On Saturday, December 2, Republican senators passed sweeping tax reform that is so broad it will likely impact nearly every part of the U.S. economy, including small businesses, according to the New York Times. The vote passed 51-49 on party lines, with Sen. Bob Corker (R-TN) being the only Republican holdout.
After the Senate vote, a number of small-business advocates argued the bill could actually harm small businesses and are urging Congress to make drastic changes during the reconciliation process.
“Like the House bill, the Senate bill favors big over small, and that is a really problem,” said Rhett Buttle with Businesses for Responsible Tax Reform, a recently launched coalition of small businesses advocating for tax reform that benefits small business owners. “Corporations get a massive tax break, while many small businesses would be left out entirely. Even among the non-corporate business who do get a tax cut, wealthier owners with larger businesses get a much bigger break than small business owners. Making matters worse, small businesses would lose the ability to deduct certain expenses, like their state and local taxes, while corporations would still be able to do so.”
Buttle urged small business owners to contact their legislators now and urge them to amend the bill during the reconciliation process. “Business owners need to speak out right now,” he told BTW. “The bill could be finalized as soon as this week. Members of Congress need to hear from you that you oppose the bill in its current form. Tell them there is no rush. They need to slow down and get this right.”
Buttle explained: “The final bill should shift tax cuts away from corporations and giant business and towards small business owners and the middle-class families who are the lifeblood of small business. The bill also should be fixed so that it does not add to the national debt.”
Businesses for Responsible Tax Reform is circulating a sign-on letter it plans to send to members of Congress stating the current tax reform proposals disproportionately help large businesses and do little to level the playing field for the bulk of small businesses.
In Saturday’s vote, Republicans approved a last-minute, 500-page draft, a rewritten version of the bill that passed two Senate committees last month, the Times noted. The new version contained significant changes, the article reported, and many changes were spurred to placate a handful of Republican holdouts in an effort to garner enough votes to pass the tax reform bill.
Under the Senate tax plan, the corporate tax rate is cut from 35 percent to 20 percent, the Times noted, and the bill also offers a large tax break for the owners of small businesses and other companies that are not organized as traditional corporations. The rewritten Senate plan now increases the deduction for income of qualifying pass-through businesses from 17.4 to 23 percent, according to the Tax Foundation.
Despite this, Small Business Majority Founder & CEO John Arensmeyer stressed in a statement that the tax reform bill overlooks the needs of small businesses. “Under this plan, the vast majority of the pass-through tax cuts will go to the wealthiest 2.6 percent of enterprises, not to Main Street small businesses. Meanwhile, small employers will be saddled with a $1.5 trillion hit to the deficit and an uneven playing field that continues to favor large corporations.”
Very few small businesses will benefit from cutting the corporate rate to 20 percent, Arensmeyer continued, and added that entrepreneurs “oppose lowering that rate without getting rid of corporate tax loopholes that overwhelmingly favor large multinational corporations, such as the loophole that allows a select few large entities to defer paying taxes on foreign profits and costs the U.S. Treasury $1 trillion over 10 years…. [C]orporations and wealthy Americans should be required to pay their fair share of taxes.”
Democratic leaders also staunchly opposed the tax bill and argue it will help the wealthy and not the middle class, and many Democratic lawmakers are tweeting about the tax bill with the hashtag #GOPTaxScam.
The bill now must be reconciled with the House version of the bill, which may represent small businesses’ last chance to fix the bill’s problems before it is signed into law.