After a 40-year decline in entrepreneurship, America has seen a boom in new business creation in recent years. But today, millions of start-ups and Main Street businesses are struggling to stay afloat under a host of recent challenges. Inflation and soaring energy prices have raised costs and lowered purchasing power, the supply chain crisis has limited inventory and hiked prices, and the stock market see-saw has heightened fears of a looming recession.
For the U.S. economy, sentiment on Main Street is every bit as important as what’s happening on Wall Street. If entrepreneurs and small business owners start to lose confidence or shut their doors, our entire economy is in serious trouble. Congress must make supporting our small business and start-up ecosystem a top priority heading into the new session next year.
We can start by protecting the pass-through deduction for small businesses. Millions of small business owners set up shop as pass-through entities, such as LLCs, partnerships, and sole proprietorships, which allows them to be exempt from corporate taxes. The 2017 tax reform bill created an additional benefit for these businesses called the “pass-through deduction” or “Section 199A.” The provision allows owners of pass-throughs to exclude up to 20 percent of their business income from their federal taxes.
By helping to lower taxes for more than 17 million small business owners, this deduction has been critical to promoting new business growth and job creation. It’s likely part of the reason that after a 40 year decline in entrepreneurship, America has gone through a startup boom in recent years. When Washington takes less of the profits, it makes starting a business more tenable for personal and family finances.
But now, some in Washington want to get rid of the deduction. Congress is considering a $147 billion tax increase on businesses making over $400,000 in qualified business income. Fortunately, there is bipartisan legislation, the Main Street Tax Certainty Act, that would instead make the Section 199A deduction permanent. Passing this permanent extension should be a priority for Congress next year.
Another way to help small business weather the economic storm is to reduce unnecessary regulation. Depending on their sector or industry, many small business owners face a maze of rules and regulations that can inhibit their growth. These rules deter many Americans from starting businesses and raise legal and compliance costs for those who do. Entrepreneurs shouldn’t have to shell out a significant portion of their start up funding for high dollar lawyers.
I recently co-sponsored a bill to end this maze of red tape called the Unnecessary Agency Regulations Reduction Act. This bill requires the government to annually report a list of rules that are outdated, duplicative, or incur excessive compliance costs. Congress must then review the list to determine which of these regulations to repeal. This will go a long way toward eliminating rules with a negative economic impact, high cost to consumers, or adverse effects on competition.
Lastly, Congress needs to stop taking every available opportunity to pump the U.S. economy full of excessive government spending. Not only does this burden the taxpayer, but it is a leading contributor to inflation. All of this extra cash infused into the economy is lowering the value of the money Main Street businesses have in their cash registers or checking accounts.
Overspending is an addiction in Congress, and the best way to treat it is through a balanced budget amendment. This would require Congress to live by the same rule most U.S. households and small businesses operate by: don’t spend more than you bring in.
A second way to stem the excess is to require more committee hearings on legislation that would raise spending. This will create extra checks along the way to ensure that any new spending proposals are truly in the public interest, and it would allow more representatives to have a voice in the debates.
Taken together, these ideas will go a long way toward restoring certainty for America’s innovators, dreamers and job creators. Entrepreneurs and small business owners boost our economy and drive our national progress every day through their grit and optimism. At this precarious time for the U.S. economy, it’s up to Congress to make Main Street businesses the priority they deserve to be.
Congressman Randy Feenstra represents Iowa’s fourth congressional district in the U.S. House of Representatives. He is a member of the Republican Main Street Partnership.