Couple of items worth highlighting on the Section 199A front. First, House Budget Committee Chair Jodey Arrington (R-TX) joined CNBC’s Squawk Box yesterday to talk fiscal cliff and the ever-growing budget deficit. Asked by host Andrew Ross Sorkin whether going to a corporate tax rate of 15 percent “is the right answer,” Arrington replied:
I’m more interested in locking in permanent small business tax breaks that will expire at the end of next year, like the 20-percent 199A deduction, where Kamala Harris, in her tax proposal, would allow that to expire. When she says she won’t allow taxes to go up on anyone making less than $400,000, that’s simply not true.
Given the outsized role played by pass-throughs in the American economy, it makes sense for Congress to focus on these Main Street businesses. Kudos to Chairman Arrington for driving home this point and making the case for 199A permanence.
Meanwhile, the Chamber of Commerce’s Small Business Council was in town to talk up 199A permanence this week. Here’s Politico with the coverage:
Congress may be gone for another month or so, but preparations for next year’s tax cliff are still underway, with the U.S. Chamber of Commerce flying in more than 50 members of its Small Business Council on Tuesday to discuss the stakes for small businesses in the tax fight.
— Small business owners met with staff from House and Senate offices from the Arizona, Utah, Illinois, Maryland and Virginia delegations, to whom they sought to make the case for preserving the 20 percent deduction for pass-through businesses; a low corporate rate and the research and development credit. The Small Business Council plans on heading back to the Hill early next year to lobby the new Congress.
The fact that these conversations are taking place well in advance of the 2025 fiscal cliff highlights just how much is at stake and the importance of getting the word out to lawmakers. S-Corp and its allies have been similarly engaged, hosting various roundtables with members of the Ways & Means Committee’s tax teams, submitting comment letters highlighting our various policy priorities, and regularly meeting with Members and staff. We look forward to continuing these efforts and securing a favorable outcome next year.
Finally, Juniper Research Group CEO Chris Jacobs has a great piece in the Wall Street Journal on the Section 199A deduction. It reads in part:
In 2021 nearly 26 million households used the qualified business income deduction, according to the latest Internal Revenue Service data, covering returns filed in 2022. Most of them are middle class. Among households claiming the deduction, 20 million reported adjusted gross income below $200,000, claiming an average $2,811 write-off. An additional 4.3 million households using the deduction reported adjusted gross income between $200,000 and $500,000, claiming a deduction averaging $9,194.
Despite the many households claiming the qualified business income deduction and the substantial savings to small-business owners, Ms. Harris hasn’t publicly committed to renewing it when it expires at the end of 2025. If the deduction lapses, the entrepreneurs Ms. Harris said “invest in the middle class” would face tax increases of hundreds or thousands of dollars a year.
As Jacobs points out, the Harris proposals to help small businesses are tiny in comparison to the threat they face from higher rates and the loss of 199A next year. For truly pro-business representatives, supporting Section 199A permanence is a no-brainer.