Tax Administration:

Employment Taxes and Small Business

T-GGD-97-21: Published: Nov 8, 1996. Publicly Released: Nov 8, 1996.


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GAO discussed the impact of various employment tax laws and regulations on small businesses hiring their first employees and all employees thereafter. GAO noted that: (1) employment tax compliance can be particularly burdensome to employers because of multiple federal, state, and local taxes; (2) each tax generally requires it own unique set of rules, regulations, and exceptions, which makes compliance difficult for employers; (3) the complexities discussed reflect the various trade-offs that have been made to address assorted tax policy issues; (4) these trade-offs include considerations as to the type of tax imposed, the types of compensation to be socially encouraged, and the fiscal requirements of individual governmental units and, consequently, they will not be easy to simplify; (5) respondents to an earlier GAO survey described characteristics of especially troublesome tax provisions, such as ambiguity, frequent changes, expiration clauses, and layers of federal and state regulation; and (6) efforts to simplify the tax code are essential to reducing compliance burden, thus making voluntary tax compliance easier for all types of businesses, large and small.

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