Letter to U.S. House: “Inflation Reduction Act” Reduces Investment & Innovation, Harms Small Business

By at 10 August, 2022, 10:02 pm

“Inflation Reduction Act” Reduces Investment & Innovation, Harms Struggling U.S. Entrepreneurs and Small Businesses

Dear U.S. House Member:

The Small Business & Entrepreneurship Council (SBE Council) strongly opposes “The Inflation Reduction Act” (IRA). The package will not reduce inflation. The Congressional Budget Office reports that it will have “a negligible” effect on reducing inflation. In fact, the “IRA” will likely do the opposite, as businesses will be less inclined and incentivized to invest. Therefore, supply chains will stay muddled. Small businesses will suffer even more and the economy will weaken further.

The “IRA’s” tax increases, price controls, vast new spending – and, ironically, various tax credits – are negatives, not positives, for our economy and small businesses.

The effect of the tax increases on big businesses will make their way down to small businesses, as larger companies cut orders with small-business suppliers. Layoffs and the reduction of worker hours means less money will be spent with local businesses. As much as politicians romanticize about the fairness associated with big-business tax hikes, the fact is you cannot wall off their effects. The business ecosystem is highly interconnected and interdependent. What impacts big business, impacts small business and vice versa. It is disingenuous to claim “only big businesses” or only targeted sectors will take a hit with these tax increases – whether it’s America’s biggest companies, the energy sector, or the bio-pharmaceutical industry – the downstream impact is harmful for our economy, workers and small businesses.

Placing price controls on drugs will damage the America’s biopharmaceutical sector, which is dominated by small to mid-size businesses. This innovative biome counts on policy stability to drive investment and risk-taking. Without investment, consumers will suffer from fewer drug and treatment breakthroughs, which means America’s leadership in this critical arena will decline.

Powering up the Internal Revenue Service (IRS) with a massive injection of tax dollars focused on compliance means small businesses and the self-employed will be swamped with audits. While supporters of the “IRA” claim the vast resources provided by the bill will go after wealthy taxpayers, tax data consistently shows that small business owners of moderate means are targeted most frequently. Obviously, this will be a burden on many small business owners who will be forced to endure expensive and lengthy audits. Resources would be better spent on helping small businesses – and all taxpayers – comply through taxpayer assistance (or better yet – simplify the tax code!) Yet, only a tiny fraction – 4% – of the $80 billion proposed in the “IRA” is dedicated toward assistance.

Finally, extending the limitation on Main Street “pass-through” businesses to claim losses for two years without extending the 20% small business deduction is the “IRA’s” final slap in the face to small business America. Small business owners need relief, support, and more capital during this challenging economic period. Using this provision as a “payfor” without considering its impact and value during an economic recession is careless policy, and ill-conceived.

Small businesses and entrepreneurs succeed with pro-growth policies that enable investment and risk-taking. That is especially needed now as business owners and their employees struggle through inflationary pressures and a contracting economy.  The “IRA” hardens government control over key areas of the economy and siphons private capital from productive businesses. This is not legislation that will help our businesses navigate through relentless inflation, supply chain headaches, the great labor mismatch, and an economy in recession.

With productivity plunging, inflation still stirring, business investment tumbling, and real personal income in decline, President Biden and Congress need to be doing all they can to support private business investment and growth, which will boost wages, job growth and heal supply chains.

We urge you to oppose the “Inflation Reduction Act” and work to advance productive policies that will boost entrepreneurs and their workers – and all U.S. businesses – not saddle them with more costs, taxes, audits and economic hardship.

Please contact me if you have questions.


Karen Kerrigan, President & CEO





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