Despite its status as the signature initiative of the Biden administration, the “Build Back Better Act” would neither build back America nor make the country better – certainly not for small businesses, the backbone of our economy, which are struggling to come back from the pandemic.
Notably, the plan includes a$25B Small Business Assistance Plan, but this “assistance” is cold comfort to small businesses, considering the unfavorable environment that Biden and Washington politicians, mostly Democrats, are creating for small business growth this year.
Small businesses in this country are hurting. The COVID-19 lockdown handcuffed the small business economy, and the majority of the small businesses that managed to survive are still a long way off from getting back to normal.
Of course, generous federal welfare programs that created the labor shortage were designed to help people, but have also hindered small business recovery, as many people in the workforce chose to stay home instead of look for work. Unfortunately, a massive labor shortage persists, despite federal COVID assistance ending earlier this month.
You’d think, given the serious challenges facing American small business, that the Biden administration and Congress would do everything in their power to foster small business growth and breathe new life into this crucially important sector of our economy. Unfortunately, that isn’t the case.
Take, for example, congressional Democrats’ recently unveiled plan to pay for a large portion of President Biden’s “Build Back Better” agenda. The$2.9 trillion tax planis being described as “making sure the wealthiest Americans and big corporations pay their fair share,” in the words of White House spokesman Andrew Bates. The truth, however, is that these tax increases target far more than just the “wealthiest” and “big corporations.”
This new tax plan would raise capital gains taxes significantly, which would have serious negative consequences for entrepreneurs, their businesses, and their employees. It also raises the corporate tax rate to 26.5 percent from 21 percent for all businesses, including small businesses reporting more than $5 million in income.
The definition of a small business actually depends on the industry, and is measured either by the number of employees or the amount of annual income earned – certainly, this sweeping tax plan would harm many enterprises that qualify as small businesses across industries and professions. And for those small businesses that do report more than $5 million in income, these proposed tax increases would be devastating.
The tax bill also includes significant tax hikes on individuals, complicating things for small business owners who pay their business taxes as individuals. As Senator Rob Portman (R-OH) explained, “about 80 percent or 90 percent of the businesses in Ohio or around the country don’t pay their taxes as corporations, they pay their taxes as individuals.” He notes that these pass-through companies, such as sole proprietorships, partnerships, or subchapter S companies ultimately report their income on their owners’ individual tax forms.
Notably, the tax plan also calls for the elimination of the 20 percent deduction on qualified business income for small businesses, and will cut the death tax exemption in half, making it more difficult for successful small business owners to pass on their legacy to their children and families.
The incredibly bitter irony to all of this is that these tax increases are necessary to cover the cost of Biden’s “Build Back Better Act,” which massively increases the social safety net and will continue to disincentivize workers and take money out of consumers’ pockets.
This is interesting when you think about it: President Biden and congressional Democrats will have small business owners pay through the nose to create conditions that further hurt their business prospects. Politicians in Washington seem to be full of talk about helping small businesses when looking them in the eye, but do so while also stabbing them in the back. The paradox here is that the Biden administration continues policies that will devalue the dollar, helped create a labor shortage that hurt small businesses, and then wants to charge those businesses more in taxes.
Small businesses in America don’t need more burdensome taxes, further COVID lockdown measures, and a continued labor shortage. What they need is for government to get out of the way and support their success by a) getting people back to work, b) lowering taxes, not raising them, and, c) stopping astronomical spending, which devalues the dollar for the small business owner and causes costs to go up.
Small businesses need tax reductions and increased credits, not tax increases right as they’re trying to recover from the pandemic lockdowns. Instead of creating new growth disincentives, the government should be working on creative strategies to incentivize workers to get back on the job so we can substantially limit the current self-inflicted labor shortage in the country and to give small businesses at least a fighting chance to come back.
If the Biden administration and Congress really want to “Build Back Better,” they should start by helping the backbone of our economy — small businesses . Doing so with policies that bolster small business growth will definitely make our workforce, our economy, and our entire nation better in the long run.