The House Ways and Means Committee on Monday released legislation aimed at paying for the Democrats’ $3.5 trillion spending package. Committee members are scheduled to begin marking up the package today and expect to finish on Wednesday. A summary document suggests the tax hikes would amount to some $2 trillion in new revenue, with an additional $200 billion in savings resulting from increased IRS funding.

Provisions Affecting Pass-Throughs

For private businesses, the Chairman’s mark is nothing short of a declaration of war.  There’s a reason more than 120 groups wrote the Committee in opposition to the package last week.  …

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The Section 199A deduction is under attack.  Senate Finance Chair Ron Wyden’s Small Business Tax Fairness Act would phase-out the deduction for owners making between $400,000 and $500,000, while critics of the deduction continue to voice their concerns loudly and often.

This post addresses all these concerns and makes the case for why Congress should retain the full 199A deduction:

• Under the Wyden bill, up to one million pass-through employers are at risk of seeing a tax hike, putting at risk up to 28 million jobs.
• Coupled with the other rate hikes under consideration, including the higher corporate rate, between …
  
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Having secured passage of their budget resolution last week, House Democrats are wasting no time in assembling the ensuing reconciliation package with tentatively scheduled markups starting as early as Thursday. It’s the start of an all-out sprint for Democrat lawmakers as they work to meet a host of high-profile September deadlines.

We’ll have a lot more clarity as the committees – particularly Ways and Means – make public their portions of the reconciliation package, but last week’s events at least give us a sense of the timing and roadblocks facing its adoption. Below is our commentary on those developments.

About that …

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The recent White House fact sheet on small businesses and tax hikes is highly misleading.  It exaggerates the number of small businesses in order to minimize the harm President Biden’s tax hikes will inflict on Main Street, it ignores many of the tax hikes under consideration, and it dismisses the economic importance of those businesses targeted for higher taxes.

The reality is that the tax hikes moving through Congress target millions of business owners, putting tens of millions of jobs in danger:

• Somewhere between 2 and 3 million small and family-owned businesses will be subject to higher taxes under the …
  
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This year’s leak of IRS tax returns has turned ProPublica into the accountant’s version of Robin Leach, host of “Lifestyles of the Rich and Famous”, whose exuberant and over-the-top narrative style made him the butt of innumerable jokes. Ostentatious! Wealth! Tax Breaks! It’s embarrassing.

The most recent example is their report highlighting how large family businesses are benefitting from the 199A pass-through deduction.  The article doesn’t claim that the profiled businesses are doing something wrong or that the deduction is a rifle shot that somehow benefits just high-income taxpayers.

No, the article focuses instead on how the deduction was implemented – …

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