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1 Kyle Pomerleau, The Tax Code as a Barrier to Entrepreneurship: Written Testimony of Kyle Pomerleau, Director of Federal Projects, Tax Foundation, before the Committee on Small Business 1 (2017)

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                               Written Testimony
                                          Of
                                  Kyle Pomerleau
                          Director of Federal Projects
                                  Tax Foundation

                 Before the Committee on Small Business



 The Tax Code as a Barrier


          to Entrepreneurship



Thank you Chairman Chabot and Ranking Member Velazquez for the opportunity to
speak about the U.S. federal tax system and entrepreneurship.

There are millions of entrepreneurs in the United States, spread across nearly
every major industry. While every entrepreneur has a different business model
and unique concerns, there are a few key characteristics that apply to many
entrepreneurs throughout the economy:

Entrepreneurs tend to run losses for some time before turning a profit, and many
entrepreneurial ventures do not survive long enough to turn a profit at all.2

As a result, entrepreneurial ventures tend to be especially risky investments for
outside investors, who typically see many of their investments in entrepreneurs
fail.3

If they do develop a successful business model, entrepreneurs often seek to rapidly
expand their operations and scale.4

Ideally, the U.S. federal tax code would be neutral with regard to each of these
characteristics. The tax code should not punish businesses for running sizeable
losses in their early years, nor should it disadvantage investors that pursue risky
investments. Certainly, it should not present additional barriers to successful
businesses looking to expand.



1  Bureau of Labor Statistics, Business Employment Dynamics, https://www.bls.gov/bdm/#data
2 Bureau of Labor Statistics, Entrepreneurship and the U.S. Economy,' April 2016, https://www.bls.gov/bdm/entrepreneurship/
   bdm-chart3.htm
3 Seth Levine, Venture Outcomes are Even More Skewed Than You Think, August 2014, http://www.sethlevine.com/
   archives/2014/08/venture -outcomes-are -even -more -skewed -than -you -think.html
4  Neil Churchill and Virginia L. Lewis, The Five Stages of Small Business Growth, Harvard Business Review, https://hbr.
   org/1983/05/the-five-stages-of-small-business-growth

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