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The latest iteration of the Senate Democrats’ reconciliation bill, known as the “Cut Inflation Act,” will raise taxes on thousands of small and medium-sized businesses across the country, according to Americans for Tax Reform (ATR).
Senate Democrats changed the language of their new minimum corporate book tax, which would now hit small and medium-sized businesses well below the $1 billion profit threshold the tax was intended to reach.
The new tax would impose a minimum tax of 15 percent on the accounting income of “incumbent companies.” However, the latest book tax change will affect any business with private equity in its capital structure.
As John Kartch, ATR’s vice president of communications, he said“Any business has [private equity] in its capital structure it is now considered a subsidiary of the company in question and is therefore subject to an accounting tax of 15%.
IMPORTANT: The bill raises taxes on small and medium-sized businesses. Any company that has a PE in its capital structure is now considered a subsidiary of that company and therefore subject to a 15% accounting tax.
Cinema should remove itself from the bill.
— John Kartch (@johnkartch) August 6, 2022
As an ATR explained:
As written, the provision now appears restructured to designate each private equity firm in its capital structure as a subsidiary of that private equity firm for tax purposes. This means that these companies will now be swept up in the new 15 percent tax on accounting income.
This provision would greatly expand the scope of the minimum accounting tax applicable to small and medium-sized companies that require capital investment to develop their business.
More than 18,000 businesses owned by venture capital and partnerships employing nearly 11.7 million people will be targeted by the new tax hike, according to ATR’s Kartch.
If enacted, this provision would violate President Joe Biden’s campaign pledge to small businesses when he said“no, small business taxes won’t go up.”
Kartch called on Arizona Sen. Kyrsten Sinema (D) to “step away from the bill” in light of her announcement Thursday that she would vote for the reconciliation bill.
“In Sinema’s Arizona, this Democratic tax increase would target [374] companies employing 229,000 people”, Kartch he tweeted.
In Sinema’s Arizona, this state tax increase would target 229 companies employing 229,000 people. pic.twitter.com/C63qIEPgZU
— John Kartch (@johnkartch) August 7, 2022
Arizona Republican Senate candidate Blake Masters, who is running against Sen. Mark Kelly (D), criticized Kelly for supporting the reconciliation bill after the small business tax was added:
Senator Mark Kelly is going to raise taxes on small and medium businesses — bad idea Mark! https://t.co/hMCEREz58i pic.twitter.com/q4RdNqqe1y
— Blake Masters (@bgmasters) August 7, 2022
Masters he said:
So we have this senator, Mark Kelly, who says he loves small business. But we have inflation and it is killing business. We have this inflation because of the spending that Mark Kelly voted for. And now he’s voting again to, you guessed it, raise taxes on small businesses. Small businesses will have to pay more, 18,000 businesses across the country, hundreds in Arizona, soon affecting hundreds of thousands of employees.
“Thank you Mark Kelly. Everyone will have a bigger tax bill. Mark Kelly is doing more than anyone, literally anyone in Arizona to drag this country further in the wrong direction. It has to stop,” Masters continued.
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