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and gift tax. The Tax Reform Act has 150 sections. It will be probably 8 to 10 years before regulations are completely forthcoming and any of us really understand that law. So I say simplification is the single most equitable direction for the tax laws to go, and I wish you would stop responding to the problems of taxation with one-shot package work solutions.

Thank you, Mr. Chairman. Senator HASKELL. I sympathize with your statements completely, Mr. Pendergast. If you will stay around we will have some questions later.

[The prepared statement of Mr. Pendergast follows:)

STATEMENT BY EDWARD H. PENDERGAST, CPA

CHAIRMAN TAX LEGISLATION

SMALLER BUSINESS ASSOCIATION OF NEW ENGLAND

PARTNER HURDMAN AND CRANSTOUN

236 Lewis Wharf, Boston, Massachusetts 02110

4 Court Street, Auburn, Maine 02410

Before Senate Small Business Committee

February 22, 1977

Mr. Chairman, thank you for the opportunity to present the views of the Smaller Business Association of New England (SBANE) regarding the impact on the small

business community of the economic stimulus package now under consideration by

Congress.

We have no copies of the proposals approved by the House Ways and Means

Committee on Thursday, February 17, 1977.

According to the reports in the

newspapers, the Committee is submitting a $13 billion tax reduction proposal. The only issue that seems to bear on small business is a tax credit encouraging companies to hire new workers. As we understand it, companies will receive a credit up to $40,000 per year. The credit will be up to $1,600 a year against the wages of each

new worker hired this year and next. Thus, 24 new workers would be needed for a

company to obtain the maximum benefit.

Since this is a two year package and is an incentive to increase employment, it should be viewed as only this and not a panacea for small business. A place maybe, but not a panacea. It should not be looked upon as a distribution of a tax benefit as

it rewards additional employment by profitable companies only. There are other

criteria to be considered before we would call this a tax benefit.

For calculation purposes, gross salary with a cut-off amount of wages in the $10,000 to $15,000 range should be utilized. The calculation should be on net new full -time

employees. The number of employees per business or affiliated groups of businesses

should be limited. This will concentrate the benefit among the labor intensive

businesses which tend to be the small businesses. For simplicity sake, the bill should

not refer to the unemployed. It is not worth it for a small business to go through the

rigamarole and red tape of determining if the employee qualifies. The bill should

not refer to those entering the labor force for the first time for the same reason.

Having made specific comments about the economic stimulus package, I must say

that the economic stimulus package now takes a brush fire approach to tax legislation. It is the proverbial knee jerk reaction at its ultimate. A hurried

patchwork is the result.

It adds another layer of complexity to the already terrifying complexity of federal

tax laws. One and I emphasize, one, of our federal income tax services now consists

of over 150 separate portfolios. An additional 115 portfolios cover estate and gift and foreign taxes. Not all the answers are here either. Research Institute has just

expanded its Federal Tax Coordinator to 28 volumes. The Internal Revenue Code

and Regulations measure over 6 inches of onion skin paper printed on both sides.

The Tax Reform Act of 1976 consists of 195 separate sections. In the name of

mercy, what are we perpetrating on our people?

President Carter is talking about basic reform. Please, let us give much thought to

this. The bill before us is relatively harmless. The real commentary on this bill is

not what it does , but what it should do.

Small business is just beginning to be heard. Soon, there will be a din unless drastic

steps are taken. I use din as a word, because it forms an acronym for three diseases

affecting small business; disillusionment, ignorance, and neglect. Disillusionment because government has become so complex and remote that we all view it as an

adversary instead of a friend. Ignorance because neither government nor small

businessmen themselves realize that problems of small and medium-sized business

are different than those of large business. Neglect because small business is like

apple pie; everyone says good things about it but nothing is done to aid a serious ill

member of our national economy. With the exception of Comsat, all businesses have

their origin in small business. Previous testimony over the years ad nauseam have detailed small business flexibility, creativity size and labor intensiveness. SBANE's

logo of a sturdy tree emerging from an acorn seems trite to some, but dammit, it is

all true!

You ignore or dismiss small business at your peril. I have listened to much rhetoric

at hearings where Members bemoan the problems of small business just before they

rush away from the hearing and do not even hear the problems as experienced by the small person. If you do not simplify government's interrelationship with small

business, you create a nation of scofflaws. This is repugnant to me.

Reform: A change for the better; a correction of evils or abuses. Such a misused

word. To me, the only true reform for small business must incorporate simpli

fication. New laws that add layers to already existing layers of laws will not work.

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