Biden admin has no plan to prevent tax increases on families, small businesses
This editorial was first published in the Washington Times on June 5, 2024.
The entrepreneurial spirit is foundational to the American identity. Millions of Americans follow their passions every day as small business owners in our nation’s free enterprise system which has created more prosperity than any other economic system in the history of the world.
I became a small business owner after graduating high school. At the age of seventeen, I began operating a small construction business, which grew over twenty-five years to employ hundreds of individuals in family-sustaining jobs.
I’ve seen the obstacles business owners face first-hand. That’s why advocating for small businesses matters to me and why I am honored to have the privilege to lead the Ways and Means Committee’s Main Street Tax Team.
Under the leadership of Chairman Jason Smith (MO-08), Republicans on the Ways and Means Committee are preparing for 2025 when provisions of the landmark 2017 Tax Cuts and Jobs Act (TCJA) are set to expire. We are fighting to preserve the changes to our tax code that will help families, workers, and small businesses struggling in President Biden’s economy.
The president made clear his desire for the TCJA to expire. A week after the president’s statement, Treasury Secretary Yellen’s testimony before the Ways and Means Committee further made clear to the American people that the Biden administration has no plan to prevent tax hikes on families and small businesses.
A pivotal moment of Secretary Yellen’s testimony came during a question from my colleague Rep. Vern Buchanan (FL-16), who asked Yellen if the administration was intending to preserve Section 199A of the tax code.
Section 199A grants certain pass-through entities a twenty percent deduction of qualified income on their tax returns. This change was implemented by the TCJA to promote tax equity between larger corporations and small businesses on main street. A pass-through entity is a company where the income derived from the business is not taxed at the corporate rate and is instead “passed through” and taxed at the individual’s tax rate.
When pressed, Yellen said she would “need to get back to” my colleague about whether the Biden administration was planning to raise taxes on small businesses on main street.
Those words, I am sure, did little to quell the fears held by small businesses that the Biden administration is planning to raise their taxes.
I am leading a growing and bipartisan group of Representatives in the House which is working to make Section 199A permanent. 178 of my House colleagues have cosponsored my Main Street Tax Certainty Act, which also has been introduced by Sen. Steve Daines (R-MT) with 32 cosponsors.
Our legislation would prevent a massive tax hike on small businesses that would limit their ability to invest in their employees, in making new capital investments, and in their communities.
The TCJA, in particular Section 199A, unleashed a robust economy where small businesses invested in their communities, creating more jobs and business opportunities. Providing permanency to this critical pro-growth tax policy will ensure main street businesses continue to have a level playing field with corporations and will strengthen communities across the nation.
A recent study indicates that nearly sixty percent of private sector employees work at companies organized as pass-through entities. Members of the Ways and Means Committee have heard directly from small businesses what the expiration of Section 199A would mean for their businesses.
“When the twenty percent pass-through deduction expires at the end of 2025 and the individual tax rates increase, our tax bill will be significantly higher. Many small manufacturers are organized as pass-throughs, so our sector will be disproportionately harmed by the expiration of this deduction, severely hampering our growth trajectory,” said Tom Tredway, President of Erie Molded Packaging.
A slower growth trajectory for small businesses, as Mr. Tredway described, means fewer or no new jobs created and fewer or no new capital investments. When businesses do not grow there is less economic opportunity for communities. Section 199A is a proven pro-growth tax policy that Congress must make permanent.
We know what is at stake when Congress considers how to move forward with renewing TCJA. The impacts on main street will be profound.
The Main Street Tax Team will be looking at key components of our tax code like Section 199A as well as ensuring small businesses have adequate access to capital. We will work to help small businesses grow, create jobs, and invest in their communities.
When small businesses thrive, our communities thrive.
Rep. Lloyd Smucker represents Pennsylvania's 11th District, which includes Lancaster and southern York counties, and serves on the House Committee on Ways and Means, the House Budget Committee, the House Committee on Education and Workforce, and Joint Economic Committee.