Newly-Introduced Tax Legislation Would Raise Levies On Small Businesses
On July 20, U.S. Senate Finance Committee Chairman Ron Wyden (D-Ore.) introduced the Small Business Tax Fairness Act, which would significantly limit the existing 20 percent deduction for manufacturers organized as “pass-through” entities. (As a reminder, federal tax reform legislation created the 20 percent deduction, which has provided industrial metals companies and manufacturers with additional capital to hire workers, increase wages, and expand operations.)
Chair Wyden’s bill would essentially eliminate the pass-through deduction for all but the very smallest of companies by phasing out the deduction for taxpayers with income above $400,000 and completely eliminating it as income reaches $500,000. The bill also would negatively impact family-owned businesses by denying the deduction for business held in trusts and estates.
According to the National Association of Manufacturers, a proposal like this one likely would lead to one million job losses after just the first two years of implementation. According to the S-Corp Association, the legislation also would would violate the President Joe Biden’s pledge not to raise taxes on taxpayers making less than $400,000 a year. How? It would preclude trusts and estates from the 199A deduction.