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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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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:

• Webinar Recording
• Survey Findings: Summary
• Full Survey Results 

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:

In an op-ed published in Roll Call today, David Winston of The Winston Group highlights a glaring disconnect between the goals of the Build Back Better Act and the priorities of everyday Americans.

The entire piece is worth a read, but the following paragraph perfectly summarizes why the BBB has stalled:

With inflation rising at a 40-year high, over 90 business groups called on Congress today to end efforts to pass Build Back Better and instead shift to the pressing issues confronting American families & businesses – rising prices, labor shortages & supply chain disruptions.

A copy of that letter can be downloaded by clicking here, and is below:

The undersigned business trade groups call on Congress and the Administration to end efforts to pass the multi-trillion-dollar tax increase included in the Build Back Better (BBB) bill and focus instead on the challenges confronting American families and businesses today – rising prices, labor shortages, and ongoing supply chain constraints.

 

Today’s Consumer Price Index report showing inflation rising at the fastest rate in forty years has our members understandably alarmed. Rapidly rising prices are a serious challenge to businesses of all sizes as they make purchasing inventory, supplies, and inputs such as heat and electricity more expensive. In many cases, our members are unable to pass these higher costs on to their customers. Some customers are unable to pay higher prices, while others are locked into long-term contracts that preclude price changes.

 

These challenges are amplified by today’s constrained labor markets. NFIB’s member surveys rank the ongoing worker shortage as the number one challenge employers face. When businesses do find suitable workers, they often need to offer them higher wages to entice them to come to work. In ordinary times, this would be good for the workers, but as we have seen in recent months, inflation eats away at these nominal pay increases and real wages are actually down this year.

 

The Administration argues that the Build Back Better bill will help to reduce prices, but those arguments are simply not credible. Our members believe the primary causes of the reemergence of inflation are the Federal Reserve’s continued easy money policies, massive amounts of deficit spending by Congress, and continued supply constraints, some tied to the Administration’s economic and Covid policies.

 

Raising taxes on America’s family businesses in this environment moves us in the wrong direction. Recent estimates show that more than $500 billion of the Build Back Better’s cost will be shouldered by family businesses and the bill would impose top rates on these businesses exceeding 50 percent. As with increased spending, voters believe these tax increases will be inflationary.

 

The Federal Reserve has recognized the challenge inflation poses to families and businesses and announced it will begin tapering its quantitative easing purchases in the coming months. Congress needs to make a similar adjustment, beginning by ending efforts to sharply increase federal spending while raising taxes on America’s employers.

Today, the Main Street Employers Coalition issued the following statement:

The Main Street Employers Coalition strongly opposes the House Democratic tax plan.  The plan is nothing short of a declaration of war on individually and family owned businesses, and is the most anti-Main Street program ever proposed.

The tax hike would tilt the playing field even further in favor of large corporations on Wall Street and against Main Street America by increasing the tax rate on public corporations by just 5.5 percentage points, compared to the 16.8 percentage point increase that applies to individually- and family-owned businesses.  Worse, it would apply these higher rates to a broader tax base.  The impact cannot be overstated.

The individually- and family-owned businesses facing this draconian tax increase represent about half of all pass-through income, and they employ tens of millions of workers. Taxing these businesses while they are still struggling to recover from the COVID-19 pandemic goes too far. Raising their taxes will directly impact inflation and the cost of living, because if companies have to pay more in taxes, those costs will be passed on to consumers in higher prices & make it harder to raise wages for its employees.

Instead, we should be doing everything we can to help these businesses get back on their feet, so that they can get Americans back to work to keep the economy recovering and moving in the right direction.  The Democratic tax plan goes in the opposite direction.