Earlier today, the Main Street Employers coalition participated in the Main Street Tax Day Summit hosted by the S-CORP Association and NFIB. Attendees heard Sen. Steve Daines (R-MT), small business owners from across the country, and tax policy experts discuss the threat that the ongoing tax debate poses to America’s Main Street businesses.
Sen. Daines kicked things off by commenting on the current legislative outlook, and emphasized the importance of preserving key provisions from the 2017 tax bill, notably the Section 199A deduction, the risk of proposed business tax increases so close on the heels of the pandemic, and the importance of the small business community raising its voices now with policymakers.
Attendees then heard from a panel featuring four small business owners from across the country. The panelists reflected on how the changes in the 2017 tax law have impacted their business operations, often enabling them to make investments in their employees and company that they otherwise would not have. They also warned of the negative consequences of raising rates and eliminating the 199A pass-through deduction. Raising their taxes now “could be the final nail in the coffin for businesses hanging on by a thread”, make it harder for them to raise wages and compete.
The second panel was hosted by Executive Director of the Main Street Employers coalition Chris Smith. Panelist George Callas, a Managing Director at Steptoe, outlined the various policy risks facing Main Street business owners as a result of recent proposals. Closing out the event was David Winston, who provided his analysis of recent trends in voter data, including public perception on tax fairness and reticence to pay higher taxes.
Today the Parity for Main Street Employers Coalition of national groups representing millions of individually and family owned businesses announced its strong support for the Main Street Tax Certainty Act of 2021, which would make permanent the Section 199A 20-percent deduction for qualified business income.
“We thank Representatives Smith and Cuellar, and Senators Daines, Cassidy, Scott (SC), and Portman for their bipartisan leadership on this important legislation to ensure permanent tax parity for individually and family owned businesses,” stated PMSE Executive Director Chris Smith. “Making Section 199A permanent would provide much-needed certainty so Main Street employers can move forward with confidence after being so hard hit by COVID-19 closures. The sooner Congress acts to make Section 199A permanent, the sooner Main Street communities will recover.
The section 199A deduction is an essential feature of the tax code to ensure tax parity between millions of individually and family owned businesses and C corporations. These employers–organized as S corporations, partnerships and sole proprietorships–are the backbone of the American economy, employing the majority of private-sector workers and representing 95 percent of all businesses. Despite the economic importance of the pass-through sector for jobs and growth, Section 199A is scheduled to sunset at the end of 2025, resulting in a draconian tax increase on the country’s most significant source of employment.
The good news on SALT Parity keeps rolling in. Just days after California’s Governor signaled his support, New York Governor Andrew Cuomo followed suit and included our pass-through SALT Parity language in his 2022 fiscal year budget proposal.
The briefing book accompanying Governor Cuomo’s budget proposal makes clear the state adopted our recommendations in their latest proposal:
The Budget includes a new voluntary Pass-Through Entity Tax designed to mitigate the impact of the cap on state and local tax (SALT) deductions enacted in the 2017 Tax Cuts and Jobs Act. Pass-through entities can deduct this tax at the Federal level, thereby allowing partners of partnerships and shareholders of S corporations to receive the benefit of a full deduction for SALT paid before income is passed-through to them. A credit will be allowed against regular State income tax to offset the new Entity tax. This proposal aligns with similar efforts in Connecticut and enables individuals affected by the SALT cap to use IRS-allowed business deductibility to mitigate its impacts.
So, New York joins more than a dozen states actively considering our SALT Parity reform this year. With the uncertain prospects of federal action, the recent IRS blessing clarifying their position, and the effects of COVID continuing to negatively affect millions of businesses, this is the perfect time for states to take up this reform and help their Main Street businesses.
Given all the activity on the SALT Parity front, we decided to put together some materials outlining the issue, why it’s important, and the status of our efforts.
The presentation can be accessed by clicking the preview image below:
Increased interest in our SALT Parity efforts means increased questions about how the reforms work and why it is the right plan to help Main Street employers during an extremely challenging time. Click the link below for the full Q&A:
Congress is on the cusp of passing a bipartisan assistance package to help the families and employers through the last months of the COVID-19 pandemic. As part of this package, the entire business community and its Hill allies sent a letter supporting expanding and extending the Paycheck Protection Program (PPP) while clarifying congressional intent on the tax treatment of PPP loans.
Getting the tax treatment of PPP loan forgiveness correct would avoid a surprise $120 billion tax hike on the five million employers who took out PPP loans. Those employers were promised tax-free forgiveness when they applied for the loans, and that was what they understood when they spent the loan proceeds keeping their workers employed.
The letter, which was signed by more than 800 trade organizations, can be downloaded by clicking here.