An Op-ed by Christopher Smith, Executive Director of the Parity for Main Street Advisors coalition, ran this morning in the Morning Consult.
The Payroll Protection Program enacted this past spring has helped millions of employers and workers survive an economy that was in freefall from COVID-related closures. Now, with the recovery underway, those same small businesses will face a surprise $100 billion tax hike if Congress fails to act soon.
The PPP program’s design was simple – use local banks to provide loans to smaller employers during the shutdown. If the employers used the money to keep workers employed and on other necessary expenses, their loans could be forgiven and tax-free. The tax-free aspect of the PPP was not an afterthought, but a central element of the plan. The sponsors of the program and their supporters repeatedly emphasized this benefit during the congressional debate, and it was well understood as the law started to be implemented. Simply take out the loan, spend it on the approved expenses, and any loan forgiveness would be tax-free.
But recent positions taken by the Treasury and the Internal Revenue Service have turned this policy on its head. By denying borrowers the ability to deduct the same expenses that qualified them for the loan forgiveness, this action produces the same result as if the loan forgiveness was repealed. This was not at all what Congress intended.
Read the full op-ed here: https://morningconsult.com/opinions/stop-the-surprise-small-business-tax-increase/