Scott Robinson is like a lot of business owners in Colorado Springs and around the country, who are both excited about the possibility of tax cuts and somewhat skeptical about them coming to pass.
As president of Concepts in Millwork, a manufacturing company in eastern Colorado Springs, Robinson is supportive of President Donald Trump’s proposed tax plan — and said it’s been a long time coming.
“For all of these small businesses — and we’re one of them — we feel we’ve been paying more than our fair share for a long time,” Robinson said.
Pass-through businesses — like Concepts in Millwork — are currently not subject to federal taxes, but their owners are taxed individually on that income. Pass-through businesses include most small and family owned businesses: sole proprietorships, partnerships, LLCs and S corporations.
Trump’s plan, released Wednesday, would create a 25 percent tax on pass-through businesses, rather than at the owner’s individual rate, which he also proposed to cut from 39.6 percent to 35. Trump’s plan will cut corporate taxes from 35 percent to 20 percent, which will help large and publicly traded companies. Trump had wanted to lower both business rates to 15 percent.
“We do our best to be competitive and tighten margins,” Robinson said, “but any time the government helps business, it’s good for everyone. It’s all going to trickle down. If you earn more, you can invest in your business more.”
Rachel Beck, government affairs manager for the Colorado Springs Chamber of Commerce & EDC, said potential tax cuts would help business owners, especially since they’re burdened by other costs.
“Tax relief is welcome for our local businesses, who have faced a number of recent cost increases,” Beck said in an email. “I’m referring to things like the state minimum wage increase, health care costs and utility rate increases.
“Particularly for pass-through businesses who have slim profit margins, an income tax reduction can make a real difference.”
Robinson hopes Congress will approve the tax cuts.
“I guess I’m not very confident,” Robinson said. “As much as they’ve debated everything else, I have doubts if this will go through.”
‘MAKE A BIG SPLASH’
Trump’s original plan didn’t have much of a chance, according to Chris Blees, managing partner of BiggsKofford, a certified public accounting firm in the Springs.
“He wanted to make a big splash,” Blees said. “But it would be way too much in terms of tax cuts. It would devastate collections.”
The deficit of $20 trillion is likely to grow, Blees said.
Trump has said that a tax cut will make businesses more competitive and create jobs, helping to bring 3 percent economic growth.
Blees thinks Congress will pass both a corporate tax cut and lower the rate for individuals.
“Not because the math says so, but politics say so. They’ll probably change the rate structure for the middle class,” he said. “Then even the guy making $1 million gets a break because he also gets taxed in that 25 or 30 percent bracket for the middle class.”
Roughly half the income from pass-through businesses went to the top 1 percent of earners, who make more than $693,500, according to a February report by the Center on Budget and Policy Priorities, a nonpartisan research and policy think tank. Blees said the president’s tax plan benefits those people most.
“Many of those flow-through businesses are not in reinvestment mode; they’re in cash flow to their shareholders mode,” Blees said. “It would be a huge tax break to the top 1 percent.”
About 95 percent of U.S. businesses are pass-through businesses, according to Tatiana Bailey of the UCCS Economic Forum in an email. But 44 percent of business-owner income was earned by the other 5 percent called C-corporations, the large publicly traded companies.
Cutting business taxes will help the economy, said Blees.
“I like to say that taxes are the tail that wags the economic dog,” he said. “If the tail wags a lot, it’ll affect the whole dog.”
TAX CUTS CAN MEAN REINVESTMENT
Robinson said a tax cut would be an “opportunity to reinvest” in Concepts in Millwork.
“We do that now, but we have to work so hard to cover that tax nut every year, it’s hard to do everything we want,” he said.
He also wants to expand a partnership with the Peyton School District.
“We have three interns from Peyton High School working with us,” Robinson said. “When they graduate, they could have a job opportunity here that could benefit them long-term.”
Concepts in Millwork has 82 employees, Robinson said, up 30 percent from five years ago. Robinson wouldn’t say what the business revenue is, but said employee growth is a good sign.
“We do work up and down the Front Range,” he said.
Robinson said he hopes politics doesn’t prevent tax cuts from becoming a reality.
“When you hear about something like this, it’s exciting,” he said. “I wish they’d look at who this benefits rather than playing politics.”