The latest version of the Senate reconciliation bill, known as the “Inflation Reduction Act,” would raise taxes for 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 business booking minimum tax, which would now hit small and medium-sized businesses well below the $1 billion profit threshold the tax aimed to hit.
The new tax would impose a minimum tax of 15 percent on the book income of “applicable companies.” However, the latest book tax change would affect any company with private equity in its capital structure.
As John Kartch, vice president of ATR’s communications, said“Any company that has” [private equity] in its capital structure is now considered a subsidiary of that firm and is thus subject to 15% book tax.”
BREAKING: Dem Bill raises taxes on small and medium businesses. Any company that has PE in its capital structure is now considered a subsidiary of that company and thus is subject to 15% book tax.
Sinema has to remove herself from the account.
— John Kartch (@johnkartch) August 6, 2022
as ATR explained:
As written, the provision now appears to have been restructured to define any company with private equity in its capital structure as a subsidiary of that private equity company for tax purposes. This means that these companies would now be caught up in the new 15 percent tax on book income.
This provision would significantly expand the range of the minimum book tax that applies to small and medium-sized businesses that need capital investment to grow their business.
According to ATR’s Kartch, more than 18,000 companies owned by investment funds and partnerships that employ nearly 11.7 million people would be the target of the new tax hike.
If passed, this provision would conflict with President Joe Biden’s campaign promise to small businesses when he said“no, small business taxes are not going up.”
Kartch called Arizona Sen. Kyrsten Sinema (D) to “remove herself from the bill” in light of her announcement Thursday that she would vote for the reconciliation bill.
“In Sinema’s Arizona, This Dem Tax Increase Would Target” [374] companies with 229,000 people,” Kartch tweeted.
In Sinema’s Arizona, this tax increase from the Dems would target 229 companies with 229,000 employees. pic.twitter.com/C63qIEPgZU
— John Kartch (@johnkartch) August 7, 2022
Blake Masters, a nominee for Arizona’s Republican Senate running against Senator Mark Kelly (D), denounced Kelly for supporting the Reconciliation Act after the small business tax was added:
Senator Mark Kelly Is About 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 said:
So we have this senator, Mark Kelly, he says he likes small business. But we have inflation, and it’s deadly for business. We have this inflation because of the spending that Mark Kelly voted for. And now he’s voting in favor again, you guessed it, he’s going to raise taxes on small businesses. Small businesses will have to pay more, 18,000 businesses across the country, hundreds in Arizona, which will soon affect hundreds of thousands of employees.
“Thanks to Mark Kelly. They all get a higher 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.