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Sen. Ron Johnson on how tax plan could help small business

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Power Test Incorporated in Sussex now employs 110 people, but owner Alan Petelinsek says it wasn't always that way.

"This business was founded in 1976 by my father as an entrepreneurial startup," Petelinsek said. "It started as a company of one. I joined my father as his first full-time employee in 1981."

Power Test is known as a pass-through business, meaning profits "pass through" Petelinsek's personal taxes. Basically, the business is being taxed as an individual, at the top rate.

"All of that profit would be flowing through the owner's individual income tax return, even though the profits of that business are sitting as inventory on the shelf," Petelinsek said.

Sen. Ron Johnson, R-WI, added a provision to the tax plan to provide some tax breaks for those pass-throughs.

"That are concerned about their employees, that are concerned about their communities," Johnson said. "That those pass-through entities weren't left behind, so they could remain competitive globally, and they could maintain their position domestically."

But some are concerned it could provide a loophole. Sen. Tammy Baldwin, D-WI, sent us this statement.

“I have been saying for a long time that tax reform needs to be simple and fair for hardworking middle-class families and small businesses. But since the beginning, these Republican plans have favored big corporations. I am really concerned that lowering the pass-through rate will give a tax break to hedge fund managers and the wealthiest few without providing real incentives for small businesses to create jobs and grow the economy. What’s worse is that these Republican plans allow Wall Street hedge funds to keep a loophole where they pay half the tax rate of what a Wisconsin worker making the same income would pay. We should not only close the carried interest tax loophole, we shouldn’t provide a new loophole for hedge fund managers. Wisconsin small businesses and manufacturers need tax reforms targeted at them, not powerful corporations and money managers. One way to do that is with legislation I have introduced that would change the current R&D tax credit to make it more accessible for small and medium businesses, especially manufacturers. This is a tax reform that would provide tax relief to manufacturers so they can invest in research and development, create jobs and help drive economic growth.”

Petelinsek says small business tax breaks always help the local community.

"And the easier they make it for us to invest in our businesses, the faster we can grow the businesses, the more we can employ, and the higher wages we can pay."


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