Groups representing small business interests slammed a deal announced Wednesday by Sen. Joe Manchin, D-W.Va., saying it would increase inflation and hurt employment.
The groups argued that the agreement, titled the Inflation Reduction Act, will increase pressure on small businesses that have already struggled to stay afloat amid record-high prices and slowing economic growth.
The legislation was unveiled after weeks of negotiations between Manchin and Senate Majority Leader Chuck Schumer, D-N.Y., who said it would guarantee corporations and the wealthy “pay their fair share.”
“We all know that taxes roll downhill,” Alfredo Ortiz, president of the Job Creators Network, told FOX Business in an interview. “So, it’s either going to be an increase in cost and, ultimately, in prices to the consumer, which is inflationary, or it’s going to be a job killer. At the end of the day, you have a few levers to pull.”
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“Taxes are considered a cost input,” Ortiz added. “If costs go up, taxes will, prices will go up, which, again, is inflationary and will impact the average small business owner, the average American consumer.”
The Inflation Reduction Act, which President Biden endorsed, will cost an estimated $433 billion, most of which will be invested in climate provisions, while increasing tax revenue by $739 billion. The bill ensures large corporations pay at least 15% in taxes, which alone would raise tax revenue by $313 billion, and boost IRS enforcement, raising tax revenue by another $124 billion.
The legislation also closes the carried interest loophole that allows private equity executives to pay lower taxes on certain income. That provision would boost revenue by $14 billion.
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“The Schumer-Manchin tax hike deal is being peddled as a tax hike that will only impact big corporations and the wealthy. Don’t be fooled,” Small Business and Entrepreneurship Council President Karen Kerrigan said in an email to FOX Business. “The effects of these tax hikes will be felt and absorbed by ordinary Americans and our nation’s small businesses.
“Increasing taxes on carried interest means many entrepreneurial firms and small businesses across sectors will not have access to the capital they need to compete, scale, innovate and navigate challenging economic conditions. This will only hurt local economies and workers and more broadly undermine U.S. competitiveness.”
Kerrigan added that the 15% minimum corporate tax would hit workers and small businesses that rely on large companies for supplies.
“Our economy is facing hazardous headwinds,” she continued. “American businesses and investors need as much of their capital as possible to heal supply chains, support their workers and pilot through destructive inflation. Rather than piling on painful government costs that ultimately hit workers and small businesses, policies need to be providing relief and stability.”
U.S. economic growth dropped 0.9% in the second quarter after falling 1.6% in the first quarter, according to a Department of Commerce report released Thursday. The consecutive quarters of negative growth suggest the U.S. has technically entered a recession.
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Meanwhile, inflation surged 9.1% year-over-year in June, the highest increase since 1981.
More than half of small businesses reported that inflation is having a substantial impact on their business, while another 35% said it was having a moderate impact, a recent survey from the National Federation of Independent Business showed. Higher energy prices have negatively impacted 96% of small businesses, according to the survey.
“The so-called ‘Inflation Reduction Act of 2022’ will make 2022 and beyond a painful one for all of America,” Kerrigan told FOX Business. “Rather than reduce inflation, it will fuel it and result in misery for many more Americans.”
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In addition, the Chamber of Commerce, the nation’s largest business advocacy group, encouraged Congress to reject the Inflation Reduction Act Thursday.
“This legislation includes taxes that would discourage investment and undermine economic growth and price controls that would limit American innovation,” Chamber of Commerce Chief Policy Officer Neil Bradley said. “Both will make our economic problems worse.”