May 6, 1997

Tax Freedom Day Rings Hollow for 20 Million Americans, According to the National Association for the Self-Employed

Washington, D.C. -- Self-employed Americans cannot consider Friday, May 9, as "Tax Freedom Day," due the additional taxes and higher rates paid by those in business for themselves, according to the National Association for the Self-Employed (NASE). "Tax Freedom Day" is determined by the number of days' wages it takes to pay off all federal, state, local, payroll and other taxes; it will take employees 129 days this year to meet this obligation. But for the nation's 20 million self-employed, this day comes much later in the year.

"It is unfathomable that small-business owners -- who generate the majority of jobs in this country -- also bear the heaviest tax burdens," said NASE President Bennie L. Thayer. "Instead of punishing people who go in business for themselves, we should be rewarding them for their ingenuity and contributions to the economy."

The self-employed pay a disproportionate share of taxes in many circumstances:

Many family businesses cannot survive to the next generation due to estate tax law, which considers a sole proprietor's business assets part of their personal estate, and taxable at 55 percent above the exempt amount.

"We are heartened that budget negotiators recommended a doubling of the estate tax exemption to $1.2 million," commented Thayer. "This will allow many more family-owned businesses to stay in the family, and shield others from the mountains of red tape they undertake in the name of planning. But these taxes are only the beginning. Much more work still needs to be done."

The self-employed not only pay the additional taxes associated with their job status; they must also pay extra to meet those tax and other requirements. Businesses spend $688 billion to comply with federal regulations, according to a 1997 study by the Center for the Study of American Business, located at Washington University in St. Louis. Companies with fewer than twenty employees spend approximately $5,500 per worker to comply with federal regulations, reported the Rochester Institute of Technology. This is more than twice as much per worker as large businesses pay.

"The smallest of small businesses -- those with less than four employees -- are the engine that drives the nation's economy," Thayer said. "Even though they're drowning in a sea of taxes and regulations, they create more jobs than any other size of company. Can you imagine the explosion of new jobs this country would experience, if the self-employed were only able to operate on a level playing field?

"Tax Freedom Day was created so that legislators could take stock of just how much a burden Americans shoulder in taxes," Thayer concluded. "This year, let's think about just how much greater the burden is for the self-employed -- and how ironic it is, that these are the most productive businesses in the nation. As legislators vow to bring Tax Freedom Day earlier in the year, let's also vow that both the self-employed and other employees will mark this freedom on the same day."

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