> ...while small businesses who can't afford to figure that out pay full freight of 35%.
"Figure that out" isn't the issue, "afford" is. I've had my company pay to work out what it would take for my US small business to avail itself of the same advantages as "the big boys". The tl;dr is it's pay to play. Sharing what I determined:
The tax minimization techniques are initially shrouded in secrecy as individual practitioners figure out how to hack the tax regulations, and over time gradually spread out through the industry, and eventually the IRS gets around to shutting down some of them.
There are many, many levels of tax minimization. There is a minimum buy-in for each level, of professional services fees, regulatory/statutory fees, and annual maintenance fees. Your tax liability must substantially exceed these buy-in levels before it makes sense to pursue them.
The uncertainty around specific techniques' legality is always >0. Not a single firm I spoke with would vouch for any technique 100%, no matter how long it has been in place, no matter how many of their clients use it, no matter what the IRS has pronounced before upon the technique. The best I could find was if I used the firm's in-house bookkeeper, accounting system, CPA, and tax attorney to be my company's sole and exclusive accounting department and tax advisor, and my company complied with every single recommendation they made to the letter and precisely on time never missing a deadline, then if a technique was invalidated by the IRS they would defend me...up to a "reasonable point", which they declined to define, beyond which they would charge us for the tax attorney's time.
For the simpler more established techniques that were more widely-used in their client base we interpreted they would defend us in tax court whatever it took, as it was in their financial interests to do so. But they needed an out for the more complex and newer techniques which fewer clients used, which is where the "reasonable point" wording came from.
Minimum I identified was high-6 to 7-figure tax liabilities p.a. before it started to make sense to even think about these techniques, and closer to mid-to-high-7 figures to be practical and conservative. It is a far lower bar to clear on just a pure tax liabilities-to-savings basis, but the uncertainty that surrounds you compels a conservative approach to put away enough to pay for not just a tax court fight, but enough to pay sufficient penalties+interest in case you lose so that an adverse ruling doesn't immediately put your company into perilous financial straits.
A large factor why small business can't afford these techniques is due to the aforementioned secrecy: every firm I spoke with, and the one I engaged and retained (paid money to) so I could review the techniques, demanded an NDA. Take the NDA to a contracts attorney and you will determine that the practical effect is despite what you might be told in the marketing sell-side of the engagement, once you employ these techniques, you are effectively obligated to use the tax minimization firm's CPA's and tax attorneys (sometimes even bookkeeper and accounting system), and not your own. You will be told you can use your own, but you cannot divulge any of the techniques. With holes like that in your financial and tax planning picture, your own CPA and tax attorney will never sign off on the end result of any of their work, and therefore you are left with going to the tax minimization firm's services as a practical matter. When you add up all those costs, it raises the bar of how high your tax liabilities must be before you can justify hiring one of these firms (even if you were willing to take away all outside options of retaining financial advice, a completely separate matter).
No one I spoke with would agree to report a comparison between the total spend on their services and the taxes I would have paid if I hadn't retained them, without substantially more services to generate that information. In other words, they themselves had no idea of the baseline tax liability and therefore the optimal point beyond which it was costing the client more to spend on them to reduce tax liability than it was worth. It was premature optimization gone completely off the rails at the smaller scale businesses.
The big business' can afford this game because they vertically integrate their own in-house tax minimization efforts, and/or they bring a large enough book of business that any outside counsel they retain will agree to sharing the techniques with in-house staff in exchange for relatively lengthy contracts. The big business' tax liabilities are so large and complex, these tax technicians' time budget to spend on optimization was gargantuan, so there was no effective need to establish a baseline. By the time they worked out one year's taxes, it was already time for the following year, with new tax regulations to take into account.
The entire industry has striking parallels to infosec hacking. Some of the specialists I met would probably strongly identify with other (sw/hw/ham/etc.) hackers.
If it were feasible to organize a mountain of small businesses into a single, monolithic producer co-op to present the same "interface" to the tax authorities as the big business' (PEO's are one form of acknowledging scaling issues in the business regulatory environment, payroll firms another), then that might level the playing field somewhat, but until that or similar action(s) happen, yes, US small businesses do face tax regulatory environment challenges.
If someone with a small business finds a tax minimization specialist firm that didn't come with these drawbacks I outlined, I'd really appreciate it if they would post here who they retained. The 35% rate is pretty eye-watering to pay when I want to put away for a rainy day fund, or save up to add an employee/purchase capital equipment/