S-Corp and NFIB hosted their second annual Main Street Tax Summit yesterday – a virtual event focused on tax policy issues faced by individually- and family-owned businesses.
Senator Kyrsten Sinema (D-AZ) kicked off the event with the keynote address. In her remarks, the Senator highlighted the challenging environment for Main Street businesses and made clear that she would continue to speak up on behalf of millions of small businesses:
In December, while Senate leaders were working to negotiate to make needed changes to the reconciliation bill, it became clear that the package in its current form did not have the support to move forward, and so negotiations were paused. I was a part of those negotiations, pushing to make sure both the benefits and the costs of any package were equitably shared, and not disproportionately borne by small businesses. The information shared by the NFIB and the S Corporation Association, as well as many of the small businesses here today, were enormously helpful in those discussions.
Attendees then heard from the first of two panels. Led by NFIB’s Courtney Titus Brooks, the first panel featured three small business owners from across the country: John Sullivan of Dana Wallboard Supply (Westford, MA); Christian Marsh of Quality Machine (Bridgeport, WV); and Marty Giebelhaus of Marlin Mechanical (Phoenix, AZ).
The panelists offered a glimpse into their businesses’ day-to-day operations, their extensive work with local charities, and the significant role that tax policy plays when it comes to hiring new workers and reinvesting in their communities.
During Q&A, Courtney asked participants about the challenges they currently face, and which issues are top of mind. John Sullivan offered a unique and sobering perspective on the ripple effects of the spiking labor costs, and the tough decisions it’s forced his business to make:
At the end of the day, as a small business, there’s only a finite amount of dollars businesses get to spend. As these costs start to rise, you have to decide where to cut. Are we going to cut healthcare benefits, or our dental program? Are we going to cut contributions to Habitat for Humanity, or New England Disabled Sports? I don’t think people realize, we’re the folks that sponsor all these local programs: Little League, Girl Scouts, high school sports. It’s not Google or Apple, it’s us.
Later, Christian Marsh honed in on how the Section 199A pass-through deduction helps his business stay competitive, and the devastating effect that proposed tax hikes would have:
I mentioned “survival,” and that’s the mode we’ve been in over the last few years. Not thriving, but surviving. I don’t know how we’d do it [under higher taxes].
Finally, Marty Giebelhaus discussed the situation on the ground in Phoenix, Arizona, and the effects of inflationary pressures:
It’s tough hiring right now…we’re constantly increasing our wages right now. We probably increased our starting wage by about 50 percent in the past year. But when that happens, we don’t get to go to our customer and say, “we’re halfway through this contract, we need to increase the price.” That’s not how it works.
We had a project that was held up for months because of a lumber shortage…that was a lot of lost opportunity where we could’ve been working on something else that we turned down because we didn’t have the people for it.
The second panel was hosted by Chris Smith, Executive Director of the Main Street Employers Coalition. Panelist Holly Wade, Executive Director of NFIB’s Research Center, discussed the organization’s latest small business survey and the uncertainty surrounding inflation and pending tax proposals ranked highest when it came business owners’ top concerns. A chart she shared, depicted below, sums things up:
Finally, Bob Carroll, Co-Director of EY’s National Tax Quantitative Economics and Statistics Group (QUEST) highlighted the results of his recent studies that quantify the massive economic footprint of the pass-through business sector; compare employment at privately-held firms versus publicly-traded corporations; and reveal the impact of the Build Back Better Act’s proposed tax increases on Main Street businesses.
The data show that pass-through businesses – not large, publicly-traded companies – employ the majority of workers in virtually every Congressional district and are the primary drivers of economic growth, and yet would disproportionately shoulder the burden of the tax hikes included in the House-passed Build Back Better Act.
As the summit made clear, Main Street continues to struggle in a high-inflation, post-pandemic world. Now is simply not the time to raise taxes on these businesses, and we are grateful to the event’s participants for helping drive home that point.
If you weren’t able to join us live, click here to access a recording of the event.