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National Restaurant Association Supports Tax Reform

Effectively reforming the U.S. tax code will make American businesses more competitive and increase opportunities for job growth, the National Restaurant Association told members of the Senate and House of Representatives in a letter dated Oct. 12.

The letter, sent to the Finance Committee’s Sen. Max Baucus, D-Mont., and Sen. Orrin Hatch, R-Utah, and the Committee on Ways and Means’ Rep. Dave Camp, R-Mich., and Rep. Sander Levin, D-Mich., said supporting comprehensive tax reform at the individual and corporate levels simultaneously and keeping tax rates low would help ensure that employers continue to invest and create jobs here in America.

“Comprehensive tax reform would provide incentive to create jobs because it would make it less costly to hire workers,” said David Koenig, the NRA’s vice president of tax and profitability.

According to the letter, which was signed by 44 trade associations, “Splitting business income and taxing it at significantly different rates would encourage planning to circumvent ... higher rates, which ultimately would “result in wasted resources and lowered growth.”

Koenig said, “Everyone agrees the tax system now is just too complicated. Reform should not only be a way of reducing rates, but making the system more equitable and less expensive to administer.”

The NRA further implored the lawmakers to seek reduction on double taxing business income, citing that most U.S. workers are employed at pass-through businesses that pay taxes at individual, not corporate, rates. It illustrated this position by pointing to a recent study from Ernst & Young that determined pass-through businesses paying a single layer of taxes “results in higher levels of investment and employment.”

Koenig indicated that the current tax system is in desperate need of an overhaul. He further noted that approximately 20 percent of NRA members are C-Corps, which are taxed at the corporate and individual levels. The remainder is organized as sole proprietors, S-Corps or partnerships. They are [considered] individuals or flow-through entities, and their business income is taxed at the individual level.

“There has been a lot of talk about corporate tax reform, but if you concentrate on that alone you are eliminating a good segment of businesses, including the restaurant industry, whose members often are taxed at the individual level,” he said. “They don’t want the corporate rate reduced without the individual rate being [readjusted] too. All we’re saying is, if you’re going to take on tax reform, make sure it’s comprehensive rather than piecemeal.”

He added that any kind of reform probably would not occur until after the 2012 election though there has been talk it could become a responsibility of the recently formed super committee that will soon start to explore ways of reducing the national deficit.