Leading small business advocacy groups condemned Senate Democrats’ proposal to eliminate a key tax deduction as part of a tax reform bill on Tuesday.
Democrats’ proposed removal of the so-called pass-through entity tax deduction would harm small business owners’ ability to hire, increase worker compensation and innovate, according to the National Federation of Independent Business and Job Creators Network.
Senate Finance Committee Chairman Ron Wyden introduced legislation Tuesday that would repeal the tax break, a 20 percent deduction for pass-through entities, which most U.S. small businesses qualify as, Bloomberg reported.
“Senator Ron Wyden’s proposal to limit the Small Business Deduction and raise taxes on small businesses is the wrong plan at the wrong time,” NFIB Vice President of Federal Government Relations Kevin Kuhlman said in a statement.
“Curtailing the Small Business Deduction would directly hurt small businesses’ ability to hire, invest in their businesses, and increase employees’ compensation, and threatens the fragile economic recovery.”
Kuhlman added that more than 90 percent of all small business owners support making the deduction permanent. The plan would also represent a divergence from President Joe Biden’s tax proposals, which did not include removing the popular tax break, he said.
“It was only a matter of time before tax hungry Democrats came after the 20 percent small business tax deduction as Sen. Wyden has proposed,” JCN President Alfredo Ortiz said in a statement.
“No small business is safe with Democrats on the hunt for new tax hikes needed to fund their historic spending plans to implement their socialist policies.”
Ortiz stressed that the deduction, which effectively reduces the tax rate paid by most small businesses from 37 percent to 29.6 percent, is important to ensure Main Street can compete with major corporations.
“Curtailing [the deduction] would amount to a dramatic escalation in Democrats’ war on small businesses and slow the economic recovery and job creation,” he said. “Democrats must not be allowed to milk productive small businesses to enable their big government agenda.”
“Few policies showcase Republicans’ commitment to giveaways to the top 1 percent like the pass-through deduction created in their 2017 bill,” Wyden told Bloomberg in a statement.
“The mega-millionaires get to write-off 20 percent of their income while middle-class accountants are cut out. This makes no sense, and my bill would overhaul the deduction to ensure its benefiting Main Street small businesses.”
Business owners who make $400,000 per year will continue to benefit from the deduction under Wyden’s plan, which would also raise $100 billion in new tax revenue, according to Americans for Tax Fairness. Only “real small businesses” would qualify, the group said.
“Let’s be clear: Democrats are not raising taxes on true Main Street small businesses. In fact, this proposal cuts taxes for Main Street small businesses,” he added in a statement to The Hill. “We’re also not going to let Republicans and their special interests falsely characterize every mega-millionaire as a small business.”
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