For Small Businesses, Lower Tax Rates Top Estate Tax Repeal

By Ruth Simon Features Dow Jones Newswires

Reducing the business tax rate is far more important to entrepreneurs than eliminating the estate tax or other proposed tax-law changes, according to a new survey.

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Three-quarters of entrepreneurs said cutting the maximum tax rate to 15% for businesses is the most important part of the tax plan recently outlined by the Trump administration, according to a May survey of nearly 750 small-business owners for The Wall Street Journal by Vistage Worldwide Inc., which provides peer mentoring to small business executives.

"A reduction in the tax rate would obviously be helpful," said Bob Deerin, owner of Prime Life Fibers Inc., a maker of socks and underwear for seniors. Lower taxes would free up funds the Durham, N.C., firm could use to increase inventory and boost product selection, he said.

The tax plan unveiled by President Donald Trump proposes to cut the rate for all businesses, including sole proprietorships, partnerships and other "pass-through" companies. It would also eliminate the estate tax, reduce the number of individual income-tax brackets and repeal the alternative minimum tax.

Just 3% of firms surveyed said reducing the estate tax was most important to their business, while 12% favored reducing the number of tax brackets and cutting the maximum individual tax rate. Five percent of business owners said repealing the AMT was their top priority, and another 5% favored the elimination of the 3.8% health-care surcharge.

Vernon Kasten, chief executive of Ceramo Company Inc., a Jackson, Mo., distributor of red clay and ceramic pottery, worries that coming up with cash to pay estate taxes would be a challenge for his family, given that most of the company's assets are tied up in inventory, accounts receivable, buildings and land.

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"I don't want to get to the point that, when I pass away, my family is left with a big inheritance tax bill in a closely held corporation with no liquidity," said the 57-year-old entrepreneur.

With the specifics of the tax proposal limited to a one-page handout, some business owners remain skeptical.

"I'd want to see some details," said Seth Gray, co-founder and chief strategist of Cement Marketing LLC in Columbus, Ohio, a digital-advertising agency. "I am in favor of reducing taxes if it doesn't hurt us in the long run."

Overall, small business confidence levels dipped slightly in May, according to the monthly survey of Vistage members, though they remain above pre-election levels. The portion of small business owners who said the Trump administration had improved prospects for their firm remained unchanged from April at 42%, while the share that expect economic conditions to improve over the next 12 months dipped by two percentage points to 47%.

Small-business owners, "were somewhat concerned about the economy after the first quarter," said Richard Curtin, a University of Michigan economist who analyzed the data. But they "really have not given up hope that Trump will come through with his promises on tax reform and regulatory reform," he added. It's an "extended honeymoon."

Write to Ruth Simon at ruth.simon@wsj.com

(END) Dow Jones Newswires

May 10, 2017 16:53 ET (20:53 GMT)