When Donald Trump was elected president, the stock markets hit historic highs in anticipation of what he would do for business, including his promise to cut corporate taxes. Until recently, revisiting the tax code has taken a back seat to other initiatives such as health care and immigration reform. But Trump has begun beating the drum for tax reform again, releasing a basic list of goals on August 30 and following it with multiple rallies in September.

As this national conversation ramped up, local business owners and executives shared their thoughts on what tax reforms they would like to see to help them grow.

Pete Sverkos, co-owner of Retro Row restaurant Kafe Neo, said that although he has been in business for 10 years, he still has trouble understanding the tax code. Simplifying the tax code and providing cuts to or incentives for payroll taxes would benefit businesses, he argued. (Photograph by the Business Journal’s Larry Duncan)


Chris Wacker, president of Long Beach-based tech firm Laserfiche, said Trump ought to have gone for tax reform before he addressed other priorities. “It is certainly easier than health care reform or attempting to construct a wall,” he said. “Big picture, my overall philosophical view is that taxes should be reduced,” Wacker said.


Trump has indicated he would like to institute a tax holiday to allow companies like Laserfiche that earn profits overseas to bring them back to America at a reduced tax rate. “I think not only should that not be a holiday . . . it should be extended on a permanent basis,” Wacker said. “We are the only country that taxes money made on foreign soil.”


Blake Christian, partner and accountant with the CPA firm HCVT, supports the idea of a temporary tax holiday for firms with money abroad. He suggested a two-year window of time in which companies could bring their foreign earnings back to the U.S. at a reduced corporate tax rate of 10% to 15%. “I think that would have a massive stimulative effect and encourage big businesses to invest domestically more,” he said.


Trump has proposed a 15% corporate tax rate from the current combined tax rate of 39%, according to a statement issued by the White House on August 30. “Even though Trump is talking about business tax rates as low as 15%, the GOP proposal is 25%, and they think that that’s maybe overly optimistic,” Christian said. “I would be happy with something maybe between 25% and 30%.”


Christian noted that while Trump has indicated he would want a new corporate tax rate on the books for 10 years or more, such a proposal could be problematic considering the national deficit. “With the deficit situation, I would prefer to see maybe a three- or five-year drop in rates, and then do a reset later once we see what the economy is like and what the deficit is like,” he said.


Wacker offered a more extreme suggestion: to have no corporate tax rate and implement a flat personal tax rate of 15%. “I know it’s radical, but profits shouldn’t be taxed more than once, in my view,” he said. The idea is one he said has been raging since he was in business school – that taxing a business for its income and then taxing the income of its workers is essentially double taxation, or taxing the same earnings twice.


Creating a flat personal tax rate with no deductions would simplify the tax code and ensure higher-earning individuals paid more into the system, Wacker argued. “People who are in the stratospheric income brackets, they pay very little taxes. And they have armies of accountants who ensure that they do pay no taxes,” he said. “People wouldn’t need tax accountants. They could just pay 15% on whatever they earned, and they could calculate that themselves.”


Wacker said instituting such changes would benefit Laserfiche. “It would be less expensive for us to operate, and we could invest more money in the company,” he said. “As it is, we’re growing like crazy. We’re now almost 400 people,” he noted, adding that the firm just purchased 125,000 square feet of land to build more offices. “If we had lower taxes, we could do more of that.”


Pete Sverkos, co-owner of Greek restaurant Kafe Neo on 4th Street, pointed to cutting payroll taxes as a means to help businesses. “Payroll taxes seem extremely high,” he said.


“It is always hard for a business to keep up with the rising costs of food and labor and then on top of that getting taxed,” Sverkos said. “If there were some incentives with regard to tax reform, I believe it would be a trickle down to the employees and to the pricing of product.”


As the minimum wage rises, so does the amount businesses have to pay in payroll taxes, Sverkos pointed out. The same goes for other wage and salary increases. “If you were to raise the wage of an individual but you wouldn’t have to pay an additional payroll tax on that wage, that allows you to focus on putting more money in the pocket of your employees,” he said. “And that gives them more spending power, which would trickle down into them spending more and paying more in sales tax and income tax. And I think that would be a benefit to the business owner.”


Christian also said that payroll taxes should be addressed. “Maybe even allow a credit for the payroll taxes that people pay for the first 12 months on a new employee,” he suggested. “I’d like to see something that would encourage people to take a little bit more of a gamble on first-year hires.”


Craig Hofman, chairman of the board of Hofman Hospitality Group (parent company of Hof’s Hut, Lucille’s Smokehouse BBQ and Saint & Second), has two main desires for tax reform. “I hope they get rid of the death tax,” he said. “Passing on a family business without a 40% tax on the business’s value is important to me as an owner of a family business.” He added, “Also, most small to medium-size family businesses file as S [corporations], which are now taxed at the personal rate. If they lower the corporate rate, it should include S corps at that lower rate.”


Overall, Sverkos would like to see the tax code simplified. “I can’t ever figure it out. I think they have to do something with reducing the number of categories,” he said. “It’s like they are forcing business people to unnecessarily play a cat-and-mouse game with regards to what they are allowed to write off and what they are not allowed to.”