EZ-C

Simplified Small Business Tax Form

     With all this discussion of a simplified tax code for personal income, I would like to suggest a similar simplified tax alternative, an "Sch EZ-C", be promoted for reporting business income, based to some extent on Washington State's B&O tax. Those of us business owners who don't want to spend a month or more of our lives each year tearing our hair out dotting every 'i' and crossing every 't' deserve a simplified Schedule EZ-C for businesses. Those who want to fill out the details and file the current Sch C, fine, let them sit down with their accountants and play the social engineering tax game.  For the rest of us business people, the EZ-C would basically be a 'Maximum Tax' that would be owed.  

     How would a EZ-C work? Simple :

Gross Receipts * industry profit margin = profit reported for that business.

     Take my business, dentistry, with an average net profit margin of 30%. To figure my profit for the 1040 using an EZ-C, I'd just enter my gross receipts and multiply by the average profit margin for dentistry that the IRS provided (30%). I'd enter that on the 1040 line for profit from business and get on with life. This means that when it came time to make a decision about what to buy or how to operate my business, I wouldn't have to refer to my accountant to find out how government is micromanaging my business. I could do the right thing because it was right.

     As one can see, the EZ-C is a simple fast and fair business tax code. Among its other valuable features would be :

     As a final note on the EZ-C (as well as on business taxes in general), it might also be suggested that all or part of any qualifying export not be counted as part of gross receipts. This would promote export trade as well as providing a good reason for businesses to stay in or locate in the United States. This would equalize the cost of US exports in the global market with nations that don't charge a VAT tax on exports.  GIVE US A LAUNCH PAD TO PROSPERITY IN A GLOBAL MARKET PLACE.

     Those who are familiar with Washington State's B&O tax, may recognize the EZ-C as a take off of that tax. While few people like paying any taxes, one thing that can be said for the B&O tax is that is it quick and easy to comply with. The EZ-C has several improvements over the B&O tax. It uses existing industry profit margins for reporting income, eliminating the problem with the B&O tax where the tax rates can be used to target a specific industry. The EZ-C also allows for those who need the tax breaks of the long code to file that way.

     There are some minor deductions that are allowed under the B&O tax that might be allowed in the EZ-C. The B&O tax provides some guidelines there. One might suggest that employee benefits be considered a deduction to promote health care coverage and pensions be offered to employees. This would require these benefits not to be considered as part of the calculations for average profit margins and adds some modest complexity to the EZ-C. If one offered 100% deductibility of self employed health care coverage for those who provide health care coverage for their full time employees, this might be a reasonable trade off.

     In summary, the EZ-C would appear to me to be a vast improvement for small business tax codes. It provides all the benefits one might look for in a simplified tax code, while not taking away any existing benefits for those who rely upon the existing 'longer form'. Most of all, it promotes people to make the attempt to create their own niche in the world and in the process create good paying jobs and prosperity for others who they may come to employ.


Submitted as written testimony to the

House Subcommittee on Small Business Taxation April 3, 1996.

Always Right