Americans are gearing up for the holiday season, and some in Congress are trying to capitalize on our attention with a slew of year-end “omnibus” spending bills. The Wall Street Journal reports that the bill would boost federal spending by $150 billion to raise pandemic-era standards and increase earmarking and pet projects across the country. The Heritage Foundation projects that the bill could cost the U.S. bailout more than $1.9 trillion.
Have lawmakers learned nothing from the historic cost-of-living crisis that has created a cost-of-living crisis for many Americans? On Tuesday, the Labor Department’s consumer price index rose 7.1 percent over the past 12 months, hovering near a 40-year high. For 20 consecutive months, inflation has grown faster than wages every year, meaning Americans’ living standards are declining.
Inflation is an even bigger problem for small businesses. Wholesale prices increased by 7.4 percent compared to last year. Some inputs have increased that top line rate by several multiples, putting pressure on already thin margins.
More reckless spending increases inflation by injecting more dollars into the economy, shrinking the money supply and raising prices. The inflation rate is even greater. This costs families $1.4 trillion in monthly payments and further depresses labor force participation by paying people not to work.
Fiscally responsible members of Congress should reject inflationary omnibus legislation in favor of common-sense, government-funding legislation. If they can hold the line on reckless spending this month, their task will be easier when a newly divided Congress takes over next month.
However, there is one policy that all lawmakers should prioritize as part of any year-end legislation: making the Tax Cuts and Jobs Act permanent. In the year These tax cuts passed in late 2017 have leveled the playing field between small and large businesses, resulting in historic shared economic prosperity prior to the pandemic.
The tax cut allows small businesses to deduct 20 percent of their income, allowing them to reinvest income in productive activities such as hiring, expansion and employee pay raises. Another provision allows small businesses to immediately deduct all business expenses, which encourages investment and growth.
Rabine’s team, for example, used the tax cut savings to deliver 50 percent higher raises and 100 percent larger donations to team members. He has managed to create more than 20 citizens from entry level to management. He dramatically increased research and development spending and launched two startups that had been on the back burner and suddenly became uneconomic for the tax cuts.
This experience was representative. And because small businesses drive the economy, these tax cuts boosted economic opportunity for everyone — especially those who need it most. In the year In 2019, real median incomes rose 7.9 percent for black households, 7.1 percent for Hispanics, and 5.7 percent for whites. Compared to President Obama’s second term, it showed a faster growth rate of 79 percent for blacks and 24 percent for Hispanics. That’s in stark contrast to today’s shrinking number of real wage workers.
Unfortunately, without congressional action, the Tax Cuts and Jobs Act will expire after 2025, and the spending provision will begin to expire next year. Small businesses make hiring and expansion plans years in advance, so they need to be sure about future tax liabilities now.
Congress could provide small businesses with some tax certainty during this uncertain time, by enacting a comprehensive spending plan that would jump-start the economy and make small business tax cuts permanent by controlling historic inflation.
Gary Rabin of Rabine group in Illinois and member Network of entrepreneursAlfredo Ortiz is the president and CEO.