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Businesses urge tax reform
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November 24, 1998: 3:01 p.m. ET
Small and mid-sized companies berate current system, favor national sale tax
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NEW YORK (CNNfn) - Small businesses are extremely unsatisfied with the current tax system and want to see radical reforms, according to a new study.
A survey by Arthur Anderson and National Small Business United found more than three-quarters of small and mid-sized business owners believe the existing tax system must be dramatically changed. And nearly 40 percent of respondents contend a national sales tax is the answer, up from 23 percent in 1997. A nearly equal number of business owners favor a flat tax, but that figure declined from 46 percent in 1997.
"While others may be surprised by the tremendous 16 percent rise in support of the national sales tax, I'm not," NSBU chair Sharon Miller said. "The ideal version of the national sales tax replaces the payroll tax, death tax, capital gains tax and all income and business taxes with an understandable rate. The more people know about the national sales tax, the more they like it."
Tax reform was by far the most important issue requiring urgent government action, cited by 65 percent of small and mid-sized business owners. Tax reform was a particularly important issue for companies with fewer than 20 employees. Among all respondents, 40 percent said that taxes are a significant challenge to the future growth and survival of their businesses.
"Clearly, small and mid-sized business owners are saying that the small, incremental changes that have been made thus far in tax legislation are woefully inadequate to satisfy their needs," John Evans, deputy director of Arthur Andersen's Enterprise Group, said. "They want a creative tax alternative that represents out-of-the-box thinking, something that will produce true change."
Those surveyed were particularly interested in seeing additional capital tax gains incentives, cited by 35 percent. Another 31 percent favor estate tax repeal and 26 percent want payroll taxes to be reformed.
Social Security also a concern
Small businesses continue to express concern about the nation's Social Security system. One-third of those surveyed said social security was an important issue, with 76 percent of that figure pointing to privatization as the answer. Of that figure, 46 percent want partial privatization, while 33 percent want full privatization of the system.
Nearly one-third of business owners said the social security system should be improved by raising the retirement age. Only 12 percent believe no reforms are required.
"The drive to privatize, or really personalize, Social Security simply proves that small business owners want to regain control of their money from the federal government," Miller said.
Health care costs remain a problem
Health care was also cited as a major concern by more than one-third of those surveyed, with 37 percent urging government action.
Nearly 75 percent of respondents said their health care costs have gone up in the past year. Of those that have seen health costs rise, the average increase has been 12 percent.
"Taxes, Social Security and health care are a heavy burden on emerging and growing businesses," Evans said. "In calling for reform in all these areas, business owners are saying that they want relief -- a simpler system that will allow them to focus more on the needs of their businesses." 
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