[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] TAX DAY: EXPLORING THE ADVERSE EFFECTS OF HIGH TAXES AND A COMPLEX TAX CODE ======================================================================= HEARING before the COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS SECOND SESSION __________ HEARING HELD APRIL 10, 2024 __________ [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 118-046 Available via the GPO Website: www.govinfo.gov ______ U.S. GOVERNMENT PUBLISHING OFFICE 55-250 WASHINGTON : 2024 HOUSE COMMITTEE ON SMALL BUSINESS ROGER WILLIAMS, Texas, Chairman BLAINE LUETKEMEYER, Missouri PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania BETH VAN DUYNE, Texas MARIA SALAZAR, Florida TRACEY MANN, Kansas JAKE ELLZEY, Texas MARC MOLINARO, New York MARK ALFORD, Missouri ELI CRANE, Arizona AARON BEAN, Florida WESLEY HUNT, Texas NICK LALOTA, New York CELESTE MALOY, Utah NYDIA VELAZQUEZ, New York, Ranking Member JARED GOLDEN, Maine KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota GREG LANDSMAN, Ohio MARIE GLUESENKAMP PEREZ, Washington SHRI THANEDAR, Michigan MORGAN MCGARVEY, Kentucky HILLARY SCHOLTEN, Michigan JUDY CHU, California SHARICE DAVIDS, Kansas CHRIS PAPPAS, New Hampshire Ben Johnson, Majority Staff Director Melissa Jung, Minority Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Roger Williams.............................................. 1 Hon. Nydia Velazquez............................................. 2 WITNESSES Dr. Aaron Hedlund, Associate Professor of Economics, Purdue University, Columbia, MO....................................... 5 Mr. Raymond Huff, President, HJB Convenience Corporation, Lakewood, CO................................................... 7 Mr. Chuck Wetherington, President, BTE Technologies, LLC., Hanover, MD.................................................... 8 Mr. Walter Rowen, President of Susquehanna Glass Co., Co-Chair of Small Business for America's Future, Lancaster, PA............. 9 APPENDIX Prepared Statements: Dr. Aaron Hedlund, Associate Professor of Economics, Purdue University, Columbia, MO................................... 33 Mr. Raymond Huff, President, HJB Convenience Corporation, Lakewood, CO............................................... 43 Mr. Chuck Wetherington, President, BTE Technologies, LLC., Hanover, MD................................................ 49 Mr. Walter Rowen, President of Susquehanna Glass Co., Co- Chair of Small Business for America's Future, Lancaster, PA 56 Questions for the Record: None. Answers for the Record: None. Additional Material for the Record: Small Business Majority...................................... 60 TAX DAY: EXPLORING THE ADVERSE EFFECTS OF HIGH TAXES AND A COMPLEX TAX CODE ---------- WEDNESDAY, APRIL 10, 2024 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 10:04 a.m., in Room 2360, Rayburn House Office Building, Hon. Roger Williams [chairman of the Committee] presiding. Present: Representatives Williams, Stauber, Meuser, Van Duyne, Molinaro, Alford, Bean, Lalota, Velazquez, Landsman, McGarvey, Gluesenkamp Perez, Scholten, Thanedar, Chu, Davids, and Pappas. Chairman WILLIAMS. I want to welcome everybody here today, and before we get started, I want to recognize Congressman Bean from the great state of Florida to lead us in the pledge and the prayer. Would you please stand? Mr. BEAN. Thank you very much, Mr. Chairman. Let us pray. Heavenly father, we are grateful for this day. The gift of today. What are we going to do with it? We ask for energy and a sense of purpose and direction. Lord, we give thanks for small business, the people that put America to work and have created one of the greatest systems of economic stability. We ask those hands that are first to show up at work, last to leave and last to get paid, that just--we bless them. We know that they are the engine of putting other people to work and putting dinner on the table. We ask a blessing on our country, our leaders, and our defenders. And everybody said together, amen. Join me in the pledge, ladies and gentlemen. I pledge allegiance to the flag of the United States of America. And to the Republic for which it stands, one nation under God, indivisible, with liberty and justice for all. Chairman WILLIAMS. I now call the Committee on Small Business to order. Without objection, the Chair is authorized to declare a recess of the committee at any time. I now recognize myself for my opening statement. Good morning to all of you, and welcome to today's hearing, which will focus on how tax policy significantly impacts our nation's small businesses. I would like to start off by thanking our witnesses for joining us today, and your attendance is greatly appreciated, and we value your input and expertise on these issues. As our nation's job creators continue to face harsh economic headwinds, we must ensure the Tax Code works for them, not against them. And in 2017, Congress passed the Tax Cuts and Jobs Act, the most significant changes in the Tax Code in decades. The TCJA lessened the tax burden on small businesses and provided much needed relief for all Americans. When small businesses get to keep more of their money, they put it to work in either their business or their communities. I believe that the cuts fundamentally provide how cutting taxes is good for small businesses, good for all Americans, and good for our economy. You don't have to just take my word for it, though. The year following the tax laws enactment, businesses revenue went up and generated the highest single year increase in government revenue since 1977. This bill also helped families. In the 2 years following the TCJA's enactment, the median household income increased by $5,000. Unfortunately, some of the main provisions in this law are starting to expire, which will make it harder for businesses to continue their operations. The House of Representatives acted in January and passed a bipartisan bill to extend some of these key provisions affecting the small business community. But unfortunately, this bill is still waiting for Senate action. I hope the stories from our witnesses here today will help spark action by impressing the bill's benefits and the time sensitive nature of these tax policies. This morning, higher than expected inflation reading shows that President Biden's tax and spend policies continue to hurt everyday Americans. Not only that, with inflation remaining stubbornly high, it will likely force the Federal Reserve to keep interest rates high, which will make it more challenging for businesses to access capital. As the small businesses continue to deal with inflation, labor shortage and onslaught of burdensome regulations, it is imperative that we don't allow the Tax Code to further penalize success. In addition to larger tax liabilities, if these provisions expire, business owners are facing a new, troubling reality. Statistics show that small businesses are receiving audits at an alarming rate. On average, small businesses owners will pay over $1,000 per year to have a CPA firm prepare their taxes, and that is money they don't have. This is just another cost that a business owner has to write off as a loss when those dollars could help build on their core business model. We in Congress must make small businesses--are not forced to play defense against an overly aggressive IRS. Unfortunately, we also saw in the President's budget that he wants to increase taxes on many small businesses. We can't tax our way into economic growth and need to let our job creators do what they do best and generate economic activity for their communities and everybody. I would like to once again thank our witnesses for being here with us today. I am very much looking forward to our conversation. And with that, I want to yield to our distinguished Ranking Member from New York, Ms. Velazquez. Ms. VELAZQUEZ. Thank you, Mr. Chairman. Good morning, everyone, and thanks to the witnesses for being here with us this morning. Main street businesses are the lifeblood of our nation's economy, driving innovation and job creation and helping millions of Americans achieve their American dream. As such, they are key to our federal tax strategy. When our tax system works for them, it brings the most value. However, despite their fundamental importance, small firms are often used as bargaining chips in the discourse around tax reform, while wealthy individuals and large corporations cash in. As a result, our tax system has grown increasingly complex and uncertain, and Congress is forced to jump from one tax extender package to another. Meanwhile, our main street firms are left with a convoluted and onerous tax code, for which they need to hire outside professionals and spend substantial funds. Unfortunately, this was especially the case in the Tax Cuts and Jobs Act of 2017. While the main priority for this legislation included a permanent 40 percent rate cut for the largest, most profitable companies in history, small firms got a complex and temporary 20 percent deduction. While many small companies have undoubtedly received benefits from the 199A deduction, nearly half of the overall benefits goes to the top 1 percent of income earners. My hope is that come 2025, when this provision is scheduled to expire, we can work together to provide genuine tax relief to millions of small businesses without saddling them with another set of complicated and temporary deductions that just end up further enriching a wealthy few. Meanwhile, Democrats will continue advocating for a tax system that is both fair and fiscally responsible. In just the past three years, Democrats have successfully delivered tax incentives to bring manufacturing back to America, used the Child Tax Credit to cut child poverty in half, and established a 15 percent corporate minimum tax so multinational companies can no longer avoid paying taxes altogether. Through investment in the Inflation Reduction Act, we have worked to modernize the IRS. Taxpayers no longer have to spend hours on hold, and filers are finding it easier to submit electronic forms. Similarly, the new direct file program is making tax submissions simpler than ever for millions of Americans. Additionally, wealthy tax cheats are being held accountable, and the IRS has already recovered over $500 million in unpaid taxes. So, while Democrats fight for a fairer system that is easier to use, many of my colleagues on the other side have been working, on behalf of tax evaders, to defund the IRS. They have also been proposing more tax cuts for the rich to pay for their cuts to essential programs like Medicare, Social Security, and the Affordable Care Act. Now, as we emerge from a cost of living crisis and wages are once again outpacing inflation, President Trump is proposing a 10 percent tariff on all imports. In my opinion, the contrast could not be any clearer. With that said, I am encouraged by the bipartisanship shown earlier this year when we passed the Tax Relief for Workers and Families Act, which not only extended the Child Tax Credit for working families but delivered an extension for viable small business provision like full and immediate expensing on investment in machinery and R&D. Unfortunately, those provisions once again face uncertainty as Republican senators play politics and aim to kill anything that could be perceived as a win for President Biden during an election year. I look forward to working with the Chairman to ensure this legislation gets passed and I look forward to hearing from our witnesses about how best to support small firms using the tax code. I yield back, Mr. Chairman. Chairman WILLIAMS. Lady yields back, and I will now introduce our witnesses. Our first witness here with us today is Doctor Aaron Hedlund. Dr. Hedlund is an associate professor of economics at the Daniel School of Business at Purdue University located in West Lafayette, Indiana, and the research director of the American First Policy Institute located right here in Washington, DC. Additionally, Dr. Hedlund is a research fellow at the Federal Reserve Bank of St. Louis and chief economic--economist at the Show Me Institute, the only think tank in Missouri dedicated to promoting free markets. Dr. Hedlund was the chief domestic economist and senior advisor at the White House Council of Economic Advisors, where he helped design and execute emergency economic measures during the COVID-19 pandemic. Dr. Hedlund earned his bachelor degree in economics and math from Duke University and his PhD in economics from the University of Pennsylvania. I want to thank you for joining us today, even though you had some Baylor history, right? And we look forward to the conversation ahead. Okay, our next witness here with us today is Mr. Raymond Huff. Mr. Huff is the president of HJB Convenience Co-op-- Corporation located in Lakewood, Colorado. Mr. Huff founded HJB Convenience Corporation in 2004, purchasing the chain of Russell's Convenience Stores, were all located in high-rise office buildings. He is also the principal of Tenderfoot Software which created the software used by Russell's Convenience Stores. Prior to owning his company, Mr. Huff was president of Trans Pacific Stores Limited, where he opted Russell's Convenience Stores--where he operated Russell's Convenience Stores. He currently serves as Vice Chair of the CONXSS Advisory Board. Mr. Huff earned his degree in accounting and business management from Howard University and thank you for joining us here today, Mr. Huff. We look forward to the conversation ahead. Our next witness today is Chuck Wetherington. Mr. Wetherington is the president of BTE Technologies located in Hanover, Maryland. For over 2 decades, Mr. Wetherington has served as president of BTE Technologies, a small manufacturing firm which produces medical device equipment. Since buying the company in 2001, Mr. Weatherington has brought new products to the market while dealing with ever changing and burdensome regulations. Mr. Wetherington is a board member and former Chair of the Small and Medium Manufacturers Group for the National Association of Manufacturers. He also serves as the Governor's Workforce Development Board for the state of Maryland. Mr. Wetherington holds degrees in engineering from both the University of Illinois Urbana-Champaign and Vanderbilt University. Thank you for joining us here today. We appreciate and look forward to the conversation ahead and I now recognize the Ranking Member from New York, Ms. Velazquez, to briefly introduce our last witness appearing before us today. Ms. VELAZQUEZ. Thank you, Mr. Chairman. Our final witness today is Mr. Walt Rowen. Mr. Rowen is the President of Susquehanna Glass Company, a 113-year-old family owned business in Columbia, Pennsylvania. Since 1995 he has been the third- generation family owner of the business and has scaled the company to sell consumer products to many of the nation's best known retailers, employing between 35 and 60 people. Mr. Rowen is also the Co-Chair for Small Business for America's Future, a national coalition of business owners and leaders working to provide small businesses a voice at every level of government. Thank you for being here today, and welcome. Chairman WILLIAMS. Thank you, and we appreciate all of you being here today. Very much so. Now, before recognizing the witnesses, I would like to remind them that their oral testimony is restricted to 5 minutes in length. We stick with that, okay? If you see the light turn red in front of you, it means your 5 minutes have concluded and you should wrap up your testimony. And what you will hear--you will hear this to just help you remind, okay? And also, you are going to see Members coming in and out, we may have a full house. We may have not so full house. No reflection on you. There is other committees happening so people will come and go and that is normal as we proceed. So, with that in mind, I now recognize Doctor Hedland for 5-minute opening remarks. STATEMENTS OF DR. AARON HEDLUND, ASSOCIATE PROFESSOR OF ECONOMICS, PURDUE UNIVERSITY; MR. RAYMOND HUFF, PRESIDENT, HJB CONVENIENCE CORPORATION; MR. CHUCK WETHERINGTON, PRESIDENT, BTE TECHNOLOGIES, LLC.; AND MR. WALTER ROWEN, PRESIDENT OF SUSQUEHANNA GLASS CO., CO-CHAIR OF SMALL BUSINESS FOR AMERICA'S FUTURE STATEMENT OF DR. AARON HEDLUND, ASSOCIATE PROFESSOR OF ECONOMICS DANIELS SCHOOL OF BUSINESS, PURDUE UNIVERSITY Mr. HEDLUND. Good morning, Chairman Williams, Ranking Member Velazquez, and Members of the committee. It is truly a privilege to engage with you today on this issue of taxes and not college basketball. My name is Aaron Hedlund. I have been an economics professor for more than a decade, and from 2020 to 2021, I had the privilege to serve as the chief domestic economist and senior advisor at the White House Council of Economic Advisors. The views expressed today are my own. Before jumping in, I would like to establish some economic context for our discussion. Put simply, America is in the midst of a policy induced cost of living crisis. One way to describe inflation is as too much money chasing too few goods, which means there are two basic ways to end the crisis. The first is to address the too much money part by withdrawing excess demand. The most natural way to do this would be to stop Government overspending. But with the reckless fiscal policy of the past few years, the Federal Reserve has had to step in with its own painful medicine of interest rate hikes to tame demand. The other avenue to reduce inflation is to address the problem of too few goods by putting in place pro-growth policies that expand supply and create affordable abundance. This recipe has succeeded in the past. The 1980s supply side revolution of simple, low, and fair taxes, coupled with regulatory reform and sound money, put an end to stagflation. The second major success of this approach occurred starting in 2017, following years of failed attempts by its predecessor at a stimulus driven growth strategy. The Trump administration, along with Congress, took a different approach when they unleashed the beginnings of a second supply side revolution with the Tax Cuts and Jobs Act, or TCJA, as one of its centerpieces. The TCJA had three primary goals. One, make the U.S. competitive on the world stage and repatriate earnings from abroad by reducing what was one of the highest corporate tax rates in the developed world. Second, reverse the stagnation of living standards that families had been facing since 2007 by simplifying taxes through lower marginal rates and doubling the standard deduction. Third, boost small businesses and unleash investment across the country by lowering tax rates, creating the 20 percent Pass- through Deduction, and enacting opportunity zones. The results were a resounding success as the economy vastly outperformed the official forecast made in 2016. Unemployment and poverty rates hit record lows, income gains reached record highs, and 10 of billions of dollars of net new investment flowed into high poverty communities. The typical American families saw their income jumped by more than $5,000. Contrast that with the $4,000 decline they saw between 2019 and 2022, driven by inflation. In short, TCJA unleashed a blue collar boom with the biggest gains at the bottom. These accomplishments are notable, but Americans still crave further progress towards taxes that are simple, low, and fair. Simple. Tax complexity costs Americans hundreds of billions of dollars in accounting and compliance headaches, resources that should be going to productive economic activities, not paperwork and bureaucracy. Tax simplification is deregulation. Make the Tax Code simpler and people won't have to contend with so many IRS regulations. Low. One myth about tax cuts is that they deprive the government of needed funds. The truth is that the government does not have a revenue problem, it has a spending problem. Federal receipts as a share of GDP have been stable for decades, and in 2022 they reached their second highest level since world War II. Meanwhile, spending had averaged 20 percent of GDP for 50 years prior to COVID, but is now forecasted to be 23 percent to 24 percent over the next decade and rising from there. Fair. Everybody wants a fair Tax Code, but class warfare mythology about the rich paying less in taxes than everyone else obscures the true sources of unfairness. The truth is that while the top 1 percent earn about 20 percent of total income in the economy, they pay over 40 percent of total taxes. And by the way, corporate CEO's don't pay personal checks when the corporate tax is getting paid. Workers and consumers bear most of that burden. So what actually makes taxes unfair? It is unfair that the complexity of the Tax Code advantages those with the resources to hire teams of lawyers, accountants, and lobbyists. And it is unfair that high effective tax rates disproportionately punish people aspiring to climb the economic ladder to enter the middle class and start small businesses. True tax fairness pursues a level playing field, not level incomes. Equality of opportunity, not equality of outcomes. And more private investment, especially in human capital, not less. Extending TCJA should be the foundation upon which to build a Tax Code that is simple, low, and fair. But I encourage Congress to be bold and not stop there. Thank you for the opportunity to speak with you about this important matter. I look forward to answering your questions. Chairman WILLIAMS. Thank you, Dr. Hedlund. I now recognize Mr. Huff for his 5-minute opening remarks. STATEMENT OF RAYMOND HUFF, PRESIDENT, HJB CONVENIENCE CORPORATION Mr. HUFF. Good morning. Thank you, Mr. Chairman, Ranking Member, and Members of the committee for allowing me to talk to you today about the 199A Tax Deduction. My name is Raymond Huff. I am president of HJB Convenience, an S Corp. I have been in the convenience industry since 1988. Today I operate seven convenience stores and have 16 employees. I am here today on behalf of myself and the National Association of Convenience Stores. In the United States, the convenience industry includes more than 150,000 stores employing 2.44 million people. It is truly an industry of small businesses. 60 percent of the industry is comprised of single store operators. The industry handles about 165 thousand--65 million transactions each day, a number equivalent to half of the U.S. population. Today, I will focus on Section 199A of the Tax Code, which provides a small pass-through business--provides small pass-through businesses, like mine, a deduction of a taxable income to help bring us into rough parity with C Corporations. From a tax perspective, I will cover the need for tax fairness for small businesses, the benefits of the provision for the economy, and the importance of making 199A permanent. Initially, the reduction in tax burden for section 199A allowed me to reinvest in my business, expand to open new stores, and hire more employees. It did what it was intended to do. It created a level playing field, and that level playing field is better for my employees and my customers. Then came COVID. My stores are located in commercial office buildings and these employees are now working from h Prior to 2020, I had 23 stores operating in major cities but had to close two-thirds of those stores due to low or no off--office occupancy. The 199A tax deduction and other provisions of the law allowed me to invest in technology that allowed me to keep some of those stores open. However, other than in 2018 and 2019, I have not made a profit and have not been able to use Section 199A. I am not alone. I have seen many other businesses located near mine, in the central business districts, struggle for years. My main message to you is do not pull the rug out from under me just when I am finally starting to recover. My--many small businesses, including mine, need the 199A tax provision to stick around so we can get healthy again. This prospect of losing the benefits of this tax law is very troubling. If my business is faced with a significant tax increase at the end of next year, it would set my business back in a way I really can't afford or plan for. A 20 percent or higher increase will require me to slow or cancel my store reopening's hiring plans in the future. This is just the stimulus that 199A in bonus depreciations were meant to spur. They allow small businesses to invest, expand, hire, and compete with the big boys. The Tax Code should not favor my larger competitors. Without 199A, those large competitors would have a better effective tax rate and would be able to invest those funds, allowing them to have an unfair advantage in the marketplace. That is not right. I can hold my own, but I do need a level playing field, and 199A for the first time leveled that field. That is we should all want that. Small businesses are the backbone of the U.S. economy. I urge the Members of this committee and all Members of Congress to recognize the urgency of this pending tax increase and take action to allow for proper business planning. The business community needs certainty, especially small businesses like mine. Waiting to resolve this issue would certainly not be as beneficial as extending and making those tax provisions permanent now. Thank you for your time today. I welcome your questions. Chairman WILLIAMS. Thank you, Mr. Huff. I now recognize Mr. Wetherington for his 5-minute opening remarks. STATEMENT OF MR. CHUCK WETHERINGTON, PRESIDENT, BTE TECHNOLOGIES, LLC Mr. WETHERINGTON. Good morning, Chairman Williams, Ranking Member Velazquez, and Members of the committee. My name is Chuck Wetherington. I am president of BTE Technologies, a 40 person medical device manufacturer near Baltimore. I appreciate the opportunity to testify about the importance of pro-growth tax policy for manufacturing in America. This is actually my second time appeared before this committee. My first appearance was almost 6 years ago at a hearing on how trade policy affects small manufacturers. Thank you for having me back. I am pleased to see that this committee is still focusing on policies, specifically tax policies, that are impacting small manufacturers throughout the country. The most important message I want to leave you with today is that small manufacturers need consistency from Washington. Straightforward, predictable tax laws means I don't have to spend time locked away with my accountants trying to figure out the rules of the road. Instead, I can get out on the shop floor and focus on growing my business and creating quality jobs in our community. In 2017, Congress was able to take stale, outdated Tax Code and update key provisions to reduce taxes on small manufacturers. Tax reform put the U.S. on a path towards years of consistent, predictable tax policy. The Tax Cuts and Jobs Act was a new wave--drove a new wave of economic activity and industrial expansion. BTE and many of our peers in the industry experienced historic growth in the years between tax reform and the pandemic. But as we saw with COVID, the world in which small manufacturers operate can change in an instant. In 2020 and 2022--21, shutdowns and material shortages for our suppliers had a direct impact on BTE. We were able to survive and maintain operations, but many weren't so lucky. Now, tax increases are harming BTE and others in our supply chain. Over the past two years, critical tax incentives that drove growth in our sector have expired. The most damaging tax policy change for BTE has been the new requirements that we amortize our R&D expenses, and about face for more than 70 years of immediate R&D expensing in the U.S. Bringing a medical device to market is extremely risky and takes years and millions of dollars. But now BTE cannot immediately express those costs, reducing the working capital I have available to invest in my business and my employees. This R&D change has delayed projects to redesign and improve BTE's flagship products. As a result, our growth plans have stalled, delaying expansions that would have allowed BTE to increase our employee headcount by 50 percent. We are feeling the pain from the loss of full expensing and new, stricter interest deductibility standard as well. Capital equipment is now more expensive and we face new barriers to operating our equipment rental business, which enables smaller medical practices to have access to high quality made in America healthcare equipment. BTE and other small manufacturers are all experiencing these tax increases. Worse, more tax increases are coming our way at the end of next year. Most of BTE's suppliers are pass-through businesses. They will lose the 20 percent Pass-through Deduction at the end of 2025, and their tax rates will go up. Many also face increased estate taxes. Higher taxes in the manufacturing supply chain will directly increase BTE's operating costs. And small businesses like ours will face uncertainty as Congress debates how and if Congress will address the full suite of pro individual, corporate, and international provisions set to expire next year. Fortunately, the House has taken the first step to stave off this uncertainty. I want to thank every Member of this committee who voted for the Tax Relief for American Families and Workers Act, common sense bipartisan legislation to restore R&D expensing, and other expired 2017 provisions. But a larger tax policy reckoning is looming. Smaller manufacturers are depending on Congress to prevent damaging tax increases before the end of next year. We deserve a Tax Code that promotes innovation and demonstrates to the rest of the world what our values will be for the next decade and beyond. It is urgent that Congress deliver on that promise. Manufacturers like BTE are ready to work with all of you on pro-growth tax policies that allow us to create jobs, innovate, compete globally, and provide a better future for all Americans. Thank you. Chairman WILLIAMS. Thank you, Mr. Wetherington. And also, now, we want to recognize Mr. Rowen for his 5-minute remarks. Thank you. STATEMENT OF WALTER ROWEN, PRESIDENT/CO-CHAIR, SUSQUEHANNA GLASS COMPANY/SMALL BUSINESS FOR AMERICA'S FUTURE Mr. ROWEN. Good morning, Chairman Williams, Ranking Member Velazquez, and Members of the committee. My name is Walt Rowen and I am president of Susquehanna Glass Company in Columbia, Pennsylvania, and I am Co-Chair of the Small Business for America's Future, a national coalition of small business owners and leaders dedicated to providing the strong voice for small businesses at every level of government. SPAF has long advocated for tax reforms that benefit small businesses and is committed to ensuring that policymakers prioritize the needs of main street, by promoting an economic framework that supports small business owners, their employees, and the communities they serve. Susquehanna Glass is a family owned business in the glass decorating industry and we have been operating for 114 years. Think about that. We have survived multiple economic upheavals, two world wars, one Great Depression, recently the COVID-19 pandemic, and our business is still here. We currently employ about 35 employees and are proud to provide good jobs and economic activity to our local community since 1910. We are actually 114 years old, not 13. However, our ability to weather these storms has not solely been due to our own efforts. During times of crisis, government programs like the pay--Paycheck Protection Program and the Small Business Administration's EID loans have been crucial lifelines that have allowed us to keep our doors opened. I am sure all of our businesses have recognized that. That is important because the success of my business like that of all small businesses, is inextricably linked to the success of my community. America's 30 million small businesses are responsible for nearly half of all private sector employment and have been the primary source of job creation for decades. We need investments and policies that create an economic climate that allows small businesses to thrive, which in turn will lead to thriving communities. However, the current Tax Code, particularly the Tax Cuts and Jobs Act, has not adequately addressed the needs of most small businesses. A recent survey by the Small Business For America's Future shows that the vast majority of small business owners, somewhere around 75 percent of them, said the TCJA did not help them hire, raise salaries, or invest in their businesses. This failure to support small business growth represents a missed opportunity to create jobs, raise wages, and empower entrepreneurs to contribute to the vitality of their communities. To support, truly support small businesses, there must be a comprehensive approach that includes a fair tax system and investments in creating economic opportunities and building a strong workforce. Merely extending the TCJA provisions beyond 2025, would lock in a tax system that does not invest in small business growth or resilience. Instead, we need to take this opportunity to create and pass tax reform that supports small business success, closes loopholes, and ensures everybody pays the same or fair tax rates. Helpful policies for small business would include a tax cut for small business owners hiring their first employee to stimulate growth, making the first $25,000 in profit for small businesses tax-free, raising the corporate rate to 28 percent, and ensuring that billion dollar corporations pay at least 21 percent of their income in taxes to give lawmakers the means to make impactful economic investments. And finally, we must simplify tax matters for small business owners--you have heard that from the entire panel--as the current Tax Code is far too complicated and costly for small businesses to navigate. The need for tax reform is particularly urgent. The U.S. Census Bureau data shows there is a historic surge in new business starts, nearly 16 million since 2021, which is an 85 percent increase in the average compared to 2004 to January 2021. This wave of entrepreneurship represents a tremendous opportunity to build a more robust economy. Smart tax reform and ensuring the taxes rightly owed are collected will open pathways to address the challenges that small businesses and their employees face. Supporting policies that help small businesses will build a prosperous economy. In conclusion, the current tax system and TCJA have failed small businesses. The expiration of key provisions in that law is an opportunity to take bold action to create a Tax Code that works for main street because investing in small businesses is investing in vibrant, thriving communities where everyone can prosper. Thank you for the opportunity to testify today. I look forward to your questions. Chairman WILLIAMS. Thank you very much. And we will now move to Member questions under the 5 minute rule. I recognize myself for 5 minutes. I have been a small business owner in Texas for over 52 years. I am a car dealer and understand the many challenges facing Main Street America. Over the last few years, it has been much harder to find and keep qualified workers, regulations are forcing us to play defense, and inflation has been cutting our margins and making it harder to keep the lights on. Tax policy is the single most important thing we can do to help all entrepreneurs facing these challenges. And when a business owner is able to keep some of their profits, they don't just put in a bank and let it sit there, we spend it. They hire additional workers that creates more taxpayers, or they buy the extra equipment to keep their business growing. So, Mr. Huff, can you discuss how you were able to utilize the 199A small business deduction to grow your business and, more generally, what you do when you are able to keep more of your hard-earned money? Mr. HUFF. In my case, I wasn't up on tax law and my CPA in 2019 called and says you invested in equipment, did a self- serve store, and the 199A and the bonus depreciation is available to you. And I said, what does that mean? He says, it means you have more cash. I was shocked. I called that an Easter egg. I did not know that that was going to be the effect doing that, having that extra funds. I then invested in 2019 in additional technology that actually paid to keep my stores open during the COVID times. So, the 199A and the bonus depreciation helped me tremendously in those two years. Chairman WILLIAMS. Competition is what drives the small business economy and at the end of the day, your customers will tell you if you are doing a good job or not as a business owner, we do not need the government telling us that. And if you offer superior product at a lower price or better customer service, you will keep people coming back and your business will survive, and they will tell others. Unfortunately, we have been, and we have seen increased government mandates that are making it more difficult for businesses to compete. When a business owner is forced to hire a compliance officer to ensure that they understand the ever-changing web of regulations or an accountant to deal with an audit firm, an overly active IRS, it is time and resources away from their core responsibilities. So, Mr. Hedlund, can you elaborate on how simplifying the Tax Code helps both American families and businesses thrive? Mr. HEDLUND. Absolutely. This is a critical task and it is made more critical by the fact that we are in the midst of this cost-of-living crisis, which is entirely artificial. It has been created by reckless policy for the past few years. And I will return to one of my remarks, which is that tax simplification is deregulation. Tax simplification is tax fairness. Fairness is about a level playing field where you don't have to hire teams of accountants and lawyers to do your taxes, but it is a lot simpler. The TCJA helped with that, for one, by doubling the standard deduction. So, prior to TCJA, 50 percent of joint filers itemized their taxes. They had to go through and look at all the receipts and look at what gets deducted. After TCJA, that fell to 12 percent. That benefits small business owners as well. So, this is why we need to start with extending TCJA and go further than that. Chairman WILLIAMS. Now, I have got a limited amount of time here, but Mr. Wetherington, as you have grown your and developed your company, how has the R&D tax credit contributed to your success? Because, as you said, you are highly regulated and a long way from bringing a product to the shelf. So, how has the tax credits contributed to your success? Mr. WETHERINGTON. So, the key to me in R&D are my technical people, my engineers, my software developers, and the clinical staff that I have to help in the development of those devices. It is key for me to know that some portion of that expense that I have that is not current revenue yielding, it is future revenue yielding, that I have some return on being able to invest that. R&D is inherently risky. I don't get a win with everything that we go through making. And it is critical that we have that other nations around the world have that. We tend to fall behind in how we have done that, particularly with moving to amortization. Since we have moved to amortization, the rate of growth of R&D in Europe has doubled the rate of growth of R&D in the United States. So, it is critical that we refocus on that. Chairman WILLIAMS. The Chair now yields his time back and I now recognize the Ranking Member for five minutes of questions. Ms. VELAZQUEZ. Thank you. Mr. Rowen, your organization's recent survey found that 72 percent of small businesses say that overall, the tax code favors large corporations over small businesses. As we consider tax reform over the next two years, what can we do to restore trust in the system and deliver benefits for true small businesses? Mr. ROWEN. Thank you for that question. Everybody knows Tax Codes are complicated. They have to be complicated, but they don't have to be overly complicated. I believe that things like depreciation, quick depreciation, immediate depreciation is essential for small businesses to survive. There is no question almost everybody in the business community would say that. What I think I disagree with is the idea that the Tax Code itself, what the rate of taxation is for a business, is the most important thing to that business. Because the reality is businesses only pay that when they are making profit. So, I, for one, since 2020, haven't made any money. So, the tax rate that I am paying right now doesn't mean a thing to me. Depreciating means a thing to me. Interest rates means things to me, but the tax rate doesn't. So, focusing just on tax rate doesn't make sense to most small businesses because most small businesses actually are not making a lot of money. Ms. VELAZQUEZ. Thank you. Mr. Rowen, the Inflation Reduction Act provided an additional $70 billion to the IRS for customer service modernization and enforcement. Yes or no, do you believe the IRS is using this funding to put greater scrutiny on small businesses? Mr. ROWEN. Absolutely no. Ms. VELAZQUEZ. Thank you. Mr. Huff, yes or no, do you believe the IRS will use additional funds to target small businesses above historical averages? Mr. WETHERINGTON. I have no evidence to tell you one way or the other. Ms. VELAZQUEZ. Okay, Mr.---- Mr. HUFF. Yeah, I have no evidence of that either. My CPAs handle the rules and get back to me on what I should and shouldn't be doing. Ms. VELAZQUEZ. Thank you. Mr. Rowen, as we know, the IRS is using much of their new funds to target people with high income that routinely avoid paying taxes. Mr. Rowen, how does it benefit entrepreneurs when people who cheat on their taxes are held accountable? Mr. ROWEN. I have reinforced over and over again that in small business community--in small businesses, we live in our communities. There are things in our communities that need to be helped. Something like childcare, something like health insurance, things like overall education. And those are the areas that government policies and programs can address. When I have people who are absent from work because their child is sick, or they simply can't afford childcare, that affects my business, my ability to hire, and my ability to have stable employment and make a profit. Ms. VELAZQUEZ. I guess you are aware Republicans are once again proposing cutting Affordable Care Act subsidies to pay for more tax cuts for the rich, and so that is something we need to keep in mind. Mr. ROWEN. That would be catastrophic for my business. We absolutely depend upon the ACA. Ms. VELAZQUEZ. Mr. Rowen, the current leader of the Republican Party, former President Trump, is proposing an across the board 10 percent tariff on all imported goods. Yes or no, would you raise prices for consumers if this tariff was implemented? Mr. ROWEN. Yes. We live in a global economy. Half of the products that I am decorating and selling are produced here in the United States. We would like to make that more, but the reality is we have to buy products overseas. Every product we buy from overseas that has a 10 percent tariff will be more expensive from me to my customer, and therefore to the ultimate consumer. So, it is an inflationary policy. Ms. VELAZQUEZ. Thank you. Mr. Chairman, I yield back. Chairman WILLIAMS. Lady yields back. I now recognize Representative Van Duyne from the great state of Texas for five minutes. Ms. VAN DUYNE. Thank you very much, Mr. Chairman, for holding this important hearing. There is no doubt that the TCJA helped supercharge the economy and provided much needed relief to small businesses. The economic success of the 2017 tax reforms was undeniable. Small business optimism peaked, and investments in research and development hit record highs. Small businesses finally felt untangled from an impressive Tax Code, and it is great to hear these stories from our witnesses today. In 2025, Congress will be facing an important choice. Continue the success of the TCJA, looking at new ways to be competitive, such as continuing the work that we have done, in my subcommittee, by finding new ways for small businesses to access capital or go back to taxing job creators at record levels. If we do not take action, the small business deductions will expire, and small businesses will be faced with a tax rate of 43 percent, compared to the 20 that they now pay. And don't be fooled, in the absences of higher taxes, Democrats are finding new ways to burden small businesses across the country. Not only are agencies such as the SBA creating regulatory burdens, but every day, the IRS under President Biden is growing and expanding. It is expanding its reach into American wallets and small business ledgers. Lastly, we also have an opportunity to get things right the first time, with new opportunities when it comes to digital assets in cryptocurrency. Mr. Huff, I am curious. You have heard that some of the criticism on the TCJA was just a bailout for wealthy corporations and one percenters. You have talked about how it has benefited you. Do you feel like your business falls into either one of those two categories? Mr. HUFF. Which were the categories again? Ms. VAN DUYNE. Well, that you are a wealthy corporation or a wealthy one-percenter. Mr. HUFF. No, I am definitely not either. I am a small business owner who goes to work every day trying to make a dollar and pay my employees and grow my business. I would like one day to be wealthy in those things. Ms. VAN DUYNE. But it is great to hear that we actually are hearing from small business owners, mom-and-pop shops and others who have actually been able to take advantage of the TCJA. Mr. Hedlund, I am going to ask you. President Biden's budget proposal contains many new tax provisions. Does any particular proposal stick out as being the worst for small business? Mr. HEDLUND. There is a lot of bad options to pick from. It is hard to pick one of them. But I say the worst thing we could do for the economy right now is to hike taxes when people have already been paying the inflation tax and the regulatory tax. This would not--that would make the cost of living crisis worse, make our growth worse, and not be good for the economy. Ms. VAN DUYNE. So, you have heard President Biden repeatedly state that he is not going to tax anyone making less than $400,000. Is that accurate? Mr. HEDLUND. Well, that promise has already been broken. As I mentioned, the inflation tax. The typical American family has seen their real income fall by $4,000 because of inflation, and that will just be compounded by the expiration of thousands of dollars' worth of tax cuts to them if that were to be allowed to happen. Ms. VAN DUYNE. I appreciate that. Mr. Wetherington, what would you do differently if the R&D provisions of the Tax Code had not changed? Mr. WETHERINGTON. So, for me, I would be hiring more engineers, more software developers. I would have a higher level of certainty over what the Codes were and what my expenses would be and what my liabilities would be associated with doing that development. It would yield me getting to new products faster, which helped me not only in selling products to the United States, but I export to over 40 countries around the world, including China. And it is important for us to bring out, to beat other competitors around the world who also make medical devices by being innovative and being on the leading edge. R&D tax credits is a key tool in us being able to do that. Ms. VAN DUYNE. Tell me also, how would higher taxes impact, because you talked about how we are competing with other, with other countries and other businesses outside of America. Can you tell me how higher taxes impact manufacturing? Mr. WETHERINGTON. So, the vast majority of small and medium manufacturers are actually suppliers to larger employers. So, even though we may be not necessarily main street, but small industrial parks around the United States, that higher tax rate has a ripple down, a trickle-down effect. And we have seen a real renaissance in reshoring of manufacturing in the United States. And I think the Tax Code has been a big piece of that. Not only the supply chain problems for the pandemic, but it was already starting before then, in 2018 and 2019, because of the improved Tax Code. Ms. VAN DUYNE. Outside the Tax Code, can you talk about how the regulations have been hurting your business? And we have got 10 seconds. Mr. WETHERINGTON. My regulatory expenses have gone up over 460 percent in the last eight years and not done anything to make the products better or safer. Ms. VAN DUYNE. Wow, that is impactful. Thank you very much for your testimony. Mr. WETHERINGTON. You are welcome. Ms. VAN DUYNE. I yield back. Chairman WILLIAMS. Lady yields back. And now I recognize Representative Scholten from the great state of Michigan for five minutes. Ms. SCHOLTEN. Thank you so much, sir. Thank you to our witnesses for being here today. What an incredibly important conversation. Small businesses make up over 99 percent of private sector employers, employing nearly half of the workforce and creating two thirds of all new jobs. In my home state of Michigan, nearly 1 million, over 900,000 small businesses employ 1.9 million people. To that end, it is incumbent on Congress and us here in this committee to help create a tax system that is both easy for our small businesses to use, and one that promotes fairness. This question is for Mr. Rowen. In your experience navigating our tax system at a small business for nearly 50 years, what programs or policies have made that experience easier? And can you speak to any changes that you would like to see specifically? Mr. ROWEN. Boy, I am not quite sure how to respond to easier. We are a large enough company that we employ an outside accountant. And he is bringing all the complexities of the tax laws to us. We don't have to employ. We have bookkeepers that do our books. But the Tax Codes. But there have been. I mean, they are just crazy. Ms. SCHOLTEN. And I am not meaning to interrupt, none is a perfectly appropriate answer. Mr. ROWEN. None. Ms. SCHOLTEN. If that is your genuine answer. Mr. ROWEN. Yes, that is my answer. Ms. SCHOLTEN. What can we do? Mr. ROWEN. So, one, and it has been said by everybody today, let us create a tax system that everybody believes is fair, is consistent, and stays stable. Because every year, if we, every two or three years, we change, that throws all of us into chaos. Ms. SCHOLTEN. Absolutely. And you just said it yourself, you hire an outside accountant. Right? Mr. ROWEN. Yes. Ms. SCHOLTEN. Not many small businesses have that luxury, right? This Congress, we have heard from a lot of small businesses about labor shortages and supply chain issues impacting their ability to grow and thrive. I hear about that back home in West Michigan as the number one concern. Maybe number two, only to access to capital. Mr. Rowen, again, as we continue to bounce back as a country, can you describe how you think we could potentially use the Tax Code as a leverage to alleviate the workforce shortages that small businesses have been struggling with in recent years? What changes would you like to see? What avenues are already there? And how can we use this to our advantage? Mr. ROWEN. So, I think some of the things we have talked about today that actually are still in the TCJA, I would absolutely encouraged to stay in. So, things like having the-- being able to write off quickly, things like--but the two things that are the most important things for me with employees is healthcare and childcare. Ms. SCHOLTEN. Yeah. Mr. ROWEN. If we could have better healthcare and childcare programs, that would make an enormous difference for the vast majority of small businesses that I am familiar with. Ms. SCHOLTEN. Heard. Thank you so much. I yield back. Chairman WILLIAMS. Lady yields back. I now recognize representative Bean from the great state of Florida for five minutes. Mr. BEAN. Mr. Chairman. Thank you, Mr. Chairman, a very good morning to you. Good morning, Small Business Committee. To our witnesses, glad to have you here. Welcome to your nation's capital. I have only been in Congress 15 months, a little over a year, and I have learned that Bidenomics is taking its toll on main streets in northeast Florida, where I represent, and really all across America. In fact, with the exception of Joe Biden, I don't believe there is one single American who objectively believes that our nation is headed in the right direction. To all of you small business owners that have been struggling with Bidenomics, I want to tell you something, there is a light at the end of a tunnel. Now many small business owners will say, is it a train? It is not a train. It is the potential tax relief in the Tax Relief for American Families and Workers Act. The House has already passed it, a bill that is both family friendly and business friendly. And we are poised to deliver big, momentous change in Washington and all across America. The provisions of this bill have a track record of increasing wages, providing more job opportunities, and helping American businesses become more competitive, more productive, more innovative, and in turn, generating a tremendous economic boom in their communities, whether you are in research and development or in the convenience store business. As Americans continue to suffer under back-breaking inflation with an uncertain economic future, I believe the bill, the Tax Relief bill, the Tax Relief for American Families and Workers Act, will provide much relief, opportunity, and certainty. So, let us get to the questions. In 2017, Congress passed and President Trump signed into law the Tax Cuts and Jobs Act, which was the first major reform in the U.S. Tax Code since Ronald Reagan did it in 1986. Sweeping reform updated the Tax Code to benefit individuals and companies of all sizes. This tax cuts was incredibly successful and provided much needed relief for Americans. Unfortunately, the bill passed under reconciliation, which bypasses the 60-vote threshold. And now the program was temporary. We are soon to see all of that great, the great work expire. So, my question, Dr. Hedlund, if Congress allows the provisions of the job--Tax Cuts and Jobs Act to expire, what will be the impact on American businesses? Mr. HEDLUND. That is a great question. And it would be a very damaging impact because we saw what positive progress that law provided. $5,000-plus in income gains for the typical family with bigger gains at the bottom, people with less formal education, people with non-managerial jobs, people at the lower end of the income distribution had faster gains than at the top. So, if we let the TCJA expire, we can expect to see less investment, lower wages and lower overall prosperity. Mr. BEAN. Very good. Thank you very much. And to Mr. Wetherington, can we agree America has always been on the forefront, cutting edge of inventing things, making the world better, making quality of life for everybody? And that comes with research and development. Is it true that our Tax Code now is, is punishing people who do research and development? And if we don't make changes, we are going to see America fall further behind the rest of the world and research? What do you say to that Mr. Wetherington? Mr. WETHERINGTON. That is absolutely true. Manufacturers are inherently problem solvers. But we want to focus our problem solving on things about what we are manufacturing. We don't want to focus our problem solving on a new Tax Code or on changes. So, it is predictability and consistency that we really need out of Washington; allows us to focus on the job we need to do not only in creating new products through R&D, but also on the daily building, making, shipping, supporting products that we make to help people get better in our healthcare system. Mr. BEAN. Ten-four. So, we have got to act or we are going to go further behind the rest of the world? Mr. WETHERINGTON. The priority is urgent. Mr. BEAN. Amen. No. Thank you for saying that. Mr. Huff, I just want to say thank you and congratulations to you. Seven stores. I know your family is proud. Sixteen people are getting a paycheck. They are putting dinner on their table because of you. Is crime a problem at convenience stores right now? Mr. HUFF. Not in my stores, but generally crime is, I think, coming down. But I am not sure about that. The--if I could speak to---- Mr. BEAN. Hold on one second. My final question, we are going to flip it back to you. Mr. HUFF. Okay. Mr. BEAN. The Inflation Reduction Act, Dr. Hedlund, has been poised even at this Committee how great it is for small business. Isn't it true that spending $1.3 trillion under the Inflation Reduction Act has greatly enhanced inflation in these United States of America? Mr. HEDLUND. Yes. It should be called the Inflation Creation Act. Mr. BEAN. Thank you very much Mr. Huff, we will get back to you next time. Thank you all for coming forward. I yield back, Mr. Chairman. Chairman WILLIAMS. Gentleman yields back. I now recognize Representative Chu from the great state of California for five minutes. Ms. CHU. Mr. Rowen, I would like to ask you a question. I also serve on the Ways and Means Committee, which has jurisdiction over the Tax Code. And I so appreciate your small business perspective on how a Tax Code geared towards corporations and the wealthy does not trickle down to small businesses and workers. In fact, that is why Democrats have fought to end trickle down policies and instead invest directly in workers and small businesses. And that is why we continue to advocate for expanding their Earned Income Tax Credit, or EITC, and the Child Tax Credit. These are two of the most powerful tools at our disposal for not only reducing poverty, but also helping more Americans enter the workforce. Unfortunately, Republicans' Tax Cuts and Jobs Act did nothing to strengthen the EITC. And Republicans in the Senate are refusing to consider even a modest improvement to the Child Tax Credit that the House did pass on a bipartisan basis. So, can you talk about why it is important that the Tax Code support workers and families instead of just corporations and the wealthy? What benefits might small business owners and prospective entrepreneurs experience if Democrats EITC and CTC expansions under the American Rescue Plan are made permanent? Mr. ROWEN. So, in the small business world, believe it or not, taxing is not one of the most important issues that we deal with day to day. It is employees, it is consumers, it is how do we get our products out. But more than anything else, primarily as a manufacturer, we have to have employees. And if we don't have consistent, dependable employees, we don't have a business. And if we have--I am an entry level, low skilled--I have a lot of those jobs. I am hiring a lot of young, new family members. And hey, guess what? They have kids. And when they have kids and their kids don't, they don't have childcare, they are not going to be dependable employees. So, those kinds of programs, health insurance is another one. If I have an employee that is going to get sick and doesn't have health insurance, they are not going to go to the doctors. And the consistency, dependability of our employees is something that is vital to us. Those programs are necessary. Ms. CHU. Thank you for that thoughtful answer. I would like to follow up with talking about the impact of the Tax Cuts and Jobs Act on small business. As a Member of the House Ways and Means Committee, I was there in 2017 when Republicans pushed through their rushed partisan Tax Cuts and Jobs Act, and I saw firsthand that the goal was simple, to lower taxes for the wealthiest individuals and the largest corporations. That is why the TCJA made the corporate tax cut permanent, while the provisions for small businesses and individuals were made only temporary. But even though Republicans said that some of these temporary provisions were targeted at main street, like the 20 percent qualified business income deduction for pass-throughs, also known as the Section 199A deduction, we know that the majority of the benefits have gone to the wealthiest businesses. In fact, the Joint Committee on Taxation estimates that in 2024, 61 percent of that benefit will go towards the top 1 percent; and, businesses in the bottom two-thirds of income will only get 4 percent of the benefit. That is in part because the TCJA created a number of complex rules that made it harder for small businesses to navigate the Tax Code and actually take advantage of these potential deductions. So, Mr. Rowen, you indicated in your testimony that we need meaningful tax reform to help small businesses, but that simply extending these expiring TCJA provisions is not the answer. Can you expand upon some of the challenges that small businesses faced in navigating the TCJA's provisions? How would small business owners, and especially the smallest and most underserved, stand to benefit if Congress finally moves past the TCJA and instead pursues a fairer tax system? Mr. ROWEN. So, we can talk about what fair means. And I think that we believe, as small business owners, that if everybody is doing the same thing and paying the same amounts, that is fair. The fact is that the corporate tax rate had been at between 30--the top rate had been around 35 percent to 39 percent, and a 40 percent reduction took it to 20 percent, 21 percent. The small business community only got a 20 percent deduction as a pass-through. And you just look at those numbers and any economist and any lay person can be, can understand that that wasn't fair. And the fact that one was permanent, and one---- Chairman WILLIAMS. The gentlelady's time is up. Mr. ROWEN.--was not permanent was also not fair. Chairman WILLIAMS. You yield back? Ms. CHU. Thank you. I yield back. Chairman WILLIAMS. Thank you. I now recognize Mr. Meuser from a state that is represented well here today, the great state of Pennsylvania, for five minutes. Mr. MEUSER. Yeah. Thank you Mr. Chairman, very much. Thank you all. Great discussion. Really important. A lot of different ideas, but you can have a lot of different ideas, but facts are facts, I guess, right. When the Tax Cut and Jobs Act went into effect, yes, the corporate tax rate came down. You know, for some reason, we want to beat up on, you know, small businesses that, you know, become large businesses. That would happen. All large businesses were once small businesses, and they grow. As Mr. Huff said, that is the whole idea. When the corporate tax rate came down to 21 percent, the whole world got far more competitive than the United States of America. That is why right afterwards we saw almost a trillion dollars in repatriation come back. And by the way, many small businesses have large businesses as their, either their suppliers or their customers. So, it all needed to be reviewed. Now we are the Small Business Committee, so that is in fact where we want to focus. So, let me just ask you this, Mr. Wetherington, and we had some past business similarities. I was in the home medical equipment business. So, when you receive your 20 percent reduction and you had your 100 percent R&D deduction and carried interest could be written down, when you were showing more revenues, in the end, more net income, what did you do with it? Mr. WETHERINGTON. It went right back into business. Mr. MEUSER. Of course. I would have bet and knew exactly what you were going to say; went right into the business. You hired, you invested, you grew, you became stronger, more built to last. Okay? That is where employment comes from. From a business that is figuring out how to not only sustain itself but also have some level of profitability. And that is, by all means, what the TCJA did. I mean, there is no question about it. You know, the 20 percent reduction, the R&D reduction. Now the idea is it was a bipartisan vote here in the House, but that this is going to be, you know, removed. I mean, it is not being taken up in the Senate and President Biden showing no interest in and carrying it on. And they are not carrying it on because the messaging continues to be that this did nothing but help billionaires, right, and the super-rich. And yet I go to more chamber meetings as a former small business person that grew into a somewhat larger business and I never have one person out of a group of 150 say to me, boy, that Tax Cut and Jobs Act really was detrimental to me, I am sorry it happened. No. They are saying bring back the R&D, bring back the bonus depreciation, keep our 199A in effect. Mr. Huff, let me ask you something. What if after COVID and everything else, you know, when you are speaking of the 20 percent reduction: A, what if that never occurred and B, how devastating is going to be if that gets eliminated? Mr. HUFF. Well, I can testify today that for the first time the 199A actually brought funds to my corporation that I was able to invest. And I believe that if I didn't have that, I would not be here sitting here today as a business person. It gave enough funds that I was able to invest in technology and open up self-serve stores that are still currently operating. Mr. MEUSER. Yeah, great, thanks. Mr. Wetherington. R&D tax credit. Very important. I was looking at your products. Of course, a lot goes into that. Design engineers, all types of engineers, electronic EEs. That gets reduced or even now with the, with the 20 percent over a five-year period. How has that affected your business, your profitability, your hiring, your growth, and your R&D investment? Mr. WETHERINGTON. Well, as I stated in my testimony, this is slowing us down from bringing out major redesigns of our two flagship products that represent 80 percent of our product revenue. Our expectation is that we are going to grow by 50 percent once those launch, but we continue to have to push those out because of the inability to cover the expenses without the assuredness of having the R&D tax credit. It is back to predictability and consistency in what the Code is. Mr. MEUSER. Absolutely. Amen to that. Mr. Hedlund, you in your work and you working on the TCJA, just related to inflation. When the former administration, Trump Administration was talking about tariffs and, and getting to zero percent tariffs and reciprocal tariffs, was there inflation back in the Trump days because of that? Mr. HEDLUND. Leaving 2020, inflation was under two percent. It wasn't until 2022 that we got to 40-year high inflation. Mr. MEUSER. Thank you very much. I yield back, Mr. Chairman. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Landsman from the great state of Ohio for five minutes. Mr. LANDSMAN. Thank you, Mr. Chair, and thank you all for being here and your testimony. The bill that we just passed was a bipartisan bill, and it put back on the books and or expanded a number of things that I think we all in this room would agree were hugely important. And the Senate should pass what we already passed. The President is very supportive of this, of course, is the R&D piece of all of this, which we have been pushing for in this committee in a bipartisan way. And thanks to the Ways and Means folks, for getting it done and getting it to the floor. Being able to deduct the interest payments when interest payments are so high right now, it has been such a burden for small businesses, families in general. So, being able to do that was really important. The Child Tax Credit, hugely important to help families pay all their bills. And oftentimes those dollars end up back with our small businesses. So, it is really good that they are in the pockets of our families as opposed to up here or somewhere else. It also included the LIHTC expansion and making sure that this tool for helping to build more affordable housing. So, these are all really smart bipartisan tax endeavors, again, passed here and then went over to the Senate. Hopefully they will pass it. The issue, and the question for me is, we know what bipartisan tax reform looks like. We just passed it. The challenge is that almost all Americans know that the tax system is rigged for the super wealthy, right, that especially because of the Trump tax giveaways to millionaires and billionaires and these big corporations. If all of the companies and millionaires and billionaires, the super wealthy, were to pay all their taxes on all their income and wealth, wouldn't we have the money to invest in healthcare and childcare, which are at the core of successful small businesses? Wouldn't we have the resources to invest in additional tax relief for small businesses? So I am curious. I will start with you, Mr. Rowen, your thoughts on that. I mean, it just seems that fixing the tax system is, for small businesses and families, is the next big moment of truth for this economy and for the country, for this Congress. And it does seem pretty straightforward, and the American people are clear, make those who are super wealthy pay all their taxes on all their income and wealth, and then put us in a position where we can invest in childcare and healthcare and more tax relief for small businesses. Mr. ROWEN. We keep going back to bipartisan tax reform and, gosh, all of us would like that to happen. The question becomes what is fair. And again, what I say is the small business community that we represent is not coming today to say we don't want the changes that the TCJA gave to the small business community in deductions in the pass through 20 percent. It is not like we don't want those, those were helpful, absolutely. We all accept that. Mr. LANDSMAN. Exactly. Mr. ROWEN. But the bottom line is that the small business community is basically being taxed at about a 28 percent rate. And we also know that the corporations are being taxed at the 21 percent rate. Mr. LANDSMAN. If, if, if. Mr. ROWEN. If. And the average corporate tax rate is closer to 10 percent. Mr. LANDSMAN. Correct. Mr. ROWEN. So, that is not, in the American eye, fair. We know that tax policy can incentivize business development. We know that. We just have to figure out how to do it. And things--small business people recognize that childcare, health insurance, making our communities stronger, government policies that do that do help small businesses, and we grow when those programs are working. Mr. LANDSMAN. Anyone else? Mr. WETHERINGTON. The TCJA wasn't perfect, but it did create a manufacturing boom and it created a beginning of onshoring that only continued once we started into the pandemic and having the supply chain issues. I think it is still very important that we make that permanent and we stop the additional provisions from expiring in 2025. Mr. LANDSMAN. Thank you. And I yield back. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Alford from the great state of Missouri for 5 minutes. Mr. ALFORD. Thank you, Mr. Chair. Good to see you back. And thank you to our witnesses for being here. I know it is a little bit of a sacrifice to come here away from your businesses, but we thank you for the investment because I think this is a very important hearing. I want to start with four simple truths today. Number one, cutting taxes is good for American taxpayers and their businesses. Number two, President Biden's new budget reveals his intention to tax Americans families into oblivion. Fact number three, complying with President Biden's war on small business, including over regulation, is a tax within itself. And number four, the IRS is now targeting more small businesses as it looks to claw away money to fund the radical agenda of this administration. My message to President Biden is, sir, end your war on small businesses now. The Federal Tax Code currently sits at over 75,000 pages, including guidance from the IRS. For context, if you were to stack 75 pages up, take a look at the ceiling right now, guys, this is about a 16-foot ceiling. The Federal Tax Code and all the guidance that goes along with it would be twice the height of this ceiling. That is crazy. Next week, hundreds of millions of Americans will be required to comply with all that paper, 32 feet high worth of regulations, and contend with the President's new 87,000 IRS agents. He hired those new IRS agents for a reason: to execute the extreme taxation policy laid out in his 2025 budget. The President's budget includes a staggering $4.9 trillion in new taxes, alongside allowing $2 trillion in tax savings from President Trump's Tax Cut and Jobs Act to expire. Allowing these pro-growth tax policies to expire and increasing taxes will not only further hurt the competitiveness of your small businesses and all small businesses in America, it will crush them, the jobs they provide, the communities they serve. Mr. Huff, one of the most important pieces of the TCJA was a small business deduction. It allowed a 20 percent deduction for pass-through business owners, allowing them to keep more of their own money and invest it in their businesses and in their employees. It has led to an estimated $66 billion in tax savings for small entities. Mr. Huff, what will happen to your small business if the small business deduction expires next year, sir? Mr. HUFF. I will not be able to invest in my planned reopening of my stores. I have stores that are actually mothballed and planned to reopen as the office buildings fill up. And just one other thing I would like to--the 199A was the first time that I actually felt that the Tax Code affected me as a small business person. I am grateful to have it. Mr. ALFORD. These savings that you are realizing under the tax cuts now, you are not taking fancy trips to Tahiti or anything like that, are you, with the money? Mr. HUFF. Actually, I am going to go to Tahiti, but not because of the Tax Code. Mr. ALFORD. You are investing this in your business and the people who work for you. Mr. HUFF. That is absolutely correct. We reinvest in our business. And I actually have to do that because I would like to get back to 23 stores across the United States. Mr. ALFORD. Mr. Hedlund, our farmers are the backbone of our nation, working sun up to sundown. In Missouri, we had, 5 years ago, 95,000 farms in Missouri. Now we are down to 87,000. Our food security is our national security. We are losing 1,000 farms a month in America. And a key policy keeping these businesses, these family farms going is the stepped up basis which allows a son or daughter to inherit their family farm without paying the devastating tax bill. President Biden wants to do away with this in his budget, and it is going to hit two-thirds adversely, two-thirds of the family farms. What impact will that have on our ag industry, do you think? Mr. HEDLUND. It would be a very damaging impact. We have seen overall prices go up by 20 percent and food prices have gone up by more than that. And that is just part of a trend. This administration has also talked about taxing unrealized gains, which would be similarly devastating to the economy. Mr. ALFORD. Well, I appreciate your answers. Mr. Huff, have a good time in Tahiti. I appreciate--I wish I could go with you, but I just got back from spending a week in Israel, and I am telling you what, we need to pray for those people in Israel and support them. Thank you so much. Mr. Chair, I yield back. Chairman WILLIAMS. The gentlemen yields back. I now recognize Representative Thanedar from the great state of Michigan for 5 minutes. Mr. THANEDAR. Thank you, Mr. Chair. And I have a couple of questions for Mr. Rowen. You know, when I ran a small technology business in Michigan, buying equipment was very critical, keeping up with the new technology so that I can provide better service to my customers, create more jobs. And so often I used my profits, so to speak, to buy equipment and invest in my own business, so I can grow, grow the business. And at times, you know, I had some tax benefits that helped me. Now, we have a bill, I am sure you are familiar, that is being with discussed in the U.S. Senate. And in terms of providing some tax benefits, especially able to write off entirely the purchase of equipment. What would you advise the senators to do on this particular bill? Mr. ROWEN. There is no question in my mind, it is the experience I have had with my business, that every time I can expense something like a piece of equipment in the year that I purchase it, it helps my business. It is an absolutely vital component of what I think should be a fair tax policy and tax reform, so it should be included in tax reform. Mr. THANEDAR. All right. The 199A deduction benefits many small businesses that operate as pass-through, but 50 percent of the benefits go to the top 1 percent. What can we do to cater benefits more towards the average small business owner who makes closer to $70,000 a year? Mr. ROWEN. So, one of our proposals is to take the first $25,000 worth of income on a business and make it tax free, give small business owners who begin to hire employees a credit for new hires, things like that. So, when you are down at the level where all entrepreneurs start, at the bottom and build up, give better tax breaks and incentives that way. Mr. THANEDAR. All right. Finally, you know, what specific policies you recommend that would help the small businesses? Often when we have tax breaks, tax incentives planned, we see a lot of that benefit go to the top 1 percent who really don't need those incentives. It is the small businesses which are struggling, the mama-papa businesses, small businesses trying to grow. You know, they can benefit more. How can we design policies that benefit more of the lower end, smaller businesses and not so much of it goes to the top 1 percent? Mr. ROWEN. I believe, our organization believes that government is not necessarily always the bad, evil part, and taxing is how we fund our government. We have just experienced 4 years', 5 years' worth of a pandemic that would have crushed most businesses. My business would not be here today, I would bet you these two gentlemen sitting next to me, their businesses very possibly would not be sitting here today, be in business, if we didn't have the protections like the PPP funding and the Small Business Administration EIDL loans. Those are the things that backstop the American economy and that is what America needs to be. We need to strengthen that. Mr. THANEDAR. Thank you, Mr. Rowen. And Mr. Chair, I yield back. Chairman WILLIAMS. The gentlemen yields back. I now recognize Representative LaLota from the great state of New York for 5 minutes. Mr. LALOTA. Thank you, Chairman, for your leadership and for getting us together to today to hear about the challenges that small businesses face regarding our Tax Code and the uncertainty in it. I want to thank our witnesses for being here today. I want to spend my 5 minutes today addressing an issue that is paramount to my Long Island constituents, and that is the state and local tax deduction, otherwise known as SALT. Long Island is already one of the most expensive places in the country to live due to incredibly high state and local taxes. Specifically, New York State has the dubious distinction of having the highest effective income, sales, and property tax rates in the country. It is not even close how bad we are in our state. Now, that is a problem mostly created by Albany politicians and nobody in this town, thankfully. Nevertheless, the complex Federal Tax Code presents challenges to small businesses and individuals, like many of my constituents. And to help provide relief to that problem, many of my colleagues and I are working to increase or eliminate the SALT deduction cap to help support our constituents. One of the first bills I introduced in Congress was my SALT Fairness and Reduction Act, which would increase from $10,000 for individuals to $60,000 for individuals, $120,000 for married couples, and would also index that for inflation. This, many think, is commonsense legislation that provides tax relief to those who need it, specifically small businesses and middle class families, who are having to cut costs every day. I made a promise to my constituents that I wouldn't support any tax package here in the House without a reasonable SALT fix. And since day one, I have made that clear to every one of my colleagues. Unfortunately, earlier on in this Congress, the Wyden-Smith tax package did not have any reasonable fix for SALT, and I was forced to vote no on that package. I am not giving up, however. Many of my New York Republican colleagues and I then fought tooth and nail to ensure that a vote on a SALT increase got to the floor. We proudly introduced the SALT Marriage Penalty Elimination Act that would remove the marriage penalty and raise the SALT deduction cap to $20,000 for joint filers who have an adjusted gross income of $500,000 or less. Sadly, this dysfunctional town, every single House Democrat who previously said they were very much in favor of an increase in the SALT deduction, and specifically 14 New York House Democrats, voted against that and blocked that bill from even coming to the floor. It was pro family, pro worker, pro American legislation and the dysfunction of this town, the partisanship of this town prevented that from moving forward. This leads me to my first question. Mr. Hedlund, I see you are from Purdue. Sorry about the game the other night. A vast majority--you guys finished second in the world. That is very good. Mr. HEDLUND. A lot better than last year. Mr. LALOTA. Yes, sir. A vast majority, I understand, of small businesses are pass-through entities, meaning income is reported on from the business owner on their individual taxes and is taxed under the individual income tax. Is that correct? Mr. HEDLUND. That is correct. Mr. LALOTA. This means the limitation of the personal income tax code, like the SALT cap, directly negatively impacts the business. Is that correct? Mr. HEDLUND. They are affected by that provision. Mr. LALOTA. And it is a negative impact. They get to deduct less? Mr. HEDLUND. They get to deduct less. Mr. LALOTA. Which means they have to pay more? Mr. HEDLUND. Sure. Mr. LALOTA. And does anybody want to pay more? Mr. HEDLUND. No one I have encountered. Mr. LALOTA. We agree on that. Would you agree, moving on, would you agree that a double tax, where the federal government and then later on the state and local governments tax the same income, that a double tax is unfair? Mr. HEDLUND. So, I would take a little bit of a different view there. I would say if there is a federal taxpayer living in Texas and one living in New York and they have the same income, that the one in Texas should not have to pay a higher federal tax because of the bad decisions that New York government is making. Mr. LALOTA. Great point. I have heard that from some of my colleagues. Now, what would you say about return on investment? If you are going to analyze, in your words, that a Texas taxpayer, God bless Texas, shouldn't have to subsidize the largesse of Albany politicians, I generally agree with that concept. But what would you say if the analysis then said that this town sends more back to Texas and some other states than they send back to New York based upon the revenue it collects from those? Specifically, New York State is a donor state, meaning that for every dollar a New York taxpayer sends to the federal government, we get a mere 85 cents back. In many of those same states who claim they are subsidizing my state's largesse, they are getting $1.25, $1.50, and $2. Would you say that is unfair, sir? Mr. HEDLUND. I would say that the money going back to a lot of these states, no one is really feeling the benefits of it. Government is way too big. So, I am 100 percent on board with you about we need to reduce the tax burden on everybody. Mr. LALOTA. Great. Let's talk about the marriage penalty real quick. So, certain parts of the Tax Code disincentivize marriage, and specifically with respect to the most recent adjustment in the SALT code, the limitation is $10,000 regardless if you are an individual or you are married. So, one person gets to deduct $10,000 from their taxes, but two people who happen to be married get to deduct the same 10,000, not 20,000. Is that fair, sir? Mr. HEDLUND. I am definitely against marriage penalties. Mr. LALOTA. Great. With that, I yield back, Mr. Chairman. Chairman WILLIAMS. The gentlemen yields back. I now recognize Representative McGarvey from the great state of Kentucky for 5 minutes. Mr. MCGARVEY. Thank you, Mr. Chairman. Appreciate this hearing today, especially given that Monday, let's not forget, is Tax Day. So this is everybody's friendly reminder it is coming, whether we want to admit it or not. Mr. Wetherington, I appreciate your statement that the Tax Code must be simple, consistent, and must support job creation here in America. I couldn't agree more. We need a Tax Code that is accessible to every American. And I think everyone needs to pay their fair share. It is not viable and I think it is certainly not fair that the top 10 percent of earners are oftentimes taxed at far less than teachers and firefighters and people below. And let's look at what the Tax Code and what has happened recently. Trump's tax plan was a massive windfall for large multinational corporations. By implementing a flat 21 percent tax rate, President Trump gave some of the largest, most profitable corporations up to a 40 percent break on their taxes. But this is the deal. We are in the Small Business Committee. They did this while subjecting the smaller businesses and C corporations, who were previously taxed at 15 percent, a tax increase. So that 21 percent tax rate that they imposed, a flat tax, it lowered it for the biggest corporations, it raised it for many small businesses. I have got twins at home, and so I say this all the time, it can be fair, right? It can be equal without being fair. And that is what has happened. They made the tax rate equal, but it is not fair to our small businesses and our entrepreneurs who are trying to grow their businesses. It is not hard to see why, right? When signing his corporate tax giveaway into law, President Trump said, ``Corporations are literally going wild over this.'' You heard that quote correctly. Not people are going wild over this, not main street is going wild over this. Our largest corporations are going wild over this. And unfortunately, under the plan, it is not just people and programs that will suffer. The Congressional Budget Office estimates that with a full extension of the Trump corporate tax giveaways, deficits will rise up to $3.5 trillion, the highest percent of GDP outside of a war or a recession. We simply can't afford to do that, and it will be a wasted opportunity to improve our Tax Code if we do. With that being said, we have a great opportunity to extend the parts of the tax cut that helped people, like doubling the standard reduction and the child tax credit. And we can work together to create a reformed tax system that is simple to understand, helps small businesses, promotes commerce, and enhances the welfare of everyday Americans. Mr. Rowen, what are some of the previous--what are some of the provisions in the Tax cut and Jobs act that helped small businesses that you would like to see continued in a new tax package? Mr. ROWEN. Well, I do think the 199A 20 percent reduction was good. I think the 100 percent amortizing, you know, taking those deductions right away, those are good. There is a lot of provisions. Anything that simplifies the Tax Code would be great. But again, we do believe that if you simply leave this law in place and keep the corporate rate at 21 percent and give back to the small businesses their 20 percent reduction, you are still creating this uneven balance where small businesses are effectively being taxed at somewhere around 28 percent and corporations are still at 21 percent. Mr. MCGARVEY. In my brief time remaining, we talked about deficits. We talked about that. We heard Mr. LaLota talk a little bit about recipient states and that sort of thing. I can tell you, I am from Kentucky. And last week, a few weeks ago, there was a study by the Republican Committee that proposed budgets that would cut Medicare, Social Security, and Affordable Care Act. In Kentucky alone, there are almost a million people enrolled in Medicare, more than 500,000 receiving both Social Security and ACA benefits. How do programs like these alleviate the workforce shortages that small businesses have been struggling with in recent years? Mr. ROWEN. We can't compete with big businesses that can give health insurance to their employees. We just can't. We have finally fallen below 50 employees, so we don't have to have our own health insurance, which we had to carry for years and very few people in my company were actually able to afford it. Chairman WILLIAMS. The gentleman's time is up. Mr. MCGARVEY. Mr. Chairman is being nice. I see my time has expired. I yield back. Chairman WILLIAMS. The gentlemen yields back. I now recognize Representative Molinaro from the great state of New York for 5 minutes. Mr. MOLINARO. I apologize to the witnesses that you had to get double teamed by New Yorkers, although my colleague adequately divided the two of us and said Trump as many times as he could, and I appreciate the fear in which he expected to instill upon all of you. But let me offer that, Mr. Chairman, we appreciate the time at today's hearing, and certainly to each of you. This is an important moment for small businesses. As we know, we are going to have to advance a tax policy that assists American families and American small businesses. Now, I was actually, as a New Yorker, very proud to vote for the Tax Relief for American Workers and Families Act. This bill, I think, is the first step to delivering relief to millions of Americans, and I was encouraged to see it come together in a bipartisan way. I trust and hope the Senate will take action soon. I also am proud to introduce the Think DIFFERENTLY Small Business Accessibility Act. This bipartisan bill will expand the existing disability--excuse me, disabled access credit, which helps small businesses invest in accessibility for customers and employees of every ability. Now, these bills are proof that there is common ground to be had on tax policy, but there is a long road ahead to secure long-term extensions of the essential tax provisions that will deliver relief for families, farmers, and small businesses across the United States. Dr. Hedlund, you outlined what you refer to as the blue collar boom in the immediate aftermath of adoption of the Tax Cuts and Jobs Act, actually quite a big benefit to small businesses and entrepreneurs across the country. According to your testimony, workers without a bachelor's degree saw a 130 percent acceleration in earnings from January 2017 to February 2020, a big benefit for small businesses and entrepreneurs. For a district like mine, in which less than half of the workforce has a bachelor's degree or higher, the impact of this growth cannot be understated. So, could you highlight for us some specific industries that saw the most growth after the 2017 adoption, and then just speak to sectors where you foresee continued growth if we can come together on extending these important provisions? Mr. HEDLUND. Absolutely. Well, I mean, the great thing about tax relief and a more competitive Tax Code is that it advantages all industries. There are too many policies where, unfortunately, the government ends up picking winners and losers and would go for this industry, not that industry, but what we actually saw was all industries gaining. We saw a lot of investment throughout the country and, as you pointed out, it benefited especially blue collar workers. And that is the thing with tax policy. It is not just the immediate dollars that the tax cuts themselves put in the pockets of people. It is the fact that it creates growth and that growth has massive benefits. Mr. MOLINARO. I appreciate you saying that. And for countless small businesses, and those who, by the way, often feel like they have the skill and the capacity, but not society's expected level of education, to show the ability to succeed and to have policy that supports them, critically important. Mr. Huff, good to see you again. I hope you enjoyed the cherry trees around Washington yesterday. Mr. HUFF. I could not find a sole, so we are good. Mr. MOLINARO. Okay, fair enough. Don't want you taking one home. Now, you highlight the importance of the 199A tax deduction in your testimony. As you know, over 95 percent of businesses in the United States are what we call pass-through entities, which means the TCJA helped millions of small businesses in New York and across the United States in the form of the 20 percent pass-through deduction. In fact, over 47,000 business owners in my district alone, small businesses, benefited and claimed the deduction in 2020. For this reason, I proudly cosponsor H.R. 4721, this is the Main Street Tax Certainty Act, with 169 other Members of the House. The bill would seek to permanently extend the 199A deduction. If that deduction were to expire today, and I know you have talked about this, so let's reinforce it, if that deduction were to expire at the end of next year, could you speak to the impact on your business and some of the decisions you would have to make should that sunset? Mr. HUFF. If this, the 199A and the bonus depreciation, changes, based upon my projections, rather than opening nine stores in the next 3 years, I will be only able to open one or two stores in the next 3 years. Mr. MOLINARO. Massive benefit to businesses like yours. Now, Mr. Wetherington, the data shows that in 2018 alone, manufacturers added over 200,000 new jobs, the best year for job creation in manufacturing in 21 years. The same year, manufacturing production grew 2.7 percent, with December 2018 being the best month for manufacturing output. I will run out of time, but could you--without question, the impact of tax reform on manufacturing is clear. Can you just elaborate in 10 seconds or less the impact to your sector? Mr. WETHERINGTON. Thank you for that. Policies have consequences. When there is a high tax rate, large employers moved offshore their manufacturing jobs. The lower tax rate, large employers started reshoring. It was going great before COVID. With COVID came the supply chain issues. It continues to go strong. We have got to keep these Tax Codes where they are. Mr. MOLINARO. Mr. Chairman, the Tax Cut and Jobs Act helps small businesses, and we have got to come together to ensure they continue to get our support. And with that, I yield. Chairman WILLIAMS. The gentleman yields back. I now recognize Representative Gluesenkamp Perez from the great state of Washington for 5 minutes. Ms. GLUESENKAMP PEREZ. Thank you, Chairman Williams, and thank you to our panel of witnesses for being here today. So, I own an auto repair and machine shop with my husband. And actually I have spent a lot of time reading, you know, books on tax savvy for small businesses and the kinds of things that make you want to crawl into a sleeping bag under your desk and never come out. And it is actually very frustrating and alienating for me to hear from--I will just be candid. I am grateful you are here. It is hard for me to hear people in ties tell me that, like, this is helping the trades because I feel like people in my world will never--we don't have the power to lobby for the tax cuts that would actually--right. We want a level playing field, we want a clear policy, we want to see a return to high-quality manufacturing, not just fueling consumption. And I appreciate, you know, the testimony, Mr. Huff, particularly you were making about the investment in things like coolers, machinery. And I am thinking particularly, I am hoping you could expand, because my experience is if you can buy the nice thing, if you can buy the work boots that will last 3 years, you have got a real asset, right? You know, if you have got to buy the cheap thing because you are thinking about your depreciation schedule, not only does American manufacturing hurt, but we hurt in the middle class. So, I wonder if you could talk about that, talk about your experience with your capacity for hiring and retaining employees. Mr. HUFF. Yes, I can. The purchasing coolers, fixtures, point of sale systems, all of those create jobs and things like that. But for me specifically, it creates an environment where I can grow, I can make money and grow my business. And the 199A and the bonus depreciation actually allowed me to do more than I planned to do. Ms. GLUESENKAMP PEREZ. I appreciate that and I think it is important that we are able to invest in high-quality equipment. But I, also, when I think about the sort of stuff versus people dichotomy, I think it is really important that our communities and our small businesses are able to invest in fixing their roof, putting more insulation in their shop, things that are investing in the capital. That is how communities actually build wealth in the long term. Grow your tax base, right? Make it so my shop isn't 107 degrees in the summer, things like that. And one of the things that we see a lot is--I mean I have customers who tell me all the time like I didn't really want to buy a dually, but I needed to get above 6,000 GVW to qualify for the first year depreciation. And I am like, let me tell you how much it costs to replace a set of tires on a dually, you know. And so really thinking about ways that we can encourage a tax policy that prioritizes investment in human capital, in people, and not just a churn of stuff. And I am wondering, you know, to that end, who could speak on what they have seen that does prioritize investment in people and tradespeople. Mr. HEDLUND. I would say that human capital investment is one of the most important types of investment, and it is not talked about enough. We need a Tax Code that is overall pro investment. And the challenge with steep tax penalties that are better now than they used to be, but we can make them even better, is that they discourage people from investing in themselves, because work is not just the paycheck you are immediately earning, it is the investment in your own future capacity. So if we have simple, low, and fair taxes, we can get a lot more of that. Mr. ROWEN. And something like a small business tax cut for the first employee that they hire or if they send one of their employees to schools or you are just training somebody onsite, there used to be programs for workforce development years ago that had tax incentives. There is all sorts of things that can be done that small business folks will take advantage of. Mr. HUFF. As I open stores, I have to hire a manager, an assistant manager, I have to hire associates. It is really critical that we continue to come up with tax policies that allow small businesses to grow because that is where the growth in employment is really happening, is in the small businesses. Ms. GLUESENKAMP PEREZ. A workforce that is nimble, that has, you know, prioritizing the critical thinking, the sort of skills that you can take to any business, that allow you to open your own businesses, these are the kinds of investments that I think we need to see. We want to see shop classes in our high schools thriving and competitive. But I thank you for your time here. Thank you, Chairman. I yield back. Chairman WILLIAMS. Lady yields back. And we have come to the end of our hearing today. I want to thank all of our witnesses for the testimony, for appearing before us and coming, leaving your home and your business to do this. Without objection, Members have 5 legislative days to submit additional materials and written questions for the witnesses to the Chair, which will be forwarded to the witnesses. Again, I want to thank all of you for being here. We are the backbone of this great country. And if there is no further business, without objection, the Committee is adjourned. [Whereupon, at 11:49 a.m., the committee was adjourned.] A P P E N D I X [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]