The New Tax Bill: How is it Affecting Small Businesses on Long Island?
Following the passage of the American Tax Cuts and Jobs Act in December, Long Island businesses have had varied responses. The new tax code, propelled mainly by Congressional Republicans, is meant to encourage economic growth. While business leaders believe the new tax cuts will do just that, others argue the bill left off necessary improvements.
Effects on Long Island
Long Island’s economy is dependent on small businesses, which represent over 90% of all registered businesses according to the Long Island Island Association. A small business consists of less than 500 employees and generates less than $6 million a year.
“More doors are going to open up for small businesses”
Outside of New York City, a huge proportion of small businesses in the state of New York are located on Long Island. As of 2016, Suffolk County was home to just over 131,000 small businesses while Nassau had just shy of 127,000. The next closest small business presence was in the Buffalo-Niagara Falls metro area, which housed over 76,000 local businesses.
The bill allows pass-through businesses, the vast majority of which are small businesses, to file an additional 20% deduction. Pass through businesses pay taxes as individuals. Since individual tax rates were lowered, these businesses pay less. The overall corporate tax rate will be slashed from 35% to 21%. The goal is to allow businesses to keep more money.
“More doors are going to open up for small businesses,” said John Hill, the president of the Long Island Advancement of Small Business.
Hill believes the new tax bill will allow businesses to create new opportunities and expand. He opposes measures to raise taxes which may block economic growth.
“Businesses are hiring more people and more are opening up. Lower taxes equal more revenue. I think what President Trump has done is fantastic,” said Hill.
Nationally, multiple companies have taken advantage of the tax cuts. Apple Inc. gave employees $2,500 worth of restricted stock units. Other large companies such as AT&T, Comcast, and Walmart have done similar actions. These actions show that the tax cuts might be having a significant impact on the economy.
“Tax cuts are part of President Trump’s agenda that America is open for business. It all makes it easier for small businesses,” said Richard Himelfarb, a professor of political science at Hofstra University.
Opposition to the Tax Bill
When the bill was passed, Democrats opposed it saying it favored only the wealthy and big corporations. Democratic Senator Chuck Schumer was among those who spoke out against the bill.
The GOP's tax bill is a cynical one-two gut punch to the middle class – raise their taxes to pay for corporate tax cuts & then decimate their earned benefits as a kicker.
— Chuck Schumer (@SenSchumer) December 18, 2017
Some members of the Long Island business community also expressed their dissatisfaction.
“It’s premature to say it’s helping small businesses. There has got to be a level playing field, there’s unfairness,” said Francesca Carlow, the president of the Nassau Council of Chambers of Commerce.
According to data from the New York State Department of Labor, Long Island small business jobs have actually seen a slight dip since the passage of the tax bill.
In addition to the number of jobs dropping, some business owners are upset by what was withheld from the bill.
Carlow is also the CFO of Trio Hardware and Paint, a small business on Long Island. She is a proponent of the Internet Fairness Conformity Tax which was left off the bill passed by Congress and the budget proposal by Governor Andrew Cuomo.
This would’ve required New York sales tax to be collected on any tangible property sold to a state resident. Currently, shoppers are more likely to search online for merchandise rather than visit the store because New York sales tax is expensive. The current tax code lets shoppers buy products online for 8% cheaper, according to the NY Association.
Corporations such as Amazon only need to collect tax on sales of their own products, not on third party products. This means that states like New York potentially lose millions of dollars a year in sales tax.
“We have to level the playing field and tax the internet. This would benefit the county and that trickles down to the towns and villages,” said Carlow.
Carlow believes companies such as Amazon are allowed to keep money that could otherwise be going to small businesses.