Small Business Owners to Congress: Consideration of Tax Increases Should Wait, Measures Would Inflict Irreparable, Long-Term Damage  

By SBE Council at 11 August, 2021, 11:36 am

NEWS

SBE Council Releases New Poll: 83% of small business owners believe elected officials should support tax policies that make it possible to pass on their family business to the next generation

FOR IMMEDIATE RELEASE

Vienna, VA –  On the heels of the U.S. Senate passing a partisan $3.5 trillion spending and tax blueprint by a 50-49 vote, the Small Business & Entrepreneurship Council (SBE Council) released a new survey  today that revealed an array of tax increases being worked on by Democrats to fund the package are not supported by small businesses owners, and would significantly hurt the ability of small businesses to recover from the economic devastation of COVID-19 and to pass family businesses onto the next generation.

In fact, according to the SBE Council-TechnoMetrica survey fielded from July 6-July 19 of 690 small business owners, a wide margin of respondents (65%) believe tax increases should not even be considered until the economy fully recovers from the pandemic. SBE Council president & CEO Karen Kerrigan noted the ongoing challenges faced by small business owners, and why they are rightly concerned about new government burdens being considered that could sink their firms for good. Kerrigan said:

“The uncertainty of the pandemic is not over for small business owners, not by a long shot. They are still reeling from the big hit they took at the onset of the pandemic and from the shutdowns. And they are now being challenged by inflation, supply chain issues, labor shortages and general uncertainty about the direction of the pandemic and economy, which are undermining their ability to recover and normalize operations. These tax increases being considered jeopardize recovery and would also undermine investment and capital formation, key drivers of economic growth. Therefore, it is no surprise that 61% of small business owners say new taxes will hurt the recovery of their firms.”

Kerrigan added:

“Moreover, as these business owner work hard to restore resiliency for the long-term, they are increasingly concerned about whether it will be possible to pass on their business to the next generation, or even sell the business, given the threat of elimination of step-up in basis and vastly higher capital gains taxes.”

According to survey results, 83% of small business owners believe elected officials should support tax policies that make it possible to pass on their family business, and a large share of the respondents reported how eliminating step-up in basis adjustment (when property such as a business is passed on upon death) would negatively impact the operation of the business both now and in the future. For example, if step-up in basis was eliminated:

● 50% of respondents said the proposal would hurt their ability to carry on the business

● 51% said it would hurt their ability to make capital investments in the business

● 42% said it would hurt their ability to secure loans or lines of credit

● 47% said it would hurt their ability to keep existing employees

● 49% said it would hurt their ability to support local charitable organizations

● 48% said it would hurt their ability to pay federal or state taxes

● 45% said it would hurt their ability to support the local economy

● 48% said it would hurt their ability to support their own family

SBE Council chief economist Raymond J. Keating noted: “Small business owners are on the front lines of our economy in good times and bad, and therefore, they possess a firsthand understanding of how assorted burdens imposed by government affect business and the economy. These survey results make clear that small business owners overwhelmingly understand the ills created via higher capital gains taxes and the death tax.”

Key Highlights of the Poll

● Respondents believe the segments of the economy hurt hardest hit by the COVID-19 pandemic were small businesses, family and privately-held enterprises, and farmers and ranchers.  A staggering percentage (77%) knew of closures, layoffs, and divesting of local small businesses and privately owned enterprises, farms, or ranches due to the pandemic.

● Almost universally (99%), respondents firmly believe in the importance of supporting local, family-run enterprises in their local communities. In tandem, 96% believe it is important for families to be able to pass on their enterprises from one generation to the next.

● Proposals in Congress and the White House to double effective Capital Gains Taxes from 23.8% to 43.4% on businesses and individuals does not find favor with many, with nearly 60% opposed. On the issue of applying a new effective and retroactive capital gains tax of 43.4% to the accumulated value of a business following an owner’s death as called for under the STEP Act, opposition among all respondents further increased to 70%.

● 78%, believe retroactive capital gains taxes on assets passed on to beneficiaries following a business owner’s death will have crippling consequences for small businesses, as well as their employees and the communities they call home.

● If retroactive capital gains taxes on the assets of family businesses were passed into law, respondents believe (1) larger companies will buy up small local enterprises at low prices (70%), (2) family members and beneficiaries would be forced to borrow money to keep businesses afloat (68%), and (3) fewer small businesses and family enterprises would survive (67%).

● Nearly 80% are concerned that applying retroactive taxes to family members or beneficiaries taking over a business would be viewed as a government tax lien and impact their ability to access needed capital to pay the new tax liabilities.

● Almost 60% of respondents say they would be less likely to vote for a U.S. Representative or Senator if they voted for an increase in capital gains taxes or estate taxes on small businesses, family or privately-owned enterprises, farmers or ranchers.

● Nearly 70% of respondents do not believe politicians in Washington understand how private enterprises such as small and family businesses, farmers and ranchers are taxed on their income and assets, and a wide majority (64%) do not want politicians creating “carve outs” or exemptions in order to pick winners and losers.

Keating concluded: “It’s worth highlighting that small business owners exhibit real economic and political wisdom when nearly 70% don’t believe that politicians understand how private enterprises are taxed on income and assets, and at the same time, 64% don’t want politicians creating special carve outs to pick winners and losers. The message is unmistakable from small business owners: Politicians need to step back from misguided escapades, like higher taxes, increased regulations and industrial policy, and let entrepreneurs and investors rebuild and get our economy back on a robust growth path.”

Detailed findings, graphs and background on the survey can be accessed here.

CONTACT:

Karen Kerrigan, kkerrigan@sbecouncil.org

Raymond Keating, rkeating@sbecouncil.org

SBE Council is nonpartisan advocacy, research and education organization dedicated to protecting small business and promoting entrepreneurship. For 25 years, SBE Council has worked on and advanced a range of private sector and public policy initiatives to strengthen the ecosystem for strong startup activity and small business growth. Visit www.sbecouncil.org for additional information. Twitter: @SBECouncil

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