The Biden Administration’s massive spending package known as the Build Back Better Act, passed in the U.S. House last month, is being negotiated in the U.S. Senate, and may be voted on in the next few weeks. To help pay for its social- and climate-focused spending, the bill includes a new surtax on many small businesses, as well as new mandates and labor fines.
The harmful small business impacts of the Build Back Better Act are detailed in a letter NFIB sent to members of the U.S. House in November and we’re fighting to have these provisions removed from the U.S. Senate’s version of the bill. The Build Back Better Act’s three most harmful proposals that would impact small businesses are:
- A Small Business Surtax: The Build Back Better Act specifically targets small business owners organized as pass-through entities with a new Small Business Surtax. A business owner with income over $400,000 ($500,000 on a joint return) would be subject to the Small Business Surtax of 3.8%. The threshold is even lower for family businesses held as trusts, with the surtax applying to income above $13,000. Worse, the surtax is not indexed to inflation, meaning the share of small businesses subject to this surtax will increase year after year.
- A New Federal Paid Family and Medical Leave Program: The bill creates a four-week federal paid family and medical leave program beginning in 2024. This inflexible program only requires employees to self-attest that they provided their employer with seven days’ notice and allows up to four weeks of leave. It would be a significant change to small businesses with fewer than 50 employees who are currently not subject to the Family and Medical Leave Act (FMLA). Small business owners depend on flexibility to be able to manage their workforce and this paid leave program mandate would only worsen the labor shortages that are affecting small businesses.
- Massive New Small Business Labor Fines: The bill increases several civil monetary penalties for small businesses seeking to comply with complicated federal employment law and it expands the Affordable Care Act’s employer mandate. For example, the minimum wage and overtime violation fine maximum would increase from $1,100 to $20,740 per violation and the maximum tipped credit violation fine would increase from $1,100 to $11,620. Small businesses cannot simply absorb substantial fines and cost increases like larger businesses can, nor do they have large legal and human resources departments on hand to negotiate lower fines with agency officials or lower premiums with health insurers. These proposed changes mean a single error could ruin a small employer and permanently put them out of business.
For a live NFIB-expert update on the latest timelines and proposals in Congress including the Build Back Better Act, the fight to reinstate the Employee Retention Tax Credit for Q4 of 2021, and an update on burdensome new proposed small business reporting requirements, NFIB will host a Federal Update Webinar on Wednesday, January 12 at 12pm ET. Mark your calendar and stay tuned for more details!
To make your voice heard in the fight to stop the Build Back Better Act’s small business tax increases and mandates, please reach out to your members of Congress with your personal story and express your concerns about the bill’s Small Business Surtax, increased penalties, or inflexible mandated Paid Family and Medical Leave Program.
