One year ago today the Tax Cuts and Jobs Act was introduced. Far from buoying small businesses, the new tax law Republicans passed late in 2017 is already proving to be more problematic than positive for Main Street. In fact, Republicans thought their massive tax overhaul would be the centerpiece of their midterm strategy. But it turns out they were wrong.
Representatives Blum, Young and King have praised the passage of this tax plan. But a year later, the promises they made ring hollow. In fact, the Tax Cuts and Jobs Act is such a bust, that the President is out promising tax cuts for middle income voters, in fact promising them in the next few days.
Iowa small business owners are not seeing a positive effect. The small increase in paychecks do not translate to more purchasing power.
“The Trump tax cuts make me worried more than anything – worried about customer demand in the future,” said PopCorn Heaven owner ReShonda Young. “The deep cuts to health care, education, and food and rental assistance that Republicans are proposing to pay for tax breaks for the wealthy will end up increasing basic expenses for my customers.”
In April, the Main Street Alliance, a national network of small business owners, released a report about the impact the Tax Cuts and Jobs Act is having on small businesses nationwide. After working with thousands of small business owners across the country, Main Street Alliance found:
- The total impacts of the tax law on small businesses’ bottom lines far outweigh the nominal tax cuts most anticipate receiving.
- The view from Main Street is very different than the view from Wall Street. The majority of small business owners surveyed say they need more customers, not tax cuts, in order to hire and expand, and call for stability and strong public investment as the way to sustainably grow a business.
- To ensure an equitable economy that works for small businesses, large corporations and wealthy individuals must also pay their fair share of taxes. This means we must close corporate tax loopholes, not skew the tax code even more in their favor.
“Strong public investment in areas like childcare, healthcare, and infrastructure are necessary for building the type of equitable economy that small business owners need to grow and thrive. But where are we going to get the money for public investment after Republicans cut trillions in tax cuts for large corporations and the richest individuals? Without significant changes by Congress, this tax law will likely hurt Main Street for decades to come,” said Amanda Ballantyne, National Director of Main Street Alliance.
Much touted in the this plan is the so-called “Death Tax.” But, according to a December 2017 Des Moines Register Article, a review of federal tax data and nonpartisan research on the subject shows that family farmers and small business owners represent a tiny share of estate tax payers, and that the taxes they owe rarely force them to sell land or quit farming.
The number of Iowans paying the estate tax actually numbers in the dozens each year, out of roughly 1.4 million who file federal tax returns each year. IRS data from the last five years shows the number of Iowa taxpayers owing estate taxes ranged from 32 in 2012 to 61 in 2015, and that the vast majority of those probably were not farmers or small business owners.
“The Republican tax plan is a huge giveaway to the rich. The estate tax does not impact me or any other small farmers I know; we make nearly enough to benefit from getting rid of the estate tax,” said James Berge, owner/farmer of Berge Farms, a 144 year old 153-acre farm in Kensett, Iowa.
Berge continues, “Not only that, a lower corporate tax rate gives more power and profits the big corporations who are destroying small family farms. It provides large corporations with an unfair edge over small farmers and creates a rigged economy where small farmers are set up to fail.”
The report also dismantles the argument that the new 20 percent deduction for pass-through income will help the vast majority of small businesses create jobs or expand. The national median income for a typical business is $50,000, the hikes in their health insurance premiums far outweigh any small tax cut they may receive. Overall, however, income from pass-through businesses skews heavily to the very wealthy, with 70 percent of pass-through income accruing to the top 1 percent of income earners – these are the hedge fund managers and Wall Street lawyers who are also “pass-through” income earners. Wealthy “business owners” stand to benefit far more from this new deduction than real small business owners.
“The so-called Tax Cuts and Jobs Act is not helping small business. The business owners the Main Street Alliance of Iowa have talked to state their number 1 concern is more customers,” said Sue Dinsdale, Director of the MSA-IA. “Tax cuts are not the answer. For prosperity on Main Street, small businesses , farmers and the self-employed need a system that prioritizes strong public investment over corporate profits. “
The full report is available for download HERE.
by Sue Dinsdale