PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

LETTER TO U.S. HOUSE – Build Back Better: The Latest Version is Not “Better”

By at 4 November, 2021, 9:14 am

November 4, 2021

Dear Member of the U.S. House:

The latest version of “Build Back Better” (BBB) is yet another bad deal for American taxpayers, small business owners, and our economy.  Moreover, it is irresponsible for Members to vote on the massive tax and spending package without a score from the Congressional Budget Office (CBO) and Joint Committee on Taxation (JCT). We urge all members of the U.S. House to demand this responsible step before voting on a bill that is projected to spend $1.75 trillion and estimates that the payfors and tax hikes will actually pay for the package.

From our perspective, it is difficult to see how the cobbled together payfors in the current iteration of BBB will actually pay for the package. That being said, voting blind – or in blind faith – on such a massive package without an official score would be irresponsible.

Bad Policy: Taxing Businesses as They Work to Recover Under Stressful Conditions

As SBE Council has noted in previous communications with Congress, we oppose tax hikes on businesses and individuals during this precarious period of time for our economy. Conditions in the supply chain and inflationary pressures have only worsened since SBE Council’s August 2021 survey of small business owners who said that tax increases should not even be on the table as the economy and businesses try to recover.

The common-sense sentiment of small business owners must prevail so that our economy can heal and return to strong growth. Rather than pushing tax policies that drain family businesses of their resources and their ability to pass businesses on to the next generation, our surveying with TechnoMetrica showed that small businesses want Congress and President Biden to do the exact opposite – 83% of small business owners believe elected officials should support policies that make it possible to pass on their family business.

YET, America’s family businesses are targeted by BBB with unfair and harmful tax increases. A broad coalition of small business organizations, including SBE Council, made it clear in a recent letter: The BBB bill is extremely unfair and harmful to family businesses. As noted in the letter:

the tax rate hikes in the Framework would apply to businesses making significantly less than the advertised levels.

● The White House fact sheet suggests the new surtax would impose a 5 percent tax on a taxpayer’s modified adjusted gross income over $10 million, and 8 percent in excess of $25 million. For pass-through businesses held in trust, however, these thresholds are fifty times lower — $200,000 and $500,000, respectively. You don’t have to be a very big business to earn $200,000.

● The same is true for the expansion of the 3.8 percent NIIT. The expanded NIIT’s threshold for joint filers with S corporation or partnership income is $500,000, but it is just $13,000 for a family business with ownership shares held in taxable trusts.

● Trusts are a common feature of succession planning for family businesses. While they may have tax implications, in most cases families use trusts for non-tax purposes, as they ease the transition of the business from one generation to the next by clarifying ownership and management roles and avoiding probate court.

● Due to the prevalence of trusts, the higher tax rates included in the Framework would harm tens of thousands of modestly sized family businesses located across the country. The rate increases contemplated by the Framework are significant.

Whether its tax hikes on small businesses, family businesses, individuals, corporations or investors, raising taxes period is not sound policy at a time when all players in the private sector need as much capital and incentives at their disposal as possible to invest and pivot, and to pay more for practically everything as a result of inflation.

Bad Medicine for Consumers and Small Innovative Companies

The “pared down” price controls measure on prescription drugs in the BBB bill remains a misguided and dangerous idea. It will harm innovation, investment and U.S. global leadership in this critical industry. We remind you that small, innovative companies dominate the biopharmaceutical sector – 78.9% have fewer than 100 employees, and 59.4% have fewer than 20 employees. Imposing price controls only works to undermine entrepreneurship, competition, and investment in this vital sector.

The provision to “negotiate” is government price-setting plain and simple. The egregious penalties and retroactive taxes in this bill will not keep this critical industry innovating, or even in America for that matter. That outcome would hurt workers, local economies, U.S. global leadership in this vital sector, health consumers and all Americans.

Small Business Owners Crave Stability and Certainty

From the early days of the Biden Administration and the current Congress, SBE Council has urged policy restraint. What is happening in our economy – slower growth and troubling conditions across markets – is exactly what happens when government sends an anti-business policy signal and does things that dislocate markets.

More big government dressed up in ‘Build Back Better’ will not pull the U.S. out of the pandemic economic woes. Vast increases in government expenditures will only drain resources from the private sector, whether via taxes or borrowing, which works against economic growth, to be used for a laundry list of political preferences. And the current round of tax increases – albeit they are much less harmful than what was previously proposed – are still very damaging.

SBE Council urges a NO VOTE on this BBB package.

Sincerely,

Karen Kerrigan, President & CEO

 

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