Why do small business owners need to care about our tax system? Because as this testimony by Thomas Sullivan of the Office of Advocacy of the SBA indicates, they have the "bull's eye" of IRS enforcement (i.e., audits) on their backs. Also, study after study shows that tax rates correlate with business start-up activity. That is, the higher the tax rates, the lower the number of new businesses. Also, tax complexity is shown to inhibit entrepreneurial activity in the economy. The more complex the tax system, the lower the overall rate of entrepreneurship.
While today is tax day, we do not celebrate Tax Freedom Day for a couple more weeks. Tax Freedom Day is calculated by estimating how long we work each year just to pay our taxes. Even with recent tax cuts, Tax Freedom Day has gotten several days later over the past two years -- economic growth has increased our taxes.
We spend more days each year working to pay just our federal taxes than any other expense category, as can be seen from this break-down from the Tax Foundation:
Their full study on this year's Tax Freedom Day can be found here.
