Background: As the Senate prepares to debate a $1.75 trillion social spending bill, Congressional leaders are considering increasing taxes and other mandates on small businesses. This comes when employers seek to recover from the COVID pandemic and brace for inflation and further economic instability. Such proposals include:
- Eliminating the 20% deduction for pass-through businesses. The pass-through deduction allowed under Section 199A of the tax code is not a tax cut for the rich, it’s much needed tax relief for many contractors who are trying to grow their businesses.
- Reverting the estate tax to pre-2017 levels and eliminating step-up basis. Rolling back the estate tax and eliminating the step-up basis will make it difficult for family-owned p-h-c contractors, often multi-generational businesses, from passing ownership to the next generation. This substantial financial burden could determine whether business operations and the jobs that business provides can continue.
- Increasing top individual and corporate rates. Increasing marginal tax rates is another added burden for small businesses and contractors. These higher rates disincentivize growth in small business which in turn limits job opportunities.
- Imposing a methane “fee” on natural gas production. Natural gas work is a key work segment for most p-h-c contractors. Many household appliances that we install and maintain, such as water heaters and HVAC systems, are powered by natural gas. The proposed fee on methane emissions is designed to increase the cost of natural gas as part of a broader effort to decarbonize the energy grid, costs which will then be passed on to the consumer, thus disincentivizing its use. The reality is that efficient use of natural gas reduces emissions from other generating sources and utility customers pay less for their energy needs.
Why does it matter? In addition to tax increases, Congress is also considering costly employer mandates such as paid leave for employees and mandatory employer-sponsored retirement plans. P-H-C contractors and small businesses across the country continue to struggle with business operations in the wake of the COVID pandemic. Businesses are facing employee retention issues and significant uncertainty in the supply chain while facing increased costs to comply with public health mandates at the state and local levels. These problems are compounded by inflationary pressures. Now is not the time to impose tax hikes on employers during this period of delicate economic recovery.
Where does PHCC stand? PHCC opposes any spending bill that increases taxes in lieu of offsets and spending cuts to pay for the legislation. Raising taxes will slow economic recovery and is not the solution to our nation’s revenue woes.