WASHINGTON — Economists and small business owners urged U.S. lawmakers Thursday to extend or make permanent Trump-era tax cuts as Congress prepares to negotiate ahead of the expiration of the 2017 tax law.
Business owners in West Virginia and Wisconsin testified at a House Ways and Means Committee hearing, arguing for the continuation of the deduction, saying it would allow them to reinvest in their businesses.
The Tax Cuts and Jobs Act of 2017, which expires at the end of 2025, allows some business owners to deduct up to 20% of their qualified business income. The bill also provides temporary tax breaks on new equipment purchases and other eligible assets, but those incentives are being phased out.
For individuals, the TCJA temporarily lowered marginal tax rates at most income levels and expanded the standard deduction and child tax credit, among other changes.
For large companies, the top corporate tax rate has been permanently reduced from 35% to 21%.
“Seven years ago, Republicans passed the Tax Cuts and Jobs Act under President Trump, providing relief to millions of families and small businesses and creating the best economy in our lifetimes,” said Committee Chairman Jason.・Mr. Smith (Republican of Missouri) said in his opening remarks. .
“Here’s the bottom line: Congress must act now to stop the largest tax increase in history for workers, families, farmers, and small businesses,” he later added.
Democrats on the committee denounced the bill as a “corporate tax benefit.”
“We knew that their tax fraud unfairly benefited the wealthy and well-connected. We knew it was not profitable on its own. It was the employees who benefited the most. “We knew it was a large company, not a private citizen,” said Richard Neal of Massachusetts, a ranking member of the committee.
Kathryn Ann Edwards, a labor economist at the RAND Corporation and a witness invited by the Democratic Party, said, “The intent of the 2017 tax law is to reduce the burden on the wealthiest Americans at incredible cost to ordinary Americans.” “Without a direct transfer of income, this was a failure.”
Edwards cited estimates from the Committee for a Responsible Federal Budget and the Center for Tax Policy that extending the law could cost the government between $3.3 trillion and $3.6 trillion over the next 10 years. told the committee.
“Episode” changes
But small business owners say the law has been an economic lifeline.
Michael Irvin, founder of Coal River Coffee Company in St. Albans, West Virginia, told a panel that his 5-year-old business had to deal with the 2017 tax changes, especially sole proprietorships, partnerships, and S. He said he is benefiting from a temporary income deduction for the company. companies.
“After the passage of the Tax Cuts and Jobs Act, LLCs and other pass-through businesses like mine were able to benefit from the newly created small business deduction, also known as the 199(a) deduction. The regulations now allow you to deduct up to 20% of your business income so you can invest in your business, your employees and your community,” said Irvin, who employs about 12 people.
Irvin told lawmakers that if Congress doesn’t extend or make the special exemption permanent, the company faces “significant tax increases” and will be at a disadvantage compared to its larger neighbors.
“There’s a larger competitor, Tim Hortons, just down the street from my location. Even if taxes go up in two years, the corporate tax rate will still be 21%. Tim Hortons has a 21% federal tax rate. I pay the tax rate plus the 6.5% state corporate tax rate, for a total of 27.5%, but my total tax rate is closer to 45%. This disparity will make it very difficult for me to compete.” Irvin told lawmakers.
Austin Ramirez, president and CEO of Wisconsin-based Hasco International Inc., also told the panel that the pass-through deduction “levels the playing field with other companies in the industry that are organized as corporations. ” he said.
Husco is a privately held, family-owned manufacturer of hydraulic and electromechanical components for vehicles with approximately 1,600 employees.
Ramirez said the TCJA made possible “the most extensive renovation of our Waukesha, Wisconsin, headquarters in 70 years.”
The company has invested $50 million in renovations to its office space and retail floors, allowing it to add nearly $150 million to sales since 2017, Ramirez said.
Trump tax cuts temporarily extended
Going forward, Smith said Congressional tax officials should remember that the law “provided an important blueprint that Congress can build upon to permanently improve the tax code.”
“The House has already shown strong bipartisan support for key provisions of the 2017 law by passing the Tax Relief for American Families and Workers Act earlier this year. But there is still much work to be done. There is,” he said, referring to the bill he proposed and negotiated with Democratic Sen. Ron Wyden of Oregon.
The hearing comes as negotiations in the U.S. Senate on the short-term tax bill mentioned by Smith have stalled. The bill received unusually broad bipartisan support in the House in January.
The bill, which temporarily reinstates expired or expired business tax breaks and expands the child tax credit, passed by a vote of 357-70.
House Republicans overwhelmingly supported the bill, but Republican senators also temporarily expanded the refundable portion of the child tax credit, making the deduction based on last year’s income if the household earned more than this year’s income. It opposes a provision in the bill that would allow the amount to be calculated.
At a February hearing in the Senate Finance Committee, business owners implored the Senate to pass the bill.
Ramirez, a Waukesha business owner, also told the committee Thursday that he supports the American Families and Workers Tax Relief Act, which would reinstate a lapsed 2017 corporate incentive that allowed for the immediate write-off of research and development costs. expressed.
“Starting in 2022, Hasco’s inability to pay these costs will result in a loss of liquidity of more than $20 million, eliminating a large portion of the benefits of the TCJA and creating a disincentive to invest in innovation. ” Ramirez testified.
Other temporary measures enacted under the TCJA expire on December 31, 2025.
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