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Main Street Asks Congress to Reject the Inflation Reduction Act

Today, the Main Street Employers Coalition joined with more than 70 trade associations in opposing the Inflation Reduction Act. A letter sent to lawmakers highlighted the various tax provisions that are harmful to the small and family-owned business community, and points out that now is simply not the time to be raising taxes on these employers. The letter, which can be accessed by clicking here, reads:

The undersigned organizations represent millions of Main Street businesses and employ tens of millions of workers and we oppose the Senate-passed Inflation Reduction Act. Inflation is at 40-year highs, we have had two consecutive quarters of negative economic growth, and we are witnessing a shrinking small business sector, yet the Inflation Reduction Act does nothing to address these immediate issues even as it increases the burden of the tax code shouldered by America’s small and family-owned businesses.

The Biden Administration claims the savings in the IRA are “front-loaded” and will reduce the deficit in the short-term, helping to ease inflationary pressures. That is simply not the case. Recent analysis by the Congressional Budget Office, Penn-Wharton, and others shows the Inflation Reduction Act would increase prices in the short term and do little to bring them down in the long run.

At the same time, the bill would give the IRS an additional $80 billion in funding, more than half of which would pay for thousands of additional IRS agents to conduct millions of additional audits. We support addressing the tax gap and oppose illegal tax evasion, but as former National Taxpayer Advocate Nina Olson observed recently, it is wrong and counterproductive to characterize the entire tax gap as willful tax evasion. From experience, we know many, if not most, of these additional audits will be conducted on the owners of family businesses who have fully complied with the tax code.

Finally, the Warner Amendment adopted at the last minute presented the Senate with a clear choice between Wall Street and Main Street, and the Senate chose Wall Street. The amendment extends for two years the Section 461(l) cap on losses a business owner is permitted to claim. This $52 billion tax hike on pass-through businesses was adopted with almost no consideration, and the revenues it raises were used to offset the cost of exempting private equity investors from the fifteen-percent corporate minimum tax. The cap on active pass-through loss deductions is bad policy at any time, but it is particularly harmful when the economy is weak and an increasing number of businesses are suffering losses. The timing of this amendment’s adoption could not have been worse.

The Inflation Reduction Act would fail to reduce price pressures even as it raises the cost of the tax code to small and family-owned businesses at a time of economic weakness. We ask that you reject the IRA’s Main Street tax hike when it is considered by the full House

MSEC: The Inflation Reduction Act Fails to Address the Challenges Facing Main Street

“The Main Street Employers Coalition – comprised of national trade groups representing individually and family-owned businesses employing millions of Americans in every state – believes the “Inflation Reduction Act” would fail to address the major challenges confronting Main Street today: high inflation, a slow economy, and a tight labor market.

“Recent NFIB member surveys make clear that inflation is the number one concern for Main Street businesses right now. With the CPI and PPI indexes measuring forty-year highs, businesses are struggling to balance rising prices with the need to accommodate their customers. A recent analysis from Penn-Wharton, however, finds the Inflation Reduction Act would increase prices in the short term and do little to bring them down in the long term.

“The legislation also provides the IRS with $80 billion in additional funding over the next decade. Its sponsors argue the funds will enable the agency to go after tax cheats and close the so-called tax gap, but Main Street knows better. More than half this funding will pay for new agents and increased audits, and the IRS has been transparent the primary target of these audits will be smaller private businesses. Meanwhile, only four percent of the funding will go to improving customer service, a long-term priority for Main Street.

“This is not a case where only tax cheats need to worry. Any business that has undergone an audit knows the cost and stress the process can impose on a business, even when no taxes are ultimately owed. The Tax Code is dense and ambiguous, so law-abiding businesses are at risk from this massive fishing expedition.

“Main Street faces numerous challenges in the current environment, but none of these are addressed in the Inflation Reduction Act. The bill will increase prices in the short term and increase the costs of complying with the Tax Code.”

Main Street Unites Against Senate Democrats’ Tax Rate Hike

The Main Street Employers Coalition joined with more than 190 business organizations, representing millions of Main Street businesses and tens of millions of American workers, to oppose Senate Democrats effort to raise tax rates on individually and family-owned businesses. The latest proposal includes a 3.8 percent tax rate hike on the active income of 1 million businesses struggling with high inflation and looming recession fears. The letter makes it clear: It’s a tax rate hike, not a loophole closer.

Expanding the 3.8 percent NIIT represents nothing more than an eleven percent increase in the rates imposed on family-owned businesses. Based on Treasury data, we estimate up to 1 million small and family-owned businesses, representing over half of all pass-through business activity, would be at risk of having their rates increased under this policy. This small business tax hike would hurt the ability of businesses that survived the worst global pandemic in a century to remain viable in the coming months.

A full copy of the letter is available here

Statement from the MSEC Opposing Inflationary Tax Hikes on Individually & Family Owned Businesses

Main Street Opposes Inflationary Tax Hikes on Individually & Family-Owned Businesses

“It’s the kind of thing you’d do to start a recession, not prevent one.”

WASHINGTON, D.C. (July 11, 2022) – The Main Street Employers Coalition—comprised of national trade groups representing individually and family-owned businesses employing millions of Americans in every state and district—released the following statement on a Democratic plan to raise tax rates on individually and family-owned businesses:

“We oppose Senate Democrats’ double-digit tax hike on the active business income of America’s individually & family-owned businesses,” said Chris Smith, Executive Director of the Main Street Employers Coalition. “These businesses already pay the highest effective tax rates, as well as payroll and self-employment taxes to Medicare.  This tax rate increase would only make that disparity worse, add to inflation, and hasten a possible recession.  It’s yet another ‘tax the rich’ smokescreen that ends up hitting Main Street instead.”

“Raising rates on small and family-owned businesses is the kind of thing you’d do to start a recession, not prevent one.  Voters understand that if companies have to pay more in taxes, those costs will be passed on to consumers in the form of higher prices.  Instead, we need to do everything we can to help businesses get back on their feet so they can get Americans back to work and the economy moving in the right direction.”

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Inflation, Taxes, and Family Businesses – What do Voters Really Think?

Our allies at the S Corporation Association recently held a webinar to highlight the results of its new national survey. David Winston, whose research and polling firm conducted the survey, was on hand to break down the results and explain how voters feel about inflation, the Build Back Better Act, the current state of the economy, and their potential impact on November’s elections.

As David made clear, the polling shows that Americans are well aware of the impact additional federal spending and tax hikes would have on inflation and are simply not on board with the Administration’s plans to increase taxes, particularly those on Main Street businesses.

The survey results and a recording of the webinar can be accessed via the links below:

 

Main Street Employers Coalition’s Chris Smith Joins S-CORP Podcast

Chris Smith, Executive Director of the Main Street Employers Coalition, recently joined the S Corporation Association’s Talking Taxes in a Truck podcast for a timely discussion about what effect the leaked Supreme Court draft decision will have on the tax policy outlook, and the odds of an overhauled Build Back Better Act being passed in the coming months. Chris and S-CORP President Brian Reardon also broke down the reconciliation bill’s various tax hikes, and explained how they specifically target family businesses.

The podcast is available here:

Talking Taxes in a Truck Episode 19: BBB Still “Too Big to Succeed”?

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