the economy, whether it is a precision manufacturing facility in Duluth, Minnesota, a family-run logging operation in Grand Rapids, or a fifth generation farm in Chisholm, or a manufacturing facility in Forest Lake. These are the folks who create jobs, train young workers, and keep our small rural towns alive. That is why the Tax Cuts and Jobs Act of 2017 was so important. It wasn't just a tax cut but a signal that the government wanted our small businesses to take our economy to that next level. The 20 percent deduction for pass-through businesses under Section 199(a) leveled the playing field for small firms competing against large corporations. This provision has helped thousands of Minnesota pass-through businesses like S- corporations and sole proprietors reinvest in their operations, raise wages, and hire new employees, as many of you testified today. Mr. Click, your business has seen remarkable growth over the past 15 years. If the Section 199(a) deduction sunsets at the end of this year, how would that impact your ability to invest, hire, and even stay competitive? Mr. CLICK. It is all about the equipment. You know, our 10- year plan we would like to have five more fabrication facilities around the country. And as I said earlier, each one costs about $2 million, so that 10-year plan without the Section 199(a) coming back they push off from 10 years to 12 years or longer. Mr. STAUBER. You have you have to stay competitive. Mr. CLICK. We have to stay competitive. We have to keep advancing. We have the most advanced equipment in this industry. We have more advanced equipment than anyone else in the industry combined, and I would like to keep that. Mr. STAUBER. Yes. And the way you survive is in continuously investing in that advancement in the equipment so you can stay competitive. Mr. CLICK. Absolutely. Mr. STAUBER. Because if you don't, you are going to be out of business. Will that be true? Mr. CLICK. It would be impactful. I don't think we will be out of business. We basically reinvented threading conduit and, again, we want to keep that title and keep growing. Mr. STAUBER. Yes. Capital purchases like equipment or new technology are foundational to long-term growth. Mr. Akers, from your experience as a franchise owner how did 100 percent bonus depreciation improve your ability to grow your business? And what risk do you see if this benefit is not made permanent? Mr. AKERS. Bottom line is since that was put into place we have grown our business by about 25 percent in the number of units, which is a huge explosion for the Midwest for rural America, as you said. With that goes 50 jobs or some something in that neighborhood. So, being able to reinvest in that has accelerated our growth and will continue to accelerate the growth in the future, as well as allow us to give more benefits and wages to our employees. Mr. STAUBER. You know, you just said the loss of 50 jobs. That is real in small town Iowa or small town Minnesota. People in this town don't understand that. We talk about small businesses being the engine of our economy. We have the opportunity right now to do that. I was a small business owner for 31 years. It wasn't easy. It wasn't easy raising four kids and my brothers would say we have got to come up with $7,000 apiece by next Friday because we can't meet net 90. You folks are the engine of our economy. Don't ever forget that. Don't let this town change your mind or anybody on this dais change your mind. Small businesses are the engine of our economy. They are going to make America even better. Your private investment, you have got to reach in your wallet, take that risk for the American Dream and be successful and employ those people that live in our rural small towns. We are depending on you. Don't quit ever. And I yield back. Chairman WILLIAMS. The gentleman yields back. I now recognize another person from Kentucky, the great state of Kentucky, Representative McGarvey for 5 minutes. Mr. MCGARVEY. Thank you, Mr. Chairman. I did see that Mr. Click and Dr. Brashers definitely went to the University of Kentucky, which I appreciate. I also want to take a moment right now to just say we are really thinking about all of the small business owners in Kentucky who are dealing with the historic flooding right now in our state. It is really bad and it is ravaging many parts of our state and small businesses are crushed right now dealing with that. So, obviously, now is not the time to be cutting back on something like FEMA or to hollow out an agency like the Small Business Administration which helps the federal relief efforts for our small businesses hit with this uncertainty. We have talked a lot about tariffs say. You know, I want to talk a little bit about tariffs as well. Tariffs are a tool. A tool is neither good nor bad. A hammer is a tool. It is pretty good for putting a nail in a wall. It is not so good for fixing your iPhone. How you use a tool matters and Donald Trump is wielding this tool in a chaotic way without any strategy, without any plans in a way that is definitively hurting businesses, small businesses, and American workers. One of the ways he is hurting our country with his current tariff plan is just the uncertainty of it. We had a day a couple of weeks ago where tariffs were on on Monday, off on Tuesday, on on Wednesday, off on Thursday. Right now people are unsure what he is doing. If you read any coverage of this, conservative, liberal, whatever, they are saying what is the president actually going to do? Is he going through this? How does this matter? And the uncertainty that small businesses face every day regardless of what the president decides to do when he wakes up in the morning is enough already, but this uncertainty that he is causing by escalating these trade fights on average every 3 days since taking office is not good for business. And the markets right now certainly reflect that. So, I want to ask you, Ms. Zimmerman, I am sure you have heard a lot from terrified small business owners who are grappling with this uncertainty over the last several weeks. How does this uncertainty alone harm small businesses? Ms. ZIMMERMAN. My colleague who is here with me today, a friend and colleague, has a manufacturing company in Pennsylvania, been in his family for 100 years. Barely survived COVID with all of that going on, came out on the other end successful, and now he is being hit with this, which is much worse than what he was hit with there. His supplies come in from out of the country. He has no negotiating power. He doesn't know how much to order for his Christmas, you know, season because he has no idea. How do you figure that out when you have no idea? And if I might say, Representative, the words level playing field have been used by all of us many of times today. How is a 40 percent tax cut for the biggest businesses and a mere 20 percent deduction, not tax cut, but deduction, an even level playing field when that is what the small business has gotten? Mr. MCGARVEY. Right and it is not. Ms. ZIMMERMAN. That is not level. Mr. MCGARVEY. It is not a level playing field and what we want for our small businesses, for main street, which remains the backbone of the American economy. We were talking about these tariffs again and why is it, you have mentioned this, but drill into why the tariffs cause such disproportionate harm to these small businesses? Ms. ZIMMERMAN. Well, I think it is the thin margins. It is the inability to negotiate. You know, if I am selling a widget and I am truly main street down the block from me that is my neighbor that is running that store. How does he have any negotiating ability when Walmart has already told that same supplier that you will not pass that whole tariff on to me or I will go somewhere else. Because my neighbor when she does that they don't care. Go ahead. I am going to take care of Walmart. Mr. MCGARVEY. Flipping from the tariffs now to the tax increases, which you talked about, if the House votes this week on the full extension of the Trump tax bill, which would give the top 0.1 percent of Americans disproportionately, not to mention the top 1 percent of Americans, while giving the rest of us very little, one of the ways that they are trying to pay for that--it is still going to add to the debt. One of the ways that they are trying to pay for that is by cutting healthcare. That will also have an impact on small businesses, won't it? Ms. ZIMMERMAN. Absolutely. We help our employees navigate that and it will make it impossible. Mr. MCGARVEY. Thank you, Mr. Chairman. I yield back. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Van Duyne from the great state of Texas for 5 minutes. Ms. VAN DUYNE. Thank you very much, Mr. Chairman. I want to thank our witnesses for joining us here today. Time and time again what we hear loud and clear from businesses all across the country is they need certainty, parity, and simplicity in the tax code. And as we move through the budget reconciliation process we must keep small businesses at the front and center of our priority. I am sitting here today listening to Members on, you know, colleagues on the other side of the aisle saying that the idea that under the Biden administration the economy was just fine and dandy, that is an absolute lie. Under the Biden administration we saw twice the inflation that we have seen under the Trump administration. And when you look at stats from the Bureau of Labor Statistics that indicates that real average hourly earnings for private sector employees actually dropped 2.24 percent between 2021 and 2024. That is not a great booming economy. On the flip side, when you look at the TCJA results, the bottom 50 percent of earners paid less income tax than ever before, and the bottom 20 percent saw their federal tax rate dropped to the lowest level in 40 year. So somehow the idea that working Americans did not benefit from the TCJA, again, is an absolute lie. The tax cuts also enabled businesses to raise wages leading to a 4.9 percent increase in real wages between 2018 and 2019. That is the fastest wage growth that we saw in two decades. Additionally, real median household incomes in the U.S. rose by $5,000, a larger increase than the previous 8 years combined. And overall, individuals and families received $3 out of every $4 from the total 2017 tax cut package demonstrating its direct benefits to American households. So, the idea that only large corporations are benefiting from this, absolute lie. So earlier this year, I joined my colleague Representative Smucker in co-sponsoring the Main Street Tax Certainty Act to make the small business pass-through deduction permanent. I have also signed on to Representative Arrington's ALIGN Act to restore and make full bonus depreciation permanent. I have joined Representative Estes on his American Innovation and R&D Competitiveness to permanently allow for immediate R&D expensing. These three provisions, cornerstones of President Trump's signature tax reforms, have brought about some of the greatest investments in innovation in our nation's history and the numbers back it up. According to NFIB, letting the 199(a) deduction expire would force 60 percent of small businesses to raise prices and nearly 44 percent to delay or cancel capital investments. On the other hand, making the deduction permanent would create 2 million jobs annually and that is more than 8,000 in just Texas 24 in my district alone. So, Mr. Click, how would your business be harmed if the section 199(a) deduction were to sunset? Mr. CLICK. Again, as I have said, it would slow us down. It would also slow down our plans to make more products here in the USA that, unfortunately, the country has stopped making. And I know there is a lot of talk about tariffs. I am definitely not a tariff expert but I can tell you from personal experience when my wife Sarah and I put the company together we made sure that our products were made here in the USA. And we are the only company that guarantees all of our aluminum products are made here in the USA, mostly in Virginia, our feedstock. The products that we import represent less than 2 percent of our revenue, and again, we have been through the tariff discussion before and see minimal impact from that. But I don't want to slow down. I want to continue. I want to make those products that we have to go to other countries for right now. Ms. VAN DUYNE. Having an aluminum manufacturer in my district and listening to them complain about how the unfair competition with the rest of the world that the U.S. government has placed on them, they really appreciate that. And I thank you for your buying from American business members. Mr. Brashers, in your research you emphasize the role of full and immediate expensing and replacing the IRS' complex rules for depreciation. Assuming that you agree that businesses have to deduct capital investment expenses over 20 years is impractical, just how important is full and immediate expensing, especially to capital-intensive small businesses? Mr. BRASHERS. Well, just to give you some idea, just think about the inflation that we have just been going through where we had 8 percent, 9 percent, even 5 percent inflation, and you think about that deduction and you are telling business owners that they are not able to actually claim that deduction for 20 years. What ends up happening is ultimately you are only potentially getting about half of the deduction for some of these 20-year assets. And so it is quite harmful. Ms. VAN DUYNE. All right, thank you very much. And I yield back. Chairman WILLIAMS. The gentlelady yields back. I now recognize Representative Simon from the great state of California for 5 minutes. Ms. SIMON. Thank you. Thank you, Chairs and Ranking Members and thank you witnesses for coming this way and telling your stories and giving us a wonderful perspective. In reading the reading materials in the homework, it is to me clear that this hearing is not necessarily about the prosperity of main street. In fact, it seems as if many of us are pretending that tax cuts for the wealthy will somehow trickle down to the small business owners who are being pushed to the edge right now. And yes, 2 years ago, 6 years ago, 10 years ago, 20 years ago small business owners in this country have consistently struggled in many of our communities to make ends meet. This hearing is actually about ignoring the fact that the real economic emergency is one that we are not talking about right now across the country. There are tens of thousands of workers, many of them veterans, first generation Americans, many of them disabled, running small businesses, many folks who have been fired from our federal government also first generation Americans, many of them veterans, many of them disabled. These are not tech giants but we fired folks from our own government. Small businesses can't safely rely on an SBA in this moment that is being dismembered in real time. We have talked to hundreds of small business owners in our office and they have said clearly they can't get through. No one is answering their request. And if the SBA has to manage $1.6 million in student loans then they can't focus on the conversations that we are having today, the mom and pop vendor on main street, on Broadway Stret. We are not investing in main street in having these conversations. We are ripping out the social safety net and we are calling it fiscal responsibility. So, let's stop pretending. The economy is not working for working people. It is not creating opportunity. In this moment we know that is true. It is not creating a class of folks who can and thrive in real time. In fact, we are discarding people, skilled workers and small business owners at the same time with no support, no capital, and no roadmap moving forward. If this hearing was truly about prosperity we would be talking about target investments, targeted investments that expand access to not only capital and real resource in real time, but also expanding access to healthcare, solidifying public infrastructure, and a tax system that honors work, not wealth. Instead, we are watching a slow collapse, a real collapse, and there is no up from here unless we change course. I have a question to Mr. Zimmerman and thank you for being here, excuse me, Mr. Zimmerman. Thank you for being here today. Ms. Zimmerman, you serve real business owners, real folks, people holding together families, communities, and folks who are disbursing paychecks to real everyday folk in community. And in this moment, as the administration disbands critical safety nets, disbands the services that are supposed to support these small business owners, disbands the SBA with no clear strategy moving forward, what are your clients afraid of most? And what would an actual true investment right now, not performative tax cuts, look like for them? Ms. ZIMMERMAN. My clients' risk is not surviving through this uncertainty. It is not surviving through the tariffs. We can talk about maybe tariffs being, as you said, a tool and maybe being successful coming out the other side but they are not going to be there on the other side for this. They are going to be gone by then. And those are my neighbors. And by cutting Medicaid and Medicare and all these safety nets, the SBA, even the IRS where we are taking away tools that they are using directly, you know, my colleagues who have larger businesses maybe even employ 100 or 200 people, they are not going to the SBA directly. They have lawyers and bankers and stuff. Ms. SIMON. That is right. Ms. ZIMMERMAN. I am talking about the true main street entrepreneur who relies on that. Ms. SIMON. I want to thank you for your answer. Andthat you have such little time but I think you pinned it correctly. As your clients continue to navigate entrepreneurship in this economy where the foundation that they stand on is being pulled out from under, I hope we get it right. I hope we get it right. And thank you all so much for being here today. I appreciate your testimony. Chairman WILLIAMS. The gentlelady yields back. I now recognize Representative Alford from the great state of Missouri for 5 minutes. Mr. ALFORD. Well thank you, Mr. Chairman, and thank you, Chairwoman Ernst, for holding this important hearing today. I would also like to thank the senators here for making the trek over the House. Thank you to all of our witnesses for being here today on your own time and own dime. American experienced its greatest economy in my lifetime under President Trump, and that was no coincidence. It was thanks to the Tax Cuts and Jobs Act of 2017. The TCJA allowed Americans to take the leap. It allowed businesses to flourish. It allowed our country to move forward as one nation under God. It ushered in the hope and reality of the American Dream as small business owners around our nation were all living their own version of it. Allowing the Tax Cuts and Jobs Act provision to expire and increasing taxes will not only further hurt the competitiveness of our small businesses; it will crush them. The jobs that they provide will no longer be there. The communities they serve will suffer. People will go out of business. It will chill the hope and reality of the American Dream on main street that we all saw was possible just a few years ago. I would urge my colleagues, Republicans and Democrats, senators and representatives, to work together to make sure that the 2026 does not usher in the largest tax increase in U.S. history. And let's get one thing straight. Enough of the lies and deception and gaslighting. This is not a tax cut for billionaires and millionaires. This is an extension of tax policy that is going to allow mom and pop businesses in the 4th Congressional District of the great state of Missouri to stay in business, to hire people, to make rural parts of America flourish. Mr. Brashers, many of my Democratic colleagues have painted an extension of this Tax Cuts and Jobs Act as handouts for oligarchs, tax cuts for the rich. Can you explain why they are wrong? Mr. BRASHERS. After the Tax Cuts and Jobs Act was passed we actually saw that the bottom 50 percent paid a smaller portion of federal taxes than they did prior to the TCJA. The idea that the TCJA was simply a giveaway to the very wealthy is just not backed up by the facts. Mr. ALFORD. And, in fact, it is going to be a big deterrent to starting small businesses in America, will it not? Mr. BRASHERS. Yes. Mr. ALFORD. Explain that. Mr. BRASHERS. Yes, absolutely. So, what we are talking about right now with the extension of these provisions, keep in mind that the corporate rates that has been locked in, so if you were to allow this to lapse what you would actually have would be that the small businesses would be slammed with a 20 percent tax increase in the case of the 199(a) deduction. And all businesses would be hit with tax increases from the expensing and all these other provisions we have been talking about today. These would be pretty much across the board for businesses. They are going to be paying significantly higher taxes and absolutely it is going to hit the small businesses the hardest. Mr. ALFORD. Mr. Akers, let's dive into this just a little bit more. If this section 199(a), the pass-through business deduction is eliminated for Main Street America, what is that going to mean to business in America, 33 million small business owners? Mr. AKERS. Well, the bottom line is that money has got to come from somewhere. If we are paying more in taxes we can't use it for other things. Again, I reiterate most of that comes from increased prices to consumers. It comes from lower future benefits and wage increases for our employees. Our piece of the pie is as an owner is very narrow. It is very tiny. We cannot give up any more of it so it has got to come from somewhere else. Mr. ALFORD. Thank you. I have 24 counties in my district from south of Kansas City over to The Lake of the Ozarks down to Springfield. I am in the district all the time. I talk to small business owners. They are deathly worried and rightfully so about us not getting this done and them not being able to compete against the big guys. We must--we must renew these provisions. It is not a tax cut for the rich. It is not for the billionaires and millionaires. This is for mom and pop. This is for the people who run the sawmills for black walnut in the state of Missouri. It is for people who have sign companies in Sedalia, Missouri. This is not about the rich. It is about making America wealthy again through small business. Thank you so much and I yield back. Chairman WILLIAMS. The gentleman yields back. I now recognize Senator Hirono from the great state of Hawaii for 5 minutes. Senator HIRONO. Thank you. It is Hirono. I thank the two Chairs for this, and I say Aloha to our witnesses. I am glad that Ms. Zimmerman is here. The bottom line is that who is going to benefit or who benefited from the 2017 tax changes? And, Ms. Zimmerman, I think you described small businesses as a 90 percent of small businesses who are making what or have revenues of what did you say? Ms. ZIMMERMAN. 75 percent earn end up with--live off of $75,000 or---- Senator HIRONO. $75,000 for the 75 percent. Ms. ZIMMERMAN. Yes, something like that. Senator HIRONO. And how many of these are the small businesses, and there are thousands of small businesses that fit into that category? Ms. ZIMMERMAN. Oh, yes. Senator HIRONO. How many of them do you think benefited from the 199(a) tax provisions? Ms. ZIMMERMAN. Well, we know that it is to the degree---- Senator HIRONO. This is the category of the 75 percent. I am not talking about the ones who have franchises and over 100 employees. Ms. ZIMMERMAN. Well, if you think about it, if they made $75,000 or let's even say 100 to make it simple, okay? So, if they made 100 then they get a deduction of 20 and their tax rate at that rate is only 12, so they are getting $2,000, $2,400. That is their benefit. How many employees are they going to hire with $2,400 is what I am saying? And I am hearing about sunsetting. We can't let these sunset because it would kill small businesses. Absolutely, but there are other options than sunsetting. Don't you have the right as our representatives and senators to improve it instead? don't you have the right to change it? Why did we have a 40 percent cut for the Amazons of the world and I got a 20 percent deduction, which actually I don't get, but I won't go into the technicalities of it---- Senator HIRONO. So, Ms. Zimmerman, we are going to be confronted with extending the 2017 tax bill so if we were to focus on the 75 percent of small businesses who I think I would describe as truly small businesses, how would we change? What kind of changes would we make to, for example, 199(a) or any of the other existing provisions that we were asked to simply re- up? Ms. ZIMMERMAN. Well, 199(a) is very complex and that is part of its problem. Senator HIRONO. Well, I know that. Ms. ZIMMERMAN. Yes, and so perhaps simplifying the overall code so that the truly small business benefits. Give them a credit for their first employee. Many of those businesses it is just one person. If they want to grow they are hiring their first one, right? Give them a credit for hiring that. Give them a standard deduction ability so that they don't have to track every receipt when they are out mowing people's lawns, right? And they can instead take that standard deduction. Close some loopholes to push money back to small businesses. Senator HIRONO. So, I think that the information that we have that the 2017 tax bill actually benefited the richest people in our country and corporations, I don't think there is any amount of gaslighting that is going to change those statistics. So, what I am interested in, again, is how do we truly help the majority of small businesses as described by you, Ms. Zimmerman, folks who are bringing in less than $75,000 a year and those are--that would not be the two gentlemen who own businesses who are on this panel, by the way. You do not constitute small businesses as described by Ms. Zimmerman. So, I am going to be very interested in finding out, you know, what provisions we can put into this bill, well, actually that would presume that I actually--that there are provisions in the bill that actually help people. I think not. But again, I just want to thank you for being real, Ms. Zimmerman. Ms. ZIMMERMAN. Thank you. Senator HIRONO. Thank you for being here. Thank you for both of our Chairs. Chairman WILLIAMS. The gentlelady yields back. I now recognize Representative Wied from the great state of Wisconsin for 5 minutes. Mr. WIED. Every single day in my offices both in D.C. and the district receive requests from local small business owners asking me to support the extension of the 2017 Trump tax cuts. I would like to tell them directly that I am fully committed to advocating for the extension and codification of the important tax breaks for small businesses. Those on the other side of the aisle don't support this. They bemoan the growing federal deficit and falsely claim that by extending the Trump tax cuts we will add to our federal debt. Let me be clear. The federal government does not have revenue problem. We have a spending problem, not to mention this, maybe the first time ever the American people have heard Democrats concerned about debt. Instead, they spent their time proposing one bloated federal budget after another. Rather than cheering on our efforts to cut discretionary spending and make sure the American people are prioritized by our own government, they spent their time claiming we are attacking democracy. The message from Democrats is clear. They want to raise taxes on everyday Americans to pay for DEI programs in Serbia, Sesame Street in Iraq, and transgender surgeries in Guatemala. They want to punish American small business owners by saddling them with added regulatory costs that make it harder for them to do business. Republicans are focused on our primary mission, helping the American people and allowing main street to prosper again. One of the common misconceptions about the Trump's tax cuts is that they primarily benefit the wealthy. Mr. Click, if we took one provision of the Trump's tax cuts, the 199(a), a CRS report found that 80 percent of 199(a) claims were filed by those making under $200,000 a year and 98 percent of all claims were filed by those making under $1 million. How vital are 199(a) deductions for businesses making under $1 million a year to maintain and potentially expand their small business? Mr. CLICK. I think they are absolutely critical, and I think all the small businesses are actually tied together. You know, there was a comment that we may not represent businesses that make less than $75,000 but I can tell you from personal experience of the years where I made less than $75,000 while risking everything for this company. I think we might represent what these smaller businesses would like to grow into and become. And without this, without the TCJA, it is going to go much slower and it is going to be much harder for the smaller businesses that maybe are designed to be a lifestyle business instead of something that is much larger. Mr. WIED. Very good. I would agree. In my business we could have lost $100,000 or maybe made $50,000 or maybe we made $200,000 in it and sometimes you don't have control over. It is a very difficult thing. Mr. Akers, as a former small business owner I know the benefits of section 168(k) bonus depreciation for small businesses to replace equipment and machinery. In my district we have over 1,000 manufacturing firms employing almost one- quarter of our working population, with 89 percent of those manufacturing firms in my district are classified as small businesses. With Republicans working to return manufacturing back to the United States right now, how important would raising the bonus depreciation back to 100 percent be for small manufacturers looking to expand their business? Mr. AKERS. Well, I would add that it is important for every small business, not just manufacturers, but thank you for the question. The bottom line is we want to grow. I agree with Mr. Click. You know, we are being characterized as being not small business, but the fact is each and every one of us started out with one unit losing money, risking millions of dollars of our own money, and sometimes not getting a paycheck. So, it is critical that we have the opportunity to continue to grow and expand because, once again, most small businesses want to grow into more than one unit or two units or three units and they cannot do that without these benefits. Mr. WIED. Thank you. I yield back. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Scholten from the great state of Michigan for 5 minutes. Ms. SCHOLTEN. Thank you, Mr. Chairman, and thank you so much for holding this critical hearing today. We are seeing unprecedented attacks on our small businesses across the country and they are struggling to keep place in a market that increasingly does not work for them here in the great state of Michigan, where we are at the center of the attacks on businesses across the country, where tariffs are reaching an all-time high. You know, we know it all too well. We are facing budget before the Congress this week that will add additional burdens if we are not careful. Studies from organizations like the International Monetary Fund and the Tax Policy Center have found that foreign investors retained more earnings as a result of the TCJA's reduction in effective tax rates. Let's be clear about who benefits from an extension of these tax rates. My colleagues on the other side of the aisle are essentially proposing that we cut critical services like Medicaid and SNAP to pay for tax cuts that benefit not only the wealthiest our nation, but also those who don't even live in this country. Ms. Zimmerman, do you agree that the federal government should ensure that large companies both here and abroad pay their fair share of taxes before we allow poor and middle class workers to foot the bill of a plan they do not stand to benefit from? Ms. ZIMMERMAN. I do. Thank you for the question and let me clarify. I am not an adversary of my colleagues here on the panel. I commend them and applaud them for their success in business, and I think their continued success is just instrumental in our company. So, I don't--in our country growing. I don't want to make that split. But what I am saying is we don't have to fix this with that proverbial hammer. Can't you stop the fact, I mean, yeah, there are statistics all over. Half of the 199 pool, half of it went to people, the top 5 percent, okay? So, throwing statistics around, yeah, we got some more. Maybe we paid a little more. My daughter and son-in-law they are a union teacher and firefighter and I thank them for what they do. Ms. SCHOLTEN. I thank them for what they do as well. Ms. ZIMMERMAN. And when the TCJA came through I have started many a business. I own my own business. I got a much bigger savings than they did as they raised their four children. And to me that is where we needed a little finesse. Surely we can do something to change this so that we are not shoving all this money to the higher income levels or to foreign investors, as you say. And the social safety net is so very important for the smaller businesses. They can't survive if their community is not healthy, bottom line. We are one with our community. Ms. SCHOLTEN. It is essential. Thank you. One message that I consistently hear from business owners back home is the need for more workers. We are experiencing a shortage across industries, small businesses in particular. We feel that and see in practice that the current administration's practices are exacerbating some of those conditions. I want to stay with you just for one second. You suggest in your testimony that a tax credit for entrepreneurs who are hiring employees for the first time may be a good idea. Can you expand a little bit on that idea and tell us how some policies like these, which give targeted support to businesses in early stages, could help us address some of these larger workforce issues? Ms. ZIMMERMAN. Right, because that is not using the hammer right. Ms. SCHOLTEN. Yes. Ms. ZIMMERMAN. Let's make those small changes. All of these millions of businesses that are making below $100,000 they are getting ready to hire their first employee or they have just hired their first employee---- Ms. SCHOLTEN. That is right. Ms. ZIMMERMAN.--that everybody on this panel will tell you that is a scary leap of faith going off the cliff when you hire that first person. And yes, we are putting our own money into hiring them. And yes, we are putting our own money in to make payday. So, a credit for that first employee that comes back immediately through the payroll credit system. We have that in place. That would be very helpful. Ironically, funding the IRS, and I know. I am a CPA and I have to deal with them but it helps small businesses who have to work with them more as a--it shouldn't be adversarial. We are trying to be compliant and we can't if you close the offices all down. Ms. SCHOLTEN. Thank you. I yield back. Chairman WILLIAMS. The gentlelady yields back. I now recognize Senator Husted from the great state of Ohio for 5 minutes Senator HUSTED. Thank you, Mr. Chairman. Thank you for inviting us to join you today for this hearing. I thank all of you for being here and what you contribute to the world through your work. My wife is a small business owner but she's like most small business owners. 81 percent of small business owners in America are sole proprietorships. They don't have any employees. I would like to focus my conversation on those businesses that have employees, the other 19 percent are, the ones who beyond themselves create jobs for others. And I want you to think about the TCJA in that context. If it were to go away versus if we renew it, how would that impact your employees? How does that impact? And I will start with you, Mr. Click. How does the structure of how we assemble the tax code across the board and everything that has been discussed today, how does that impact your employees and your ability to take care of them? Mr. CLICK. Thank you, great question. You know, I have said it several times that it slows down the businesses, but it is also that the business is also very interconnected. And the equipment and the employees as a work family we all, kind of, work together. To keep growing the company, to keep investing in equipment means that I have got new skills that my employees are going to get to learn. They are going to get paid a higher wage as we go away from the very basic manual operations to more advanced CNC operations or even driving trucks, something more valuable to the company. Taking away the TCJA slows that down tremendously. We will keep going but it makes it much easier when everyone is on the same page and pushing in the same direction. Senator HUSTED. And I presume that that is not only improving their skills? Mr. CLICK. Improving their skills and improving their wages. Senator HUSTED. Improving their wages and---- Mr. CLICK. Absolutely. Senator HUSTED.--productivity gains? Mr. CLICK. It's a direct 1:1. As soon as they get that skill---- Senator HUSTED. Get to where you can more all the time? Mr. CLICK. They get paid more absolutely. Senator HUSTED. Benefits, wages, all that? Mr. CLICK. Benefits, bonuses, annual bonuses, mid-year bonuses, the turkeys that we give out for Thanksgiving, all of that is impacted by this. It is all tied. Senator HUSTED. So in the end, it is good for small businesses but it is good for your employees. Mr. CLICK. It is great for the employees and it is great for the smaller businesses that are the sole proprietor that provide services to companies like Patriot. Senator HUSTED. Mr. Akers, would you like to share some thoughts on, reflect on that question? Mr. AKERS. Yes, thank you very much. Our employees are a part of our family, to be very honest with you. I know it is trite but the bottom line is that we can't do any of the business we do without our employees, so we pay higher than normal industry standard wages already. When the tax cuts came through the first time we increased the wages by about 20 percent. They have gone up another 10 or 15 percent since then. We will continue to raise them. Our benefits are by and large huge over most of our competition, so we can only do that when we have got extra money that we can do something with. One other thing, the communities we are in they are dramatically impacted by the money we give back to them and that comes from this same fund, the ability to have that money back so that we can redistribute it. Senator HUSTED. So, let me just, I have a contention that if you look at history those nations that are the most economically and militarily successful are the ones that are the most innovative, the ones where technology allows them to be successful. In the context of your business and think of your employees, how much does the investment in new technologies and job training mean to your productivity levels, which allow you to compete against foreign competition and improve the overall quality of the work environment for your employees? Mr. Click? Mr. CLICK. That is a great question, and I am so glad that you asked it. The technology that we brought into our industry had never crossed over. We are in a 100-year-old industry that was essentially unchanged up until 15 years ago when we came in because advanced manufacturing is the reason that Patriot exists today. And when we take the bankers through and other people through the company I show them this bank of 16 CNC machines. First shift we will run all 16 of them with four employees. Second shift we will run 10 or 12 with two or three employees, and on third shift we will run seven or eight with zero employees. And do you know what beats offshore wages? Zero wages on that machine overnight. It runs automatic. It produces the best quality products on the planet. Senator HUSTED. And that allows you to do Made in America. Mr. CLICK. Absolutely it does. Senator HUSTED. And it allows you to continue to make investments to continue to compete and to have a thriving business where you can employ people? Mr. CLICK. Yes, sir. Senator HUSTED. And so you would say that the renewal of this is essential to American success and prosperity? Mr. CLICK. Absolutely it is. It is critical. Senator HUSTED. Great, thank you. I yield back. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Tran from the great state of California for 5 minutes. Mr. TRAN. Thank you, Mr. Chairman. Ms. Zimmerman, just last week former President Trump, I am sorry, President Trump and his administration proposed one of the largest tariff tax increase on American people since the 1960s and already we are seeing the economic ripple effects. The U.S. market had its worst week since the start of COVID and families are feeling it. These tariffs are taxes on consumers raising prices on everyday goods, groceries, cars, appliances, housing materials. These are the essentials for working families and they simply can't afford to pay more at a time when household budgets are already stretched thin. Let's be clear. No one voted for more expensive groceries, more expensive children clothing, more expensive cars, and more expensive household goods. No one voted for President Trump to tank the stock market and the economy. And yet, this is what Donald Trump's economic approach is delivering. He is creating a recession. In fact, just yesterday, JPMorgan said, `` Trump's tariffs will send the U.S. into a recession.'' At the same time, small businesses are facing uncertainty. Supply chains are being disrupted and many Americans could soon see job losses as a result. Ms. Zimmerman, the United States is currently experiencing a cost of living crisis. Everything from rent to groceries to energy are being squeezed by the consumers. How do you expect tariffs to affect the cost of living crisis? Ms. ZIMMERMAN. Well, what it really does is it creates a dangerous negative feedback loop. It creates higher prices which reduces spending, right, which causes business decline, which causes job losses, which causes future spending reduction. I mean there is no question. If it is going to cost the average family $3,800 more just to buy what they are buying now, they are not going to have as much to spend at their local businesses period. Some of those businesses are going to go out of business. Mr. TRAN. Thank you for that. I was a proud small business owner myself before coming to Congress. I know that Healthcare is one of the biggest challenges facing small employers, not just for themselves but also for attracting and retaining workers. Large corporations often have the resources to offer group health insurance plans, but small businesses are frequently left to navigate the individual market. That is where the enhanced premium tax credits have made a real difference by lowering the cost of health insurance through the Affordable Care Act marketplace, especially for people who are self-employed or working in small shops. These tax credits have helped level the playing field and save thousands of dollars the year for small businesses. Ms. Zimmerman, my Republican colleagues are more interested in providing tax cuts for millionaires and billionaires than extending a tax credit that helps small business owners buy health coverage. Considering this, can you speak to how these enhanced tax credits have impacted your ability to afford quality coverage for yourself, your family, or your employees? And if these tax credits were to expire at the end of the year, what would that mean for your business? Ms. ZIMMERMAN. One of the biggest competitive disadvantages we all have here, and certainly smaller businesses have, is health insurance. We can't get a reasonable policy for our employees and so then on the marketplace what we do is we help our employees eat--well, actually we don't now. I should change that. We did when it came out. We would help our employees go out and find some and we set up a HR, you know, plan and paid back some of the premiums as we were allowed to tax free. Without that marketplace, a lot of people are going to go uninsured again. And small businesses are going to lose their employees to the P&Gs and GEs of the world, which are the big companies in Cincinnati that can give them stellar benefits that we just can't afford. Mr. TRAN. Yes. I agree with that. Thank you. Mr. Chairman, I yield back. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Meuser from the great state of Pennsylvania for 5 minutes. Mr. MEUSER. Mr. Chairman, I thank you very much. And certainly thank you to our witnesses. The so-called TCJA of 2017 led to years of record low employment, GDP growth, real wage growth, and record high tax revenues. Families saw their median household incomes increase. Real wages grew. Six million people were lifted out of poverty and main street businesses saw $66 billion in tax revenues, all the while tax revenues, federal tax revenues grew dramatically. That is a record. That is a fact. Now, Congress is working to deliver on the American first agenda in the so-called one big, beautiful bill, reconciliation bill which will rein in--the plan is for it to rein in wasteful spending and reignite our economic growth. So, last week in our Small Business Committee hearing we heard some testimony from witnesses that brought out that only 1 percent of small businesses make a profit of over $1 million, so one out of every hundred business makes less than in net income of $1 million. That being said, do any of you believe that the TCJA was a handout to billionaires, as is often stated? Mr. Click? Mr. CLICK. No, definitely not, just by the sheer math of it, the amount that goes out to the owners of the company. It was fractionally impacted it. Mr. MEUSER. I appreciate that. Mr. BRASHERS. No, I don't agree with that statement at all. I think, as Mr. Click was saying, the exact opposite was true. It was designed very specifically to avoid just being a giveaway to the very rich and they, if anything, targeted the bottom half of the income distribution more. Mr. MEUSER. Thank you. Mr. Akers? Mr. AKERS. Not at all it. It dramatically impacted us and anything that impacts us in a positive way creates more revenue, which creates more taxes, which is a big cycle sending more money back to D.C. So, it is positive for everybody the way that I see it. Mr. MEUSER. Right. And something tells me that added revenue that you gained went back not into your pocket but into the business, which is pretty much what 100 percent of small businesses tell us. Mr. AKERS. Absolutely true. The majority of it goes back to either growing the business or funding more benefits for our staff. Mr. MEUSER. Thank you. Ms. Zimmerman, would you like to answer that? Ms. ZIMMERMAN. Let me be clear. I think you misunderstand me. I don't want you to raise taxes on small businesses. I think that would be a mistake, but it is not a black or white yes or no question here. You know, renewing the TCJA small business deduction does nothing at all to fix the problem that we---- Mr. MEUSER. All right. I just really wanted a yes or no if it was a tax cut for billionaires. Thank you. The R&D expensing, how important, Mr. Click, is that to your business as well as the bonus depreciation that would expire should we not pass TCJA, that we know? Mr. CLICK. Yes. The R&D will be more valuable as we go forward in time. We had already done the development before that was allowed. But the bonus depreciation that is absolutely critical to the business plans. It makes it a lot easier and if it is permanent it makes it a lot easier to make that 10-year plan into a 20-year plan. Mr. MEUSER. I couldn't agree more, from my business experience as well as my time in the field working with small businesses to our time on our Small Business Committee. Mr. Brashers, same question? Mr. BRASHERS. Yes, I think absolutely. So many small businesses have very thin margins and so if you are talking about taking a deduction away from them and if you started with the 2 percent margin and then all of a sudden you take away this deduction for your workers that are in R&D, all those supplies and materials that are going into R&D, you take that away and you push it back 5 years or at least a portion of it, especially for small businesses with limited access to capital it can be devastating. Mr. MEUSER. Thank you. Mr. Akers, same question? Mr. AKERS. Yes. It leads to growth and money from anywhere it leads to growth for us and that leads to added benefits for everybody up and down the system. So, when that money is sent back to us, that extra depreciation, we reinvest it right back into the business. Mr. MEUSER. I have 40 seconds left. I am just going to ask each one of you your thoughts on the president's plan, the so- called America first agenda, the taxes, the regulations, the making energy that much more competitive, and as we move along with this tariff issue, would you rather see an increase on let's call them taxes on foreign manufacturers or would you rather see an increase on taxes American manufacturers? Mr. CLICK. That's a really tough question. You know, I am not going to advocate for more taxes on foreign companies, but I think if you set the stage for American companies to be successful we will. Mr. MEUSER. Great, thank you. I yield back, Mr. Chairman. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Olszewski from the great state of Maryland for 5 minutes. Mr. OLSZEWSKI. Thank you very much, Mr. Chairman and to fellow Members of both the House and Senate committees here. I just want to open by saying as we have highlighted within this committee and throughout this Congress, we know that small businesses are, in fact, the backbone of America, so thank you all for the work that you do. Thank you for being our job generators. Thank you for supporting economy as being fabrics to the community, even doing things like sponsoring local sports teams and offering those unique goods and services that are so critical. Two observations that I have today. You know, first of all, is as we are talking about this idea of keeping taxes lower on our small businesses and our producers, the silence on these tariffs, this Trump tax is absolutely deafening. We are talking about how do we lower taxes for our businesses at a time when we have just seen the single largest tax increase enacted in peacetime history of the United States. So, let that sink in. We are having a hearing about how do we keep taxes low for our small businesses when we are not talking at all or not pushing back at all against the fact we just saw the largest tax increase in peacetime history in the United States. I want to say, you know, as we should come together in a bipartisan way to push back against those tax increases, I come to this work and welcome the opportunity to sustain some of these strategic investments in our small businesses so that we can keep things moving. But, you know, the facts of the matter are that these tax changes in this law probably should be done more thoughtfully and comprehensively than an outright extension. The data shows that the implementation of the current tax policy skews incredibly high to the risks, the wealthy, the ultra-wealthy. And so while perhaps not just for billionaires, the income of the top 1 percent of Americans are seeing the average tax cut of $60,000 a year under these provisions, which is fine until you compare it to the bottom 60 percent of Americans who saw a mere $500 tax cut. You know, we also know that this is failing to deliver the promised economic benefit. The Trump administration promised that by a conservative estimate we would see a $4,000 boost in income but new research is showing that workers who make $114,000 or less, in fact, have seen no boost. And so, I think I just wanted to share for the record that we welcome the opportunity to continue the investments we have heard today, but I think we can do that without just writ large embracing this wholesale extension that does not benefit all Americans. So, I guess with that mind, if we were to be more thoughtful about that, Ms. Zimmerman, could you just talk a little bit about what in your view the kinds of impacts we might see on a small business if instead of just merely extending and seeing this completely inequitable distribution of tax benefits that we were instead to, sort of, incentivize work and expand and invest more in things like the earned income tax credit, the child tax credit, other things that incentivize work but also support businesses and business owners putting money back in the pockets of hard-working Americans? Ms. ZIMMERMAN. I would say exactly. I would say that is what this is all about. Again, I don't want you to increase our taxes. I don't want you to increase any one of our small business taxes. We are doing a lot of good work here on the ground and we are good for the economy. And coming out of the 2008 recession we led with the new jobs being created, we being small businesses. So, we are going to need that again because it looks like we are going to have to come out of something again, right? But to forget the fact that the TCJA gave absolutely twice the tax savings to the large corporations in this country than they did to any one of us on this panel misrepresents the whole concept of, oh, you don't want us to extend this? Well, it is not that I want you to raise the tax. I want you to do it smarter, do it better. Don't not do it. Mr. OLSZEWSKI. Thank you for that, and we welcome the opportunity again to sustain the investments that do benefit our small businesses while not giving those incredible benefits to large corporations and the ultra-wealthy. So, Mr. Chairman, I will yield back with that and say I welcome the opportunity to really dig in and do this right as opposed to a wholesale extension that only grows our deficit and misses the mark on some of these important investments. Thank you. Chairman WILLIAMS. Okay. The gentlemen yields back. I now recognize Representative Downing from the great state of Montana for 5 minutes. Mr. DOWNING. Thank you, Mr. Chairman and I greatly appreciate the House and Senate Small Business Committees hosting this joint hearing today on such a critical issue. The 2017 Tax Cuts and Jobs Act was a tremendous lifeline for small businesses across the nation and especially in my home district of central and eastern Montana, in particular, the estate tax provisions. And I think there has been a false narrative that has been played here that this is unduly affecting, you know, millionaires and billionaires but the reality of it is in my district I have a lot of small businesses that are farms and ranches that, you know, can be, you know, land rich and cash poor. And the estate tax provisions of the TCJA have been vital for these small farmers and ranchers across my district. And by doubling the estate tax threshold for individuals and married couples, the Trump tax cuts have ensured that farmers and ranchers can focus on their work and livelihoods rather than preparing for the eventual tax punishments that will be inflicted on their grieving families. I am going to start with Mr. Brashers. In your testimony you accurately point out that the estate taxes disproportionately impact small farmers and ranchers who are, quote, `` land rich but cash poor.'' If the TCJA a estate tax provisions were to go away, you know, what impact would this have on the continuation and the productivity of agricultural land across our nation? And something I worry about is production agricultural land, you know, coming out of production. Mr. BRASHERS. Well, thank you so much for the question. The reason that it matters so much for ranchers and farmers is that you have this tax that is imposed on assets beyond a certain level. And think about valuing those assets, think about the estate planning that has to go into that. It is very--as opposed to someone that just has a large amount of cash. It is easier to think about estate planning when you are just talking about cash but when you are talking about a cash poor but asset rich---- Mr. DOWNING. Thank you for that. I am just going to move on a little bit here. To what degree would you say our small farms and ranches are forced to divert their resources away from farming and into liquid assets, attorneys, and accountants? Mr. BRASHERS. Yes. I mean, what you are going to end up having is these family businesses, family farms, they have to break up and in a lot of cases I can't give you a specific statistic. I can look into trying to find out those numbers for you, but it is, especially for what you are doing with this, we are talking about a tax that accounts for 0.6 percent of the federal budget. So, it is quite small and there was no meaningful impact from expanding that exemption. Mr. DOWNING. With this potential negative impact on agricultural production, how do you believe that may or may not jeopardize our national security and interests and increase our reliance on foreign products? Mr. BRASHERS. Yes. I mean, we are moving away from, kind of, the small business model of Americans passing on their businesses, their farms, their ranches to themselves and they may choose to sell that to foreign investors. That is absolutely a possibility. Mr. DOWNING. So beyond agriculture are there any other small businesses or industries critical to national security that would be impacted disproportionately by the expiration of these tax cuts? Mr. BRASHERS. The tax cuts broadly? So, yes, anyone involved in research and development is going to be a critical one. Anyone that is investing heavily is, especially where we are trying to get companies to invest here in America, invest in new equipment and machinery, these expensing provisions are critical for that. Mr. DOWNING. Thank you. Mr. Click, you rightfully labeled the estate tax as the, quote, `` survivor's tax.'' Given the impact that state taxes have on grieving families shouldn't we get rid of them altogether? Mr. CLICK. Yes, absolutely. It makes no sense. You have already paid taxes on all the money that you have earned, all the assets that you have got. And as a company like the farmers with an illiquid asset in our inventory around the country you can't just generate the cash to be able to pay that. Mr. DOWNING. So, how would you have to adjust the operations of your small business, Patriot aluminum products, if the TCJA estate tax provision expires? Mr. CLICK. For the company at large it just means more time on planning and money spent on consultants and attorneys instead of on inventory and employees. Mr. DOWNING. I appreciate that. Mr. Akers, you importantly highlight in your testimony that small businesses are deeply involved in illiquid assets that are difficult to pay off like real estate and machinery. So, can you talk more about how expansions to the estate tax could result in a liquidity crisis, as you mentioned in your testimony? Mr. AKERS. Yes. Similar, just like farmers coming from the Iowa, we have the same issue there. When you are investing in all of those things you can't turn that into cash overnight, so if you end up having a death in the family that leads to one of those estate planning issues that money has got to come from somewhere. You cannot do that. You don't have the liquidity to do that because your money's invested in time, in land, and materials, equipment, and that type of thing. So, it is critical and you will lose farms and businesses by doing that. Mr. DOWNING. Thank you for your answers. I have run out of time so, Mr. Chairman, I yield. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Conaway from the great state of New Jersey for 5 minutes. Mr. CONAWAY. Thank you, Mr. Chairman and thank you for holding this hearing today. I have been listening to a lot of the commentary and questions and answers and I just want to make a few comments. The Tax Cuts and Jobs Act in 2017 resulted in the deficit growing by $2 trillion, Now, that deficit is something that is going to have to be dealt with and paid by average people all over this country while the benefits of that tax cut, as we know and has been documented, went to the wealthiest people in the country, to the billionaires and millionaires, and God bless them, It would be great to have that kind of money. And he would be even greater, as they do, to often pay zero income taxes, which many people in this room, including yours truly, has to pay their taxes. And as Warren Buffett and others have pointed out, what is the fairness of that? When you look at these policies I think, and I hope the American people will ask the question, does it seem fair to you? Are the benefits of the policy that we are bringing forward being distributed in a way that makes sense when you look at our entire population? We are one nation after all. And this Tax Cuts and Job Act certainly didn't meet that test. It was a test for me. And this next round of this, or the renewal of this, we are hearing now that we need to raise the debt ceiling by another $2 trillion. And we are going to see the same, kind of, just amount distribution of the benefits of this. And historically, people ought to know that in a developed economy such as ours with even robust growth rates, that this tax cut, just this last one, will never be paid for by the growth that is touted. Never happen. Now, if you are an emerging economy where you can grow along at a clip of 7 percent, 8 percent, yes, you can pay for a tax cut like that. But in developed economies such as ours, United States, Europe, that kind of growth from what I am told by experts just will not materialize. And so, the American people need to understand that historical fact as they contemplate this next round of these cuts. In my state of New Jersey if these cuts, to pay for these cuts, the kind of cuts that need to be made to Medicaid as an example, $14 billion comes to the state of New Jersey to help pay for insurance and a safety net that keeps a nursing home open for that sandwich generation that are taking care of their kids, trying to get them off to college and dealing with an elderly parent or other relative in a nursing home that will close if these Medicaid dollars do not come back to our state. We are a donor state after all. Can we make up for these to keep these institutions open, hospitals, nursing homes by raising the tax revenue in New Jersey? I think New Jersey will be like many other states. We will find they won't be able to do that. And the expansion and access to health insurance under the ACA, if these supports go away as the other side wants to do, we will see a 10 percent increase in insurance that people have to pay or people will go without and the number of uninsured in our society certainly at large in New Jersey will increase significantly. Talking about tax increases, the tariff represents nothing but a tax increase on average people. We had an income tax in the mid-1800s. We had tariffs as well and they decided to rebalance it because the tariffs were being paid for by the poorest people, the low income people in the country. And so they decided let's change this around. We will reinstitute an income tax and then 1 percent on $3,000 to $5,000 that would be great, but we reduced the burden on regular people. That is what happened. Here we are, I guess, claiming that that era should be revisited upon the American people yet again, even after the experience that we ought to have with the Depression and the worldwide devastation that that caused driven by tariffs. Now, we have, Ms. Zimmerman, and I know you deal with the IRS and I have got to get this question out really quickly, you deal with them all the time. It has been starved of resources. If you have a complicated tax situation you might get away without paying any taxes at all. Small businesses have to deal with them to get their work done. Can you comment on the starvation that has occurred to the IRS and what that means for your ability to run your business and comply with the laws most people want to do? Ms. ZIMMERMAN. Well, I have a few seconds so I will say that we are losing about $700 billion in revenue by cutting back on the IRS' ability to enforce. Chairman WILLIAMS. Okay, thank you. The gentlemen yields back. I now recognize Representative McIver from the great state of New Jersey for 5 minutes. Mrs. MCIVER. Thank you, Chairman and Ranking Member for convening this very important hearing today. And thank you to each of our witnesses for being here today with us. As mentioned over and over today, and even in previous hearings, the small businesses are the backbone to our economy and we must ensure that our tax policies support their growth. Tax policy can often decide whether a small business entrepreneur can hire workers, invest in themselves, their communities, or even expand. For too long the tax code has favored large corporations while small businesses are left carrying the brunt of tax burdens without sufficient help. This is especially true now as we see the continued gutting of the Small Business Administration by the current administration in the face of a severe economic uncertainty. We must work toward a tax code that is fair and responsive to the needs of small business owners and ensure the government is meaningfully here to provide real assistance to businesses in need. To Mr. Brashers, you were a contributor to Project 2025, which the president began implementing on day one despite previously saying he didn't know anything about it. Since then, he has followed its directives to the tee, gutting the Small Business Administration with mass layoffs, implementing tariffs, and supporting a budget that would destroy Medicaid and SNAP benefits all to create a tax code that punishes the middle and lower class while only benefiting the wealthy. Do you agree, Mr. Brashers, that your Project 2025 has been a failure for small businesses? Mr. BRASHERS. I appreciate the question. I am primarily here to talk about the expiring provisions of the Tax Cuts and Jobs Act. Mrs. MCIVER. Is it a yes or no? Mr. BRASHERS. I would disagree with that statement. Mrs. MCIVER. Of course you would. Then why have small business entrepreneurs lost millions in wealth this week alone as our economy heads towards a recession? Why do you think that is happening? Mr. BRASHERS. So, sorry, the Project 2025 was a collaborative effort from many conservative institutions. I was a contributor to that. It had a menu of options for a lot of different parts of the government. Some of those are being adopted, some of them are not being adopted, and that is something that the Heritage Foundation has been a part of for many years, many decades going back to the 1980s. So, I think scapegoating Project 2025 is not accurate. Mrs. MCIVER. Going back to the question, in your opinion as a contributor to Project 2025, what is your opinion why many small business entrepreneurs lost millions this week and why are people predicting that we are on our way to a recession? Mr. BRASHERS. I mean, right now, obviously, we are looking at there is some uncertainty because of the tariffs and that was a conscious decision of the administration that they understand that they are trying to make deals and they are trying to negotiate on this. And so, I am personally not involved in the tariff discussions. I don't have any insights into that and a lot of people--there is a lot of conversations presumably happening behind closed doors that I am not aware of, so I am not going to speculate as to where this all ends. And I think ultimately that is the most important thing for businesses is what the final outcome of all this is. Mrs. MCIVER. However, was tariffs mentioned in Project 2025 plan? Mr. BRASHERS. As a matter of fact there were two ideas. There were---- Mrs. MCIVER. Correct. Mr. BRASHERS. On the tariff point there was a section that was written that was pro-tariff and there was also a section that was written that was anti-tariff. Mrs. MCIVER. So, thank you for acknowledging a point that, yes, there is a lot of uncertainty around tariffs and that is why we are seeing many small entrepreneurs and small businesses lose money this week and many predicting we will be into a recession. I will say this in ending in my comments. Women lie, men lie, but the numbers and the data don't. With that, I yield back. Chairman WILLIAMS. The gentlelady yields back. I now recognize Representative Morrison from the great state of Minnesota for 5 minute. Ms. MORRISON. Thank you, Mr. Chairman and Ranking Member for holding the hearing. And thank you to the witnesses for taking the time to testify today. I just want to start by saying I think we all agree that we want a tax system that benefits small businesses. Small businesses, as we have all said, are the backbone of our economy and keep jobs in our communities. But I believe a tax code that benefits our small businesses is a tax code that pays also for the essential services that small businesses rely on. Millions of small business employees rely on Medicaid, for example. Thanks to the Affordable Care Act, Medicaid expansion has been crucial to decreasing the number of uninsured business employees. Between 2013 and 2022 an additional 2-1/2 million small business employees received health insurance through Medicaid and the uninsured rate of small business workers dropped by 9 percent. The Republican budget that the Senate passed last week and that the House will consider this week will require an $88 billion spending cut from the Energy and Commerce Committee which, by definition, will have to target Medicaid. Additionally, the ACA premium tax credits that help cover the cost of premiums for health insurance and make health insurance more affordable for small businesses are set to expire at the end of this year. If we fail to extend these tax credits nearly 4 million Americans will become uninsured, and the average premium payment will increase by 93 percent. 90 percent of small business owners report healthcare- related tax credits are very important to their ability to afford health insurance for themselves and for their employees. So, Ms. Zimmerman, could you help explain how cuts to Medicaid and the expiration of the ACA tax credits will impact small businesses? Ms. ZIMMERMAN. Yes, thank you. It will definitely impact small businesses. It will force small businesses to drop coverage and lose employees to larger businesses. We will definitely lose that competitive edge. We will have to absorb more cost cutting into already thin margins or eliminating our ability to invest in growth in our companies. And, you know, wages are going to go down to compensate for the extra cost in the benefit that. I think the smaller the business the more impact it is going to have on them for sure. It is really going to hurt main street. Ms. MORRISON. Thank you. And you also during your testimony mentioned, I know we have had a lot of tariff questions, but I have to have a turn, too, that the tariffs announced last Wednesday have created uncertainty and unpredictability for small businesses. Small businesses are particularly dependent on imports and rely heavily on trade for components used in manufacturing. They lack the negotiating power that larger corporations have and operate with tighter margins than big businesses. Can you speak to what you are hearing from small businesses about how most recent tariffs will affect them? And what steps we in Congress can take to help insulate small businesses from the worst of these effects? Ms. ZIMMERMAN. Well, Congress could take back the power of the purse to the legislative branch and consider small businesses in doing so. It has always been my understanding, I am not a history major, but I thought that was your job. Trying to figure out what to buy now for the Christmas season so we can sell then, impossible right now, impossible. Knowing that costs are going to go up, knowing that small business owners knowing they can't compete with the big businesses of the world, we are going to very possibly get even more of a price increase than the tariffs because we are going to have to compensate for all the strangleholds the big businesses put on suppliers. And they are going to have to make it up somewhere and, you know, threatening to quit with. I supplier doesn't make a huge difference when you are a small business it doesn't move the needle. Ms. MORRISON. Thank you so much for your testimony, and I appreciate your reminder to Congress that we should take back the power of the purse. Thank you, Mr. Chair. And thanks again to the witnesses. I yield back. Chairman WILLIAMS. The gentlelady yields back. I now recognize Senator Justice and Baby Dog from the great state of West Virginia for 5 minutes. Senator JUSTICE. Okay. I have Baby Dog with me here, too, you know, but she is outside. But I will just hold her right there for just a few minutes, okay? I had the luxury and the honor of being the governor of West Virginia the last 8 years, and I can tell you just this, and I can tell you this as point blank as point blank can be. Our small businesses in West Virginia are the backbone of us period. And with all that, our small businesses are the backbone of this entire country period. That is all there is to it Now, I am a plain spoken guy. I challenge the media all the time. You find something that knowingly I have told you is not true, and they can't do it because I am not going to do that. You know, I was brought up in a way with my father that absolutely I was expected to tell the truth and that is what I am going to do. With that being said, we have got to extend these tax breaks and these tax cuts. If we don't, absolutely we are going to get in real trouble. Absolutely our small businesses depend on this in every way, and if we don't watch out, you know, bad things could happen and bad things could happen really soon. Now, with that, I have tried in the state of West Virginia to do anything and everything I could to provide additional tax breaks or tax cuts. You know, I am really proud that when we were there, you know, over the 8 years we cut taxes I think 26 different times for all kinds of different things and a lot of different agencies. But the one thing we never lost focus with was just how important our small businesses really truly are and the fact that we have got to keep them going and keep them going in a way that is absolutely moving the ball and moving the ball forward. Now, in addition to all that, you know, from a standpoint of a pass-through, you know, by making it accessible that really and truly we could pass through to the individual absolutely it is so, so important. And so with that being said, we have got to continue to do exactly what we are doing or try to find even ways to make it even better now. And in regard to the estate tax, I have got a real quick story to tell you and this is as true as true could ever be. You know, you see I don't speak from a bunch of notes. I speak, you know, from experience and from the heart. Now, the other thing is I didn't come here as a 40-year-old looking to be a Committee Chair, you know, or whatever it may be. I came here to try to do one thing and that is in my own way shake up the world. You see we have got so much that we have got to do here and there is so much that is screwed up about this town and absolutely from the standpoint of all the goodness that can be done if we all focused on getting off of our soapboxes and getting off of the cameras and really trying to do the job that we are supposed to do. You see I never took anything, anything as the governor. I don't want anything now. I don't want the next hot tip. I don't want a thing for me. I want to do what our forefathers did, and I am the real deal on that. You know, our forefathers stood up. Many of them lost their farms. Many of them lost everything they had for this unbelievable nation. And so with all that being said, that is what we all need to be doing. Now, I am not going to go on and on about that. I just want to tell you just a story real quick. My dad died in 1993. He was an only child. He lived in a little coal camp house and if you were there, if you went there today, you know, that house has one bedroom, one bathroom, My mom she was one of 10 kids and they never, ever, my grandparents every time I ever visited them they never had indoor plumbing. Now, so with all that being said, all of a sudden my dad worked really hard with my mom and then he built a level of riches that for all practical purposes we thought my dad was a wealthy guy, you know. And all of a sudden he died. And he had done all kinds of estate planning and everything else and literally in 1993 I absolutely worked through all the wickets and tried to some way keep our small family business. And with all that being said, through all that we worked, and we owned probably about 60 percent between he and I together of our small family business. Through all that literally I sold every single thing he had, every single thing he had. And at the end of the day Jim Justice, Jimmy Justice at the time, took care of my sister and literally paid all the obligations, and it took about 3 years to be able to do it. And what money flowed to me was zero. Chairman WILLIAMS. The gentleman's time is up. Senator JUSTICE. So, I would tell you just this that it is the estate planning there our small farms or whatever it may be, we got to do that, too. So, I am with you. I am with you 1,000 percent I thank you so much for letting me speak. Thank you. Chairman WILLIAMS. The gentlemen yields back. I now recognize Representative Cisneros from the great state of California for 5 minutes. Mr. CISNEROS. Thank you, Mr. Chairman. Thank you to our witnesses for being here today. Ms. Zimmerman, the Trump administration claims it wants to restore U.S. manufacturing. The SBA even announced a Made in America manufacturing initiative, but in your testimony you mentioned corporate tax loopholes. Does our tax code incentivize large corporations to move production back to the United States? Ms. ZIMMERMAN. Not so much. If you have got enough planners in place you can save a lot of money by moving it in, moving it out, and bringing it back. You can cut your tax rate to 10.5 percent if you do what they call roundtripping. And, of course, I don't think any of us are doing that but the big companies certainly are because it is costing I believe $70 billion that would be available for other programs. Mr. CISNEROS. And do these corporate tax loopholes put domestic small businesses that manufacture in the United States at a disadvantage, in your opinion? Ms. ZIMMERMAN. Well, certainly, because they don't have the same skills and finesse available to them that the large companies do. And a lot of them being part of their community they may not take advantage of them anyway because, you know, our employees, as has been said here by my colleague next to me, they are a family. We are not going to send those jobs overseas. So, yes, a definite disadvantage. Mr. CISNEROS. Right. And just, you know, the tax code I would say for small businesses it is already complex and it is burdensome. Did Elon Musk and DOGE cutting IRS staff, how is that going to help small businesses at all? Ms. ZIMMERMAN. It is going to entirely make things worse. I have advocated for a long time that we go back to having a small business hotline where a small business who is trying to be compliant can call in and get some information. They were getting to a point where they could answer some questions, at least they could answer our calls and that is all gone again with the cut in staffing. Mr. CISNEROS. Yes. So, right now you would say, I guess again in your opinion, that just with the cuts they are not going to be more efficient and definitely they are not going to be more responsive? Ms. ZIMMERMAN. Well, they are definitely not going to be more responsive, and they are not going to collect the dollars that we need. Ironically, they are the one agency that pays for itself if you let them enforce. And so, it has just never been very logical to me why we would cut that back. I think we are probably going to lose, the number is huge, $700 billion I believe is the number by cutting back all that enforcement that we just added for the IRS. And that enforcement wasn't aimed at small businesses. It was coming from the top 1 percent. Mr. CISNEROS. Yes. And look, while my colleagues claim they want tax cuts for small businesses they are also defending the Trump tariffs. And I am sure you answered this question numerous times, and I am going to ask you to answer it one more time just to give a little emphasis there, but how are these tariffs, which are really taxes, how are they going to impact small businesses? Ms. ZIMMERMAN. They are having a huge impact on small businesses. They are causing to lose a competitive advantage against big businesses who have negotiating power with their suppliers that small businesses don't have. They are causing them not to be able to plan how much inventory should I have in to meet the Christmas rush. Well, we have no idea because we don't know what the prices will be because we don't know what the tariffs will be because we don't know anything from day-to-day. Mr. CISNEROS. Yes. With that, I thank you for your answers. And with that, I yield back. Chairman WILLIAMS. The gentleman yields back. We are almost ready to close our hearing and I want to thank everybody. Does anybody--if I give you 1 minute did you have any closing arguments that you would like to say? Mr. Click? Well, this is not a batting order, I mean, you-- yes, ma'am? Ms. ZIMMERMAN. Very important to me, you know, I work with Small Business for America's Future and we support all small businesses. I am not by any means--some of the representatives and senators here made it sound like we were adversaries. We are not. We are in this for the same thing. We are helping our communities. We really are. But how we can say that just extending the TCJA is the best thing is what gets me. I certainly don't want tax increases. I want an explanation of why the large companies in this country got twice the tax cut that I got and my clients got when the law went in. And I would like that to be rebalanced so that we all can really use the level playing field without smirking as a phrase. Thank you for having me. Chairman WILLIAMS. Next, 1 minute. Mr. AKERS. Yes. We all have different opinions and different viewpoints on how to make this happen but if small business is truly the backbone of America, which has been expressed here by both sides of the aisle, we have no choice. We have to figure out how to get through this. I can speak as my small business and as most of our friends. We have seen a huge impact by the tax cuts that we have been able to get, so we are going to continue to reinvest that as long as we continue to have that benefit. Secondly, I am going to pass my business down. The fact that I can do it either easy or hard and how much money it is going to cost is going to be directly impacted by what happens in this forum. Thank you. Mr. BRASHERS. I am actually going to agree with Ms. Anne Zimmerman on something. I think we can improve on the TCJA. I think there are things that can be done better and so I don't think it is necessarily something that should just be rubber stamped exactly as it is. So, I think this committee and Congress has a very important job ahead to find ways to make it better, and I think it can. But with that said, I do think that the Tax Cuts and Jobs Act as it was passed was a tremendous success. Some of the statistics out there that we haven't had a chance to mention, unemployment rate hit a 50-year low, labor force participation rate was growing at the fastest pace in 20 years, real median household income rose 7.8 percent in 2019, a record dating back to 1954. Homeownership was growing at the fastest rate in 15 years, U.S. stocks were booming, and as I have mentioned earlier, the net wealth of the bottom 50 percent was actually at the highest level since pre-Great Recession. Chairman WILLIAMS. Okay. Mr. BRASHERS. The poverty rate was down so it was a tremendous success, and I think we can actually improve that. Chairman WILLIAMS. Thank you. Mr. Click, you are our fourth place hitter, cleanup hitter. Mr. CLICK. Thank you, sir. Chairman WILLIAMS. Thank you. Mr. CLICK. Yes, I think there is a lot we can agree on. I think there are definitely opportunities to improve. I do think it is critical though to extend the existing TCJA right now, keep those in place, give some certainty to these businesses. Keep in mind that, you know, small businesses are the backbone of America's economy. We create the jobs that pay the taxes. We are the engine of growth that is going to keep growing the country and the growth of the innovation. Chairman WILLIAMS. Okay, thank you. And our last person to be heard from is Congresswoman Goodlander from the great state of New Hampshire for 5 minutes. Ms. GOODLANDER. Thank you so much, Mr. Chairman. And thank you to our witnesses for being here today. There is a lot that we agree on. I want to start by asking each of you do you agree that our tax code is too complicated and the compliance burdens are too great? Mr. CLICK. Yes. Ms. ZIMMERMAN. Yes. Mr. AKERS. Yes. Mr. BRASHERS. Yes. Ms. GOODLANDER. Ms.---- Chairman WILLIAMS. Yes. Ms. GOODLANDER. Ms. Zimmerman, can I get a yes? Okay, thank you. I want to ask you, Mr. Click, how much time and energy by way of resources does your small business have to dedicate to tax compliance? Mr. CLICK. Yes, it is a lot. I mean, we have a professional CPA firm and we have professional staff, an absolutely fantastic person in the company who had years in public accounting to help us grow. And without her I don't think we would be where we are here today. Ms. GOODLANDER. Well, Ms. Zimmerman, you shared with us in your written testimony that the Section 199(a) deduction is so complex that the vast majority of small business owners actually cannot determine if they qualify. Many, far too many, can't determine if they qualify and far too many can't take advantage of this. Can you speak to, from your perspective, what you believe Congress should be doing in the days ahead to address these disparities which really hurt small businesses overwhelmingly? Ms. ZIMMERMAN. Balance the tax cuts between big business and small business, simplify the code, give some first employee credits to give some immediate relief to people trying to enter the employer field, staff the IRS, those are a number of them. Ms. GOODLANDER. I appreciate that. You also testified to the need to close a series of loopholes in our tax code. What top three loopholes would you advise Congress to take a hard look at closing? Ms. ZIMMERMAN. Oh---- Ms. GOODLANDER. Or maybe just your top loophole? I come from the Live Free or Die state. We are not big on loopholes. Ms. ZIMMERMAN. Yes. If I had to pick the top one I would probably say roundtripping. I think that, which allows corporations to pay actually a 10-1/2 percent tax instead of 21 so they are lower than even our lowest rate or right down there with it, and that costs us about $70 billion a year. Ms. GOODLANDER. Thank you for that. Can we all agree that tariffs are taxes? Ms. ZIMMERMAN. Yes. Mr. CLICK. I don't think so, no. Ms. GOODLANDER. Okay. Well, I will ask you, Ms. Zimmerman, because you noted in your testimony that the pervasive feeling of uncertainty that small businesses are feeling I hear it every single day from small businesses all across my state. The uncertainty is crippling. The uncertainty is bad for the bottom line. Can you speak to what you are hearing from small businesses about what threats of trade wars and tariffs that are being imposed have had on our small businesses around the country? Ms. ZIMMERMAN. Yes. They are absolutely afraid that it is going to cut into the small business share of business in this country because they are going to get hit the worst by tariffs, increasing prices from the tariffs because they aren't able to negotiate like the big companies. They just don't have the same ability to do that. Their suppliers, when you are 0.1 percent of your supplier instead of 50 percent of your supplier guess what? They don't listen to you. They don't negotiate with you. And so that is going to make a huge difference to main street, huge. Ms. GOODLANDER. Well, thank you for that. I would like to enter into the record an article from the Concord Monitor about the Viking House, which is a small business in Concord, New Hampshire, in my district. It shares the story of Emily Glavin who runs this small business. She has been doing so over for over a decade. She weathered the COVID-19 pandemic. She put her heart and soul into this business. And what she sees is clear, and I think it is clear to many of us in this room today that the costs from these tariffs, as she put it, `` will be passed on to us.'' And I think she is right. Simply put, these tariffs are taxes on hard-working people and on small businesses, on consumers, and on American families who are going to be paying the cost for trade wars, senseless trade wars. Ms. ZIMMERMAN. A it is going to put some of the small businesses out of business. Ms. GOODLANDER. It sure will. Well, I thank you for your testimony today. And with that, I yield back, Mr. Chairman. Chairman WILLIAMS. The gentlelady yields back. And I want to thank our witnesses for their testimony. I want to make sure nobody runs over each other trying to get to that bathroom now we when we leave, but I want to thank you for appearing before both the House and the Senate committees today. Now, without objection, Members have 5 House legislative days until April 30 to submit additional materials and written questions for the witnesses to the Chair. Those questions will be forwarded to the witnesses. I ask the witnesses to please respond promptly. And again, thank you for being here. We appreciate it very much. And if there is no further business, without objection, the joint committee hearing is adjourned. [Whereupon, at 12:45 p.m., the Joint Committees were adjourned.] [Ms. Anna Zimmerman did not respond to questions in a timely manner.] A P P E N D I X GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT [all]