Congress has finally passed a budget, but the job is not yet done. Our lawmakers must follow through on their promises and put tax cuts on President Trump’s desk.
Our economy depends on it. As it stands now, the overwhelming majority of small businesses (95 percent) are considered “pass-through” entities, which means their owners are taxed at the highest individual marginal tax rate. The federal pass-through tax rate hovers around 40 percent. With Michigan’s state and local taxes included, the pass-through tax burden can reach 50 percent.
That’s right: Many small businesses — our nation’s most dedicated job creators — send nearly half of their income to Washington, D.C. This is money not being reinvested into local communities. Instead of hiring new employees and raising wages for their current workers, small business owners are forced to give up a large share of their annual earnings.
This has far-reaching consequences. America is home to roughly 30 million small businesses. These job creators employ about 60 million workers — half of the U.S. workforce. Moreover, small businesses generate over $470 billion in exports every year.
Their impact is especially profound in Michigan. In our state alone, there are more than 866,000 small businesses, which employ 1.8 million workers. Michigan’s job creators — your local brewery, the bookstore across the street, and countless others — account for nearly 35,000 net new jobs every year. And they account for roughly 90 percent of Michigan’s exports.
Without them, our state economy would be in shambles. Not only do small businesses produce the goods and services we rely on, but they provide Michiganders with transformative career opportunities. This paves the way for professional development and financial security — not only for employees, but the families depending on them.
As a proud Michiganian, I know the vital importance of small business firsthand. In 1968, I founded McKinley Associates, a real estate investment firm dedicated to enriching the quality of life in local communities. Back then, I only had a dream; I didn’t have millions of dollars or hundreds of employees.
But, since then, I’ve grown McKinley into a national company with hundreds of millions of dollars in revenue and roughly 1,000 employees. And I’ve found no greater fulfillment than in hiring new employees, mentoring them, and putting them on the path to a rewarding career. McKinley is nothing without its workforce, and I’m grateful for our employees every single day.
Small businesses across the country do the same for millions of hardworking Americans. The government should be there to help them create jobs, not hinder them with high taxes.
When rewarded with tax relief, job creators will put their tax savings to good use. A recent Job Creators Network poll determined most small business owners would use their tax savings to hire more workers, raise wages, open an additional location, or buy new equipment.
I certainly would have when I was growing McKinley Associates into a national player. A fairer tax code incentivizes small business owners to grow the economy, not bureaucratic budgets in Washington. Under no circumstance should small businesses — many of which are solely operated or have very few employees — pay 50 percent of their income in taxes.
In Michigan alone, the House Republican tax plan is projected to increase median household income by $4,716 and create over 50,000 new full-time jobs. Imagine the impact of small business tax cuts nationwide.
We must do for the nation what we have done in Michigan under Republican leadership — cut taxes, grow our economy, and get people back to work.
Ron Weiser is the founder of McKinley Associates and chairman of the Michigan Republican Party.