Obama budget pitches tax simplification for businesses

President Obama wants to make it easier for small businesses to pay their taxes by letting them stop using what the White House calls "an array of complicated accounting rules."

The proposed budget unveiled Monday would also extend provisions allowing small businesses to write off investment spending of up to $1 million annually.

"Tax compliance is a significant burden for small-business owners," the White House said in a statement outlining the proposed changes.

The simplification proposals affect businesses with gross receipts of less than $25 million annually, which means more than 99% of all businesses.

"Today's rules require many small businesses to disregard their cash flows, and instead use more complicated and onerous accrual accounting," the White House said in its statement. "Many small businesses are also required to gradually deduct the cost of investments and other expenses over time under a host of different rules."

The Obama plan would allow businesses to dispense with most of these rules, and "simplifies how small businesses file their taxes," said Jeff Zients, director of the administration's National Economic Council.

"They can use cash accounting, which is basically their bank statement, rather than very complex accrual accounting," Zients said. "That's available for all businesses up to $25 million."

At least 75% of the compliance hours for small businesses deal with filing taxes, the White House said. About 60% of the costs of tax compliance are due to the complexity of the rules on measuring income.

Simplified accounting rules allowing businesses to write off investment spending of up to $1 million would enable businesses to pay taxes "on an amount much closer to their bank statement," the White House said.

The White House also said that, as in previous budgets, Obama is calling "to eliminate capital gains taxation on investments in small-business stock, increase the tax deduction for start-up expenses, and expand and simplify the Affordable Care Act small-business credit."