The Biden administration is at war with American small businesses. Entrepreneurs and the employees who rely on them desperately need help from congressional Republicans.
Senate Republicans could provide meaningful help to small businesses immediately, if only they can get on the same page politically.
On January 31, the House of Representatives passed HR 7024, the Tax Relief for American Families and Workers Act of 2024, with a bipartisan super-majority of 357-70. The bill resurrects a key element of the Tax Cuts and Jobs Act of 2017 – full and immediate expensing of business investments.
It’s difficult to overstate how important this provision was to the original TCJA. Although it didn’t generate as many headlines as changes to tax rates, it actually makes a bigger difference to many businesses’ bottom lines than the corporate or personal income tax rates.
Small business owners all over the country are begging Congress to pass this bill, because right now they’re operating at a competitive disadvantage relative to foreign companies based in countries such as Great Britain and China, both of which allow businesses to deduct the full value of investments right away. In China, companies can even deduct 200% of the value of certain R&D expenses, giving them a tremendous advantage when it comes to staying at the cutting edge of technology.
America used to be ahead of the curve on this. When the TCJA passed, the entire world sat up and took notice. Our trade partners and rivals alike recognized that they had to play catch-up, resulting in a worldwide race to make tax codes and regulatory structures more friendly to business development and growth.
Unfortunately, many of the most important elements of the TCJA – including full and immediate business expensing – have been allowed to expire during the Biden administration. At the same time, the Biden White House has made it a priority to impose punitive taxes and regulations on American businesses, including restrictions on their ability deduct legitimate business expenses.
HR 7024 would serve as a lifeline to struggling American small businesses. I’ve spoken with dozens of small business owners who are filing extensions on their taxes and even taking out high-interest loans to make estimated tax payments, all in the hope that the Senate will pass this bipartisan bill.
You might be wondering: What’s the hold-up? As usual, it’s politics. In order to get lawmakers from both parties on board with the legislation in the House, HR 7024 also includes an expansion of the Child Tax Credit that would modestly increase the amount that certain low-income parents would qualify for. Some senators have expressed concerns that this would create a disincentive to work, while others are worried that President Biden would claim political credit for refund checks that would arrive in mailboxes close to the election.
These are not trivial concerns, but they aren’t enough to justify killing this important bill. In 2017, when negotiators were shaping the TCJA, they encountered this exact same situation. Then, it was Republican Senator Marco Rubio who insisted on expanding the Child Tax Credit before he would agree to full and immediate business expensing. Congress accepted that compromise then, when Republicans controlled both chambers, and they should do so now, with divided government sharply limiting the range of policy options available.
I’ve heard from certain Republican senators who think they can get a better deal next year, after the elections. If so, then GREAT! I’ll be the biggest cheerleader for such a bill.
But what if the elections don’t turn out the way they expect? In that case, this compromise will no longer be on the table, and Republicans will have basically no leverage to get Democrats on board with full business expensing for at least the next two years, and possibly four. We should not let the perfect be the enemy of the good.
At a time when small business owners are being pummeled by federal taxes and regulations, Republicans have a golden opportunity to ease their burden. Will they take it?
Julio Gonzalez is the CEO and Founder of Engineered Tax Services, Inc.
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