PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Letter to Congressional Leaders: SBE Council Supports the “Tax Relief for American Families and Workers Act of 2024”

By at 18 January, 2024, 1:17 pm

The Honorable Mike Johnson

Speaker

U.S. House of Representatives

 

The Honorable Chuck Schumer

Majority Leader

U.S. Senate

 

The Honorable Jason Smith

Chairman

Ways and Means Committee

U.S. House of Representatives

 

The Honorable Richard Neal

Ranking Member

Ways and Means Committee

U.S. House of Representatives

 

Dear Speaker Johnson, Leader Schumer, Chairman Smith and Ranking Member Neal:

Though resilient and tenacious, America’s small business owners continue to be challenged by incessant headwinds that have made it more difficult to invest and grow. Entrepreneurs need policies that support their resourcefulness in navigating inflationary pressures and financing their investments and growth. The “Tax Relief for American Families and Workers Act of 2024” includes important measures that provide needed relief and incentives – ones that will support small business owners in their grind to stay competitive, to innovate, and to grow.

SBE Council strongly supports the “Tax Relief for American Families and Workers Act of 2024.” We urge every member of Congress to support this bipartisan legislative package.

The legislation could not come at a more important time. With the tax filing season upon us, it is critical that Congress act quickly given the harmful tax increases and consequences resulting from expired provisions. Moreover, 71% of small business owners, according to SBE Council’s Small Business Check Up Survey Q4 2023, have conveyed that they have taken steps to prepare for a possible economic downturn or recession in the coming months. That means entrepreneurs currently are – and will be – investing less, hiring less, and innovating less, unless relief, support and certainty are provided.

The legislation restores key investment incentives that will positively impact the competitiveness and financial condition of small businesses and startups across the country. When small businesses and startups are doing well, the U.S. economy is more stable and vibrant. The boost and certainty enabled by specific provisions in the legislation will help fuel investment and healthy growth in local economies.

Enhancing and Restoring Important Expensing and Investment Incentives: In response to inflationary pressures, tighter capital availability, and lower confidence, small business owners are cutting back on their business spending and investments. Providing business owners with the tools and capacity to reinvest business revenues will enable pathways to growth and survival. That is why the tax measures in the legislation are vitally important, such as an increase in small business expensing, restoring and making retroactive immediate R&D expensing, extending 100% bonus depreciation, and extending interest deductibility.

With regard to the need to restore immediate R&D expensing, SBE Council has found that the financial hit for small businesses is quite severe if the provision is not restored. For example, the median “tax hit” for small businesses that use the incentive amounts to a 32% increase in their tax bill, according to SBE Council’s “Emerging Technology, Innovation and Small Business” small business survey. Because immediate R&D expensing has expired, a significant number of small businesses have cut back on resources directed toward productive innovative activity. Instead, they have been focusing on unproductive and economically harmful survival strategies, such as borrowing money to pay higher tax bills, holding off profit sharing for employees, scaling-back hiring plans, reducing employee benefits, laying off employees, and forgoing their own compensation. Alarmingly, 19% of small business owners reported in our tech survey that their firms may go out of business if R&D expensing is not restored.

At a time when traditional financing methods and fund raising have become more restrictive due to tighter lending standards and higher capital costs, investment incentives become even more important. In SBE Council’s Q4 2023 Check Up Survey, nearly two-thirds rate the availability of credit or capital as fair or poor, and over half of small businesses surveyed (53%) reported that the lack of credit is hampering their operating capacity. Again, the investment incentives and relief in the legislation provide small business owners with proven tools to re-invest and strengthen competitiveness.

SBE Council has long supported updating the $600 reporting threshold on 1099 reporting, which has not been adjusted since 1954. While the legislation provides a minor increase to $1,000, it is movement in the right direction. We are hopeful that Congress will re-adjust this threshold further in the coming year. A much higher increase is not only warranted, it will reduce burdensome administrative costs for entrepreneurs and the IRS alike.

The ”Tax Relief for American Families and Workers Act of 2024” provides entrepreneurs and small businesses with an infusion of relief and critical support during a period of significant uncertainty. It does the same for families through reasonable changes to the Child Tax Credit.

When small business owners confidently invest in their businesses, the U.S. economy is strengthened. SBE Council applauds the bipartisan effort that went into reaching consensus around these tax provisions, and we urge every member of Congress to support this important legislation.

Sincerely,

Karen Kerrigan, President & CEO

 

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