The PRO Act and a New Death Tax are Threats that Could Block this Critical Path to Financial Security
by Karen Kerrigan –
New research from the SBA’s Office of Advocacy underscores the importance of business ownership to wealth creation. As noted in the report:
“A substantial amount of family wealth is in business ownership. On average, the self-employed are wealthier than the non-self-employed. This implies the value or potential value of business ownership in economic mobility.”
SBE Council has continuously delivered this message during our 28-year history. Opportunity and wealth creation are why our mission focuses on both “Protecting Small Business” and “Promoting Entrepreneurship.” We are excited to see a big surge in startup activity, as reported by Census Bureau data, and policies need to continue to encourage new business creation along with the health and growth of existing businesses and family businesses that survived the Great Shutdown.
The report finds:
The self-employed have a higher median net worth than others. The median net worth of self-employed families at $380,000 in 2019 was over four times that of families of workers ($90,000) and over twice as much as families of retirees ($178,000). (Source: Federal Reserve Board, Survey of Consumer Finances)
Business equity represents a relatively large share of nonfinancial assets. In 2019, nonfinancial assets represented a 58 percent share of total assets, while business equity was 34 percent of nonfinancial assets (Chart 1). Business equity was second only to primary residence’s 45 percent share. (Source: Federal Reserve Board, Survey of Consumer Finances)
Two bills being advanced in Congress are direct threats to self-employment and the building of business wealth through business ownership – the PRO Act and the STEP Act. SBE Council opposes these two pieces of legislation, and we are actively advocating against both.
The PRO Act would make it very difficult to operate as a self-employed independent contractor (or hire one) and the STEP Act would make it very hard to build assets and pass on the family business (or home) to the next generation at death. This “double death tax,” as some are calling it, or a new middle-income death tax, would crush many family-owned businesses. The dreams of many entrepreneurs who want to start or grow a business would also be crushed with the enactment of these misguided bills.
In a survey unveiled by SBE Council last week, small business owners outlined how the STEP Act, which is actively being considered as a “pay for” for the $3.5 trillion spending package, would negatively impact family businesses and family farms. SBE Council is actively opposing, and advocating against, both of these bills.
Karen Kerrigan is president & CEO of the Small Business & Entrepreneurship Council.