IFA Letter to Super Committee to Tackle Tax Reform for Small Franchise Businesses

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TO THE MEMBERS OF THE JOINT SELECT COMMITTEE ON DEFICIT REDUCTION: 
 



As you work toward your

stated goal of achieving at least $1.5 trillion in budgetary savings over 10 years from spending cuts or tax revenue,
I write on behalf of the International Franchise Association (IFA) to urge you to consider reforms that encourage job creation by franchise small business owners. IFA supports the mission and goals of the Joint Special Committee on Deficit Reduction to reign in our deficit spending. At a time of 9.1% unemployment (16.2% when you count the part-timers and those who have given up looking for work), IFA believes the Special Committee must view reforms through a lens that ensures businesses of all sizes, and particularly small businesses like the majority of franchise businesses, are given long-term certainty and clarity regarding their future tax rates.  
 



Uncertainty by small business owners does not lend itself to job creation and future investment. Franchise business owners will not expand to new locations or hire new workers until they have certainty regarding the future of tax rates. This sentiment was echoed by IFA’s most recent
Business Leader Survey, which revealed mounting concerns and decreasing optimism by franchise executives regarding overall business conditions and the outlook for job creation in the industry. The majority of our members will not be able to create jobs until business conditions improve. As the Special Committee debates comprehensive tax reform, it is essential that corporate tax revisions not be enacted that would impede or stifle small business growth,
 especially given that many of our country’s small businesses
 file taxes as individuals. As you know, small business creates 64 percent of new jobs.  
 



One issue to be resolved is whether comprehensive reform will encompass both individuals and corporations.
 The Administration has pushed for corporate reform, which will result in significant tax increases on IFA members, who file taxes at the individual rate. If most or all of the business deductions are eliminated in an effort to lower the overall corporate rate, it will leave all the so-called “pass-through” taxpayers (including “S” corporations and partnerships) exposed to significantly higher taxes without the benefit of a lower rate.
 In fact, many franchisees could find that their taxes will increase by losing these deductions. They also face the prospect of the higher tax rates after 2012 when individual tax rates could be as high as 39.6% and in 2013 when the 3.8 percent surtax on “unearned” net investment income takes effect to help pay for Medicare. 
 



As the oldest and largest franchising trade group, the IFA’s mission is to protect, promote and enhance the business environment for franchising worldwide. According to a study conducted for the IFA Educational Foundation, there are over 825,000 franchised businesses across 300 different business lines that provide for nearly 18 million jobs and generate over $2.1 trillion to the U.S. economy. Franchising is a creative and innovative force in this economy. With sound tax and pro-growth policies, franchising can be the locomotive for
 job creation that it has been historically, as evidenced by the industry’s demonstrable 40 percent growth rate over the past
 decade. We know that your critical task at hand is worthy and must be achieved.
 As the Joint Committee considers both cuts to federal spending and possibly revenue increases, we respectfully urge that you consider the effects of these proposals on the small franchise business owners who reside on virtually every Main Street in America. 
 



Sincerely, 
 



Stephen J. Caldeira 
 



Cc: House Committee on Ways & Means 
 




      Senate Committee on Finance 
 

 

 

 

 

 

 

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