Nearly 200 organizations representing a variety of industry interests have raised concerns about tax increase proposals. In a letter sent to Congressional leadership, the coalition highlights certain tax considerations that would create significant hardship for small businesses. One of the proposals being considered includes expanding the 3.8 percent Net Investment Income Tax (NIIT) to individuals actively participating in their business. Another cause for concern includes the expansion and extension of the “excess loss limitation.”
“In the face of a possible recession, 40-year high inflation, unprecedented supply-chain challenges, and chronic labor shortages, raising taxes on small, individually, and family-owned businesses is the wrong approach and should be rejected,” the letter states. “This small business tax hike would hurt the ability of businesses that survived the worst global pandemic in a century to remain viable in the coming months.”
The groups dispute the proposed tax increase as generating additional Medicare funding. Signatories of the letter include the American Farm Bureau Federation, California Association of Winegrape Growers, National Pork Producers Council, and Western Growers. Expanding NIIT would increase tax rates imposed on family-owned businesses by 11 percent. The coalition notes that an estimated one million small businesses could have their rates increased under the proposed policy. Small businesses would again be damaged during economic downturns if business losses were limited. Family farming operations would have a particularly difficult time recovering as they did during the Great Recession in offsetting losses against taxes already paid.
“This is ill-advised tax policy and it is being considered at a moment when the economy is no longer growing. First quarter gross domestic product (GDP) fell by 1.6 percent and many economists and forecasters predict that the second quarter GDP will also be negative,” the coalition points out in the letter. “Meanwhile, the small business sector may already be in recession, as those businesses have lost employment in three out of the last four months.”
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