Wyden promotes federal tax breaks for small businesses

Advocates of Oregon small businesses have joined forces with U.S. Sen. Ron Wyden, who continues to push for legislation coupling an extension of three tax breaks for businesses with a three-year expansion of tax credits for children and construction of low-income housing.

The Oregon Democrat says he hopes that local and national coalitions will prod some Senate Republicans to move the bill (HR 7024), which passed the House on a 357-70 vote four months ago.

Wyden and local business advocates spoke May 24 at an event at Migration Brewing in Northeast Portland.

“If you have been following the D.C. scene, it is hard to get 357 people to agree to buy a piece of pie, let alone pass a major tax bill,” he said.

“Advocates are now going to the grassroots to build a coalition so we can pass this through the U.S. Senate. We understand that you do not pit kids against small businesses. We pass legislation that does it all,” he added.

“I appreciate small businesses because they understand all the pieces of this puzzle. For small businesses, this bipartisan blueprint is a big deal.”

The legislation was the result of negotiations between Wyden, the Democrat who leads the Senate Finance Committee, and Rep. Jason Smith of Missouri, the Republican who leads the House Ways and Means Committee — the congressional tax panels.

Wyden said the bill would pass with Republican votes if it came to a Senate floor vote — but it takes 60 votes to avert a filibuster that would block any action. Democrats have a 51-49 majority.

What businesses say

For small businesses, the legislation extends business write-offs of interest and equipment costs and deductions of research and development expenses. These breaks were contained in a 2017 tax law, but they expired with the 2023 tax year.

McKean Banzer-Lausberg, co-founder and chief executive of Migration Brewing, said brewers go through as many as 1,000 test batches to come up with the 70 to 100 craft beers that eventually go on sale to consumers.

“We work with our suppliers to get the greatest ingredients and work on our ideas, our processes and equipment and then make the best product we can make. That allows us and other craft brewers to make some of the best beers in the world,” Banzer-Lausberg said against the backdrop of the brewery on Northeast Glisan Street.

“This bill allows us to be more aggressive in the process and come up with the next generation of products.”

According to the Oregon Brewers Guild, craft brewing accounts for $9 billion in economic activity, though declining sales have led to the recent closure of about 30 breweries.

Andrew Colas is president of Colas Construction, one of the largest Black-owned businesses of its kind on the West Coast.

“It has been paramount to our success and our growth. But it’s not just construction companies like mine that benefit,” Colas said, referring to the network of subcontractors and suppliers that his business relies on.

Colas also said that the allowable tax deductions enable his company to take advantage of new construction techniques, known as “green building,” that are more compatible with environmental protection and energy conservation.

“When we have the resources to innovate, it creates a ripple effect throughout our entire supply chain and local business ecosystem,” he said. “Passing the Wyden-Smith bill will amplify these positive effects.”

As a certified public accountant and leader of CTO Consulting, David Evans works with a number of small businesses. He said one company he works with suddenly faces a tax liability that exceeds its net annual income as a result of federal rules that kicked in when the 2017 law no longer allowed the company to deduct its research and development expenses annually.

“This is not just for high-tech or pharmaceutical companies that people usually think of when it comes to research and development,” he said. “It is for any company that is innovating.”

Evans said afterward that this “expensing” differs from a credit, which is subtracted directly from taxes owed.

Argent Rhealm is the founder and chief executive of Bobafy, a startup focused on boba tea. He’s an emigrant from Afghanistan. He said the tax breaks also benefit immigrants who seek to start their own small businesses in Oregon.

Other tax breaks

Wyden did a similar event with Democratic Rep. Suzanne Bonamici of Beaverton March 28 at Neighborhood House Children’s Center/Ramona in the Pearl District of Northwest Portland. They were joined by Neighborhood House and leaders of the Oregon Food Bank and Ballmer Institute for Children’s Behavioral Health.

The focus then was on the proposed three-year expansion of the child tax credit, though it is less generous than the one-year credit included in the American Rescue Plan Act that President Joe Biden signed in 2021. The earlier credit, which applied to 2021 tax returns due in 2022, reduced the national child poverty rate by half from 10% to 5.2%. But the Census Bureau reported that the poverty rate shot back up to 12.4% the year after the credit expired.

The latest proposed credit would increase the maximum refundable share of the $2,000 credit for three years through 2025.

Some Senate Republican critics say that the proposed credit effectively subsidizes families without a tie to employment, unlike the existing earned-income tax credit. Wyden disputes their argument, based on a report by the Joint Committee on Taxation tied to the legislation. (It is staffed by the Congressional Budget Office, which analyzes tax and budget measures.)

Its conclusion, Wyden said, is that the bill Republicans “promoted work, not discourage it, largely because parents would be able to get some help with child care.”

The legislation also would increase the number of units that can be built under the tax credit for low-income housing, which Congress originally created in 1986 in the Tax Reform Act shaped by Wyden’s Republican predecessor, Bob Packwood.

Now vs. later

Other Republicans have said that if Donald Trump regains the presidency in the Nov. 5 election, and win majorities in both chambers, Congress can pass a more sweeping continuation of the 2017 tax cuts. Wyden was a vocal opponent of the 2017 law that Trump signed and Republican congressional majorities passed without any Democratic votes — and cost the U.S. Treasury an estimated $1.7 trillion over a decade. Analyses have shown that big businesses and high-income households benefited most from those tax cuts.

Wyden said he’s already heard from small businesses that they want the renewed tax breaks now, not a promise of tax cuts unlikely to occur until well into 2025.

“A lot of small businesses, for which the R&D (expensing) provision is a lifeline, came to me and said that if we wait until 2025, we are not going to be around,” he said. “What some Republicans are saying is that their political timetable is more consequential than the needs of the small businesses that David Evans just described.

“This does not pass the smell test of why we cannot pass this.”

pwong@pamplinmedia.com

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