Following Vice President Kamala Harris’s proposal to boost the startup deduction if elected President, the Small Business & Entrepreneurship Council (SBE Council) posted its feedback on the policy.
Harris has recently highlighted her vision of fostering an economy of opportunity. While details are few, the startup deduction is one economic tactic designed to help early-stage firms. The SBE Council says the increased deduction is reasonable, but other policies advocated by Harris will eliminate any potential benefit.
SBE Council CEO and President Karen Kerrigan explains:
“For example, the PRO Act, along with the Administration’s new independent contractor rule, will eliminate self-employment opportunities and threaten the livelihood and flexible business ownership that millions of independent contractors currently enjoy. Moreover, allowing the expiration of the 20% small business deduction and other business and individual tax measures provided by the Tax Cuts and Jobs Act puts Main Street businesses at great risk as they will have less capital to compete, innovate and grow. Increasing the corporate tax rate, as Vice President Harris supports, would disproportionately hit small businesses, as the bulk of C-corps are small firms. And increasing the capital gains tax, as highlighted by the Vice President today, actually harms capital formation and its availability. The startup ecosystem and small business growth would be damaged and U.S. competitiveness would certainly suffer.”
Kerrigan states that while new business applications are on the rise only a very small percentage of these applications actually end up being a new business.
“Therefore, maintaining a positive, enabling business environment – one that includes tax certainty and investment incentives that businesses can count on to stabilize and grow – is fundamental to successful startup activity and encouraging more of the 25 million applications that the Vice President set as her goal to actually launch into new businesses.”
Kerrigan points to the record number of federal regulations harming small businesses enacted in the past three years. She believes that Harris should call on the federal government to immediately reduce cumbersome rules.
“As Vice President Harris visits small businesses during her campaign stops, we encourage her to discuss these important issues with entrepreneurs so she can better understand how federal tax and regulatory policy affect their competitiveness and survival, as well as the incentives that are needed to not only start a business but to successfully grow one,” says Kerrigan.
Others have highlighted damaging economic policies that worry the business sector. Price controls advocated by Harris would shift the economy towards a command economy and away from efficient market rule. Taxes on unrealized gains and higher capital gains taxes would directly harm the startup sector – a vital sector of the economy that generates wealth and jobs.
