The pandemic has been difficult for small business owners, their families, and employees. According to the Small Business Association (SBA), 66% of small business owners support legislation that will strengthen their ability to run their businesses. From various loan and subsidy programs for small businesses, the Biden administration has shown a keen interest in supporting small businesses during unprecedented and uncertain times. Currently, up for debate and discussion is the Build Back Better agenda (also known as the reconciliation bill). The bill aims to provide business owners with more financial security by offering business funding, tax cuts, child care support, paid leave, and healthcare insurance - all in an effort to encourage greater business development and job creation.
What Is the Goal of the Build Back Better Agenda?
The overarching and also, most controversial goal of the Build Back Better Plan is to reform the tax code. The majority of small businesses owners believe that the current tax structure largely favors bigger businesses and corporations who have the know-how and corresponding resources to avoid paying high taxes. Therefore, in an effort to “level the playing field” for small businesses, the proposed legislation seeks to address the issue by enacting various measures such as raising corporate income tax by 28%, working to increase global minimum taxes, cracking down on tax avoidance, decreasing incentives to offshore jobs and profits.
In addition, the tax reform would affect wealthy individuals earning $452,700 or married couples earning over $509,300 annually by increasing their tax rate by 2.6%.
The Treasury Department found that only 3% of small business owners would be adversely affected by the legislation. The vast majority of small businesses do not pay corporate tax as they are pass-through businesses, S-corporations, partnerships or file their taxes as personal income tax. In contrast, the legislation seeks to decrease taxes for small businesses that make less than $400,000 per year.
Reducing taxes and instituting programs to help fund projects, increase skills training and award federal contracts are ways for small businesses to grow and create more jobs. One takeaway from the pandemic has been that employers are being pushed to create better employment conditions in order to attract and retain employees. In turn, employees who are satisfied with their compensation and benefits packages are more apt to stay in their current roles.
As such, the bill proposes to provide support to small business owners and employees who have few benefits or who weren’t previously entitled to any benefits.
Increasing Child Care Tax Credits for Business Owners With Children
Many American families struggle to pay basic necessities such as food, rent, and healthcare. In order to curb child poverty and give families more financial security, the tax credit would expand on the American Rescue Plan (ARP) to assist more than 39 million households. Currently, ARP payments increased from $2,000 to $3,000 for children over 6 years old and $3,600 for children over 6 years old. Moreover, the Earned Income Tax credit would go from $543 to $1,502.
Increasing Access to Healthcare
Building on the Affordable Care Act (ACA), over 1.3 million small business owners who are beneficiaries of ACA, would have permanent reductions on their healthcare premiums. In addition, the Build Back Better plan would provide over 4 million uninsured people who did not have access to Medicaid, with healthcare coverage.
Providing Family and Medical Leave
Currently, 4 out of 5 American workers in the private sector do not have paid leave. Since most small businesses don’t have the means to provide worker benefits, workers sometimes have to make difficult financial choices that affect their family, health, and well-being. Therefore, providing workers with up to 12 weeks of family, parental, or illness leave (paid by the federal government) would enable workers to receive up to ⅔ of their average weekly salary, up to $4000 per month. The move would likely improve employee retention as workers are asking for (and expecting) better working conditions since the pandemic.
Investing in Small Businesses
The legislation would offer various loans, federal contracting opportunities, and training programs for up-and-coming businesses and established businesses. A special focus would be placed on empowering underserved communities by increasing access to capital, research participation, and development initiatives to foster innovation. Small businesses would be able to access funding through the Small Business Association (SBA), which will be administering billions of dollars in loan programs.
While the merit of the reconciliation bill is a subject of debate, the $3.5 trillion bill proposal has been supported by 17 former Nobel Prize-winning economists. But whether or not the legislation passes, it’s evident that small businesses and workers want (and require) tax structures and legislation that will enable them to recover, flourish and continue to do what they love - keeping America’s main streets buzzing with activity and innovation.