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Businesses See Tax Benefits in Short Term; Critics Look at Long-Term Impact

Small businesses are waiting on word from the IRS on how they may deduct meal expenses after recent tax-law changes that took effect in January. (Twenty/20)
Small businesses are waiting on word from the IRS on how they may deduct meal expenses after recent tax-law changes that took effect in January. (Twenty/20)
June 13, 2018

WILMINGTON, N.C. - Wilmington business owner Beth Bacheldor knows she may benefit from some of the federal tax cuts implemented in January. As she considers how she might invest those savings, a survey from the National Federation of Independent Business finds 27 percent of them plan to use the savings to hire additional employees.

Bacheldor said she understands that her firm, Conteuse Marketing Agency, may see some tax benefits in the short term, but added that she's looking at the bigger picture.

"I can't, as a business owner, just look to the next year when I think about how my business grows," she said. "I have to look to the next five years, and these tax cuts are very short term in their nature unless you are in the very, very top 1 percent."

In addition to some tax breaks, there are changes in the ways business meals can be deducted, but the Internal Revenue Service has yet to clarify that regulation. There also are uncertainties for what are known as "pass-through businesses" - sole proprietors, partners and owners of companies structured as "S" corporations, which the agency also needs to clarify.

The report came as some economists were projecting that larger corporations will not reinvest their tax savings into the economy. However, Juanita Duggan, the federation's president and chief executive, said there's an important distinction to make.

"Main Street is not Wall Street, and Main Street has reacted very positively to the tax bill," Duggan said. "We know because we've been asking our members what are they planning to do with their tax savings, and they're telling us that they're going to hire new workers, they're going to increase wages. Sometimes, they're going to provide benefits."

Bacheldor said she also thinks of the unmet needs the tax cuts may be creating, with less money for health care and education for communities.

"I can understand why some small businesses feel that some extra money in their operating budget is good news," she said, "but running a small business is so much more than dollars and cents."

The Small Business Credit Survey released this month also found heightened optimism for revenue and employment growth in 2018 among business owners. Critics of the tax cuts say they don't do enough to help lower- and middle-income families.

The NFIB survey is online at nfib.com. The Small business Credit Survey is at fedsmallbusiness.org.

Stephanie Carson, Public News Service - NC