More than ninety trade associations came out in support of a broad tax package before the House Ways & Means Committee later today. The legislation builds on the TCJA by making permanent and expanding several key provisions important to America’s pass-through community.
As the letter reads:
This legislation would provide certainty to the more than 95 percent of all American businesses structured as S corporations, partnerships, and sole proprietorships. These pass-through businesses employ 62 percent of the private sector workforce and form the economic backbone of virtually every community nationwide.
Provisions key to the Main Street community include increasing the Section 199A deduction to 23 percent while making it permanent. This provision recognizes the importance of parity in the tax code by bringing down marginal tax rates for the 26 million businesses that rely on the 199A deduction. Coupled with a permanent 37 percent top rate, the legislation would lower the top rate paid by pass-throughs and bring it closer to parity with the 21-percent corporate rate.
Another key feature is the commitment to reducing the bite of the estate tax:
Main Street also strongly supports provisions to enhance and make permanent the estate tax exemption. Reducing the bite of the estate tax while eliminating the uncertainty surrounding its application will help preserve countless Main Street businesses, sustain jobs, and help ensure these enterprises can remain family-owned for generations to come.
That said, the House tax bill is not perfect. It includes numerous needlessly complicated provisions, several of which are targeted directly at small and closely-held businesses:
Certain provisions should be improved. The limitation on SALT deductions for certain pass-through entities is needlessly broad and complex, while tightening and extending the cap on excess losses would make worse a policy that should never have been enacted in the first place.
S-Corp and its allies will continue to work with the House and Senate to address these concerns.
On the whole, this bill represents a significant step forward, particularly in comparison to the existential threat facing the Main Street business community if Congress fails to act. There remain major hurdles to overcome before it becomes law, but there’s plenty of reason for pass-throughs to be optimistic about this bill. It is an excellent starting point and Main Street supports it.