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What issues of concern to homebased entrepreneurs is the 105th Congress, now at the start of its two-year term, likely to undertake? We asked three freshman and two veteran congressional legislators their views.
Representing both sides of the political spectrum, the three newcomers share a common bond: a strong business background. And both veterans have proven records of supporting home-based entrepreneurs.
Republican Christopher Cannon, the newly elected con- gressman represent- ing Utah's third district, has owned Cannon Industries for six years. This venture capital firm works almost exclusively with start-up businesses, concentrating in the high-tech industry. His business experiences have convinced Cannon that simplification of tax and regulatory codes is what he should advocate during his congressional tenure.
"We have some heinous problems with government regulation. The principle one is taxation," says Cannon, who would like to restructure and simplify the corporate tax code so both companies and the government do not waste so much time and money on the issue.
Ideally, he would like to simplify the entire tax code, which would make the home office deduction unnecessary. Recognizing that this is an extremely complex and time-consuming undertaking, Cannon sees a need for adjustments to the codes regarding home offices.
"We need to even the playing field for small companies, and the home office deduction is one of the things that can do it," Cannon says. "Where you do business is really in your head and quite often on a cellular phone. If a place is dedicated to business, it should get the deduction."
Susan Collins, recently elected Republican senator from Maine, knows cost was a major stumbling block preventing the passage of home office deduction legislation during the 104th Congress (the Senate Ways and Means committee estimates proposed legislation would cut $1.9 billion in government revenues over 10 years).
"There is a lot of interest in Congress in reducing the tax burden for middle-income taxpayers, and I think a lot of homebased business owners fall into that category. I'm suggesting this should be one of the proposals on the table as we look at tax cuts," says Collins, who served as the executive director of the Center for Family Business at Husson College in Bangor, Maine, before her election. She also was the New England Administrator for the Small Business Administration in 1992. And Collins' family has operated a small lumber and building supplies retail business--S.W. Collins Co. Inc.--in Caribou, Maine, for five generations.
"Success will depend on homebased business owners making their voices heard in Washington," Collins continues. "There will be a certain amount of money set aside for tax relief as part of the budget resolution, and homebased businesses need to make sure they are heard when decisions on tax relief measures are made."
Collins is planning to establish six state offices to act as information and help centers throughout the state of Maine, as well as a Web site, and encourages homebased entrepreneurs to express their opinions at these locations.
On the independent contractor issue, Mary Landrieu, a Democrat and the first female senator elected from the state of Louisiana, says she strongly supports tax simplification and regulatory reform. "We should be rewarding people and making it easier for them to start businesses and hire people, not more difficult," says the senator, who also favors repealing estate taxes, particularly for family-owned firms. Landrieu ran a real estate business that specialized in townhouse development for 10 years.
In their business dealings, Cannon and Collins have talked with entrepreneurs who have repeatedly faced the confusing issue of what constitutes an independent contractor for tax purposes. Both see widespread agreement that IRS rules regarding independent contractors are too complicated.
Sen. Christopher "Kit" Bond (R-MO), chairman of the Senate Committee on Small Business, says trying to simplify the test for independent contractors will be one of his top priorities during the 105th Congress. The Small Business Job Protection Act of 1996 offered a slight clarification but did not solve the problem, asserts Bond.
In the 104th Congress, Bond introduced legislation called the Independent Contractor Tax Simplification Act of 1996, which would change the way workers are classified. The bill would require entrepreneurs to answer affirmatively to three questions in order for their employees to be considered independent contractors:
1. Is there a written agreement between the parties involved?
2. Does it appear that the worker has made some investment, such as incurring substantial unreimbursed expenses or being paid primarily on a commission basis?
3. Does the worker appear to have some independence, such as having his or her own place of business?
Bond co-sponsored the legislation jointly with Sen. Don Nickles (R-OK), Assistant Majority Leader. He is hoping to forge a similar alliance in the 105th Congress.
"I think the legislation needs to be reintroduced early in the session, [which will] allow time for careful consideration of specific provisions," says Sen. Collins. "There may be disagreement on the specific test Senator Bond's bill would provide, but I think he is going in the right direction. I think there would be a lot of support for simplifying the process."
On the congressional side, Republican Nancy Johnson, who represents the sixth district in Connecticut, believes that legislation to reinstate the home office deduction stands a better chance of passing this session of Congress because there will be less competition from other interest groups seeking tax cuts. She speculates that this, combined with support from a coalition of organizations representing homebased businesses, might be a key to passage.
Sen. Christopher Cannon, 118 Cannon House Office Bldg., Washington, DC 20515;
Rep. Nancy Johnson, 343 Cannon House Office Bldg., Washington, DC 20515, (202) 225-4476;
Sen. Mary Landrieu, U.S. Senate, Washington, DC 20510, (202) 224-5121;
Small Business Administration, 409 Third St. S.W., Washington, DC 20516, (800) 8-ASK-SBA, (http://www.sba.gov).