We believe that Main Street employers are the backbone of the American economy—employing the majority of U.S. workers, and comprising 95% of all U.S. businesses. By organizing as S corporations and other pass through businesses, they help keep family businesses in the family, and make America more innovative and competitive. The American economy would simply not be the same without them.
But to keep these businesses and their workers dynamic and growing, we need a federal tax code that restores parity between corporations and pass-through businesses by leveling out top rates and eliminating multiple layers of tax.
The tax reform law enacted in 2017 is a work in progress when it comes to equal treatment of Main Street employers and large corporations. The 20-percent “pass-through deduction” created under the new law is helpful, but it leaves too many Main Street businesses paying tax rates significantly higher than their corporate competitors.
Moreover, the rules surrounding the new deduction are uneven and simply too complex and unstable to work effectively. The deduction:
- Excludes many service sector businesses;
- Does not apply to international income;
- Lacks the effective guardrails necessary to prevent abuse; and
- Is Temporary!
Couple these challenges with the preservation of the Net Investment Income Tax and the disallowance of state and local income tax deductions, and the result is problematic for Main Street employers.
To address these challenges, the Parity for Main Street Employers coalition will work to:
- Maximize the value of the new deduction for the real business profits of Main Street employers while protecting against abuse;
- Restore the ability of Main Street employers to fully deduct their state and local income taxes, just like C corporations; and
- Provide certainty by making the deduction permanent, so Main Street businesses can plan and make long-term decisions.
We need a tax code that is as friendly to family businesses as it is to corporations.