What We Know (and Don’t Know) About the Tax Code’s Impact on Small Businesses Owned by Women

Caroline Bruckner, an Executive in Residence, Department of Accounting and Taxation at the Kogood School of Business (American University), has published a report entitled Billion Dollar Blind Spot: How the U.S. Tax Code’s Small Business Expenditures Impact Women Business Owners. It is available for download here.  This report contains a wealth of information that could inspire a career’s-worth of further research.

The major conclusions of the report include:

  • Most women business owners are small businesses operating in service industries and are legally organized as something other than a C Corporation.
  • Three of the four small business tax expenditures studied are so limited in design that they either explicitly exclude services firms, and by extension, most women-owned firms; or effectively bypass women-owned firms that are not incorporated or are service firms with few capital-intensive equipment investments.
  • When women-owned firms can take advantage of tax breaks, they do.
  • There is little or no tax research on how women business owners use the tax code.

The report further notes that the tax laws do not openly discriminate against women-owned businesses, but there is still a need for more research and data in this area.  Specifically, the report suggests:

  • The Congressional tax-writing committees should hold hearings to consider the impact of Code’s small business tax expenditures on women-owned small businesses.
  • The Congressional tax-writing committees should charge the JCT with preparing a formal estimate of the taxpayer cost and distribution by industry of the Code’s small business tax expenditures claimed by women business owners.
  • The federal Commission on Evidenced-Based Policy Making should develop assessments and strategies to inform Congress with evidence-based analysis on tax expenditures’ impact on women business owners and other groups.
  • The Administration should move quickly to nominate a nonpartisan Director of the Census Bureau, and Congress should prioritize considering this nomination in order to move forward with executing the 2017 Census survey of business ownership as well as the annual survey of entrepreneurs.

We need to know more about the impact of tax laws on women, racial minorities, immigrants, disabled individuals, LGBT taxpayers and other historically disadvantaged groups. This report is a welcome addition to the critical tax literature!

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