Bill Overview
Title: American Innovation Act of 2022
Description: This bill revises the tax treatment of business start-up or organizational expenditures. Specifically, it allows an election to deduct such expenditures in an amount equal to the lesser of the aggregate amount of such expenditures incurred by an active trade of business, or $20,000, reduced by the amount by which such aggregate amount exceeds $120,000. The remaining amount of such expenditures shall be amortized over the 180 month period after the trade or business begins. The bill also revises the tax treatment of partnership syndication fees and start-up net operating losses and tax credits after an ownership change.
Sponsors: Rep. Buchanan, Vern [R-FL-16]
Target Audience
Population: Businesses and entrepreneurs involved in start-ups within the United States
Estimated Size: 35000000
- The bill impacts businesses in the United States by changing tax deductions for start-up or organizational expenditures.
- There are over 30 million small businesses in the United States as of 2023, many of which are start-ups that could benefit from this change.
- This bill also impacts partnerships by altering the tax treatment of partnership syndication fees.
- There are hundreds of thousands of partnerships in the US that could be part of this target population as they often go through ownership changes.
- New businesses or entrepreneurs planning to start a business could also be impacted since the financial feasibility of starting business could be influenced by tax treatments provided by the bill.
Reasoning
- The policy aims to provide tax deductions for start-up costs, which could enhance financial feasibility for new businesses.
- Small businesses form a large part of the U.S. economy, and many could benefit marginally depending on their tax situation.
- Entrepreneurs may see increased cash flow by reducing taxable income in the early phases of their business.
- The budget constraints suggest that the policy effects may not reach all potential beneficiaries in a substantial manner, considering the large number of small businesses.
- Long-term benefits could be realized as businesses gain initial financial relief, potentially freeing up resources for growth.
Simulated Interviews
Tech Entrepreneur (San Francisco, CA)
Age: 30 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 3.0 years
Commonness: 12/20
Statement of Opinion:
- As a new entrepreneur, any tax deduction is significant.
- This policy could help me manage initial costs better, providing a slight relief.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 9 |
Small Business Owner (Austin, TX)
Age: 45 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 0.0 years
Commonness: 14/20
Statement of Opinion:
- This policy likely won't impact my established business.
- It seems more suited for start-ups and not businesses like mine.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 6 |
| Year 5 | 6 | 6 |
| Year 10 | 6 | 6 |
| Year 20 | 6 | 6 |
Corporate Lawyer (New York, NY)
Age: 38 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- I see this policy benefiting my start-up clients substantially.
- It provides a financial cushion during a crucial early period.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 10 | 9 |
| Year 20 | 10 | 9 |
Freelancer (Miami, FL)
Age: 29 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- Launching a business has been financially tough.
- This policy helps by saving a bit more on taxes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 7 |
| Year 20 | 9 | 7 |
Venture Capitalist (Chicago, IL)
Age: 50 | Gender: male
Wellbeing Before Policy: 9
Duration of Impact: 5.0 years
Commonness: 6/20
Statement of Opinion:
- Start-ups need all the help they can get economically.
- This aligns with long-term growth interests.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 9 |
| Year 2 | 9 | 9 |
| Year 3 | 9 | 9 |
| Year 5 | 9 | 9 |
| Year 10 | 10 | 9 |
| Year 20 | 10 | 9 |
Start-Up Founder (Los Angeles, CA)
Age: 40 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 10.0 years
Commonness: 5/20
Statement of Opinion:
- Every dollar back is crucial as we reinvest in growth.
- This seems to alleviate immediate financial strains.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 10 | 9 |
| Year 5 | 10 | 9 |
| Year 10 | 10 | 9 |
| Year 20 | 10 | 10 |
Retired (Houston, TX)
Age: 60 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 18/20
Statement of Opinion:
- This policy won't personally impact me.
- It's a positive change for young entrepreneurs.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Graduate Student (Boston, MA)
Age: 25 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 8.0 years
Commonness: 8/20
Statement of Opinion:
- This gives me confidence that starting a business could be less risky.
- Tax incentives are attractive for business planning.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 7 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 8 |
Consultant (Seattle, WA)
Age: 55 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 5.0 years
Commonness: 8/20
Statement of Opinion:
- This policy will add consulting value to my services.
- Small businesses will appreciate any initial tax relief.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 9 |
| Year 20 | 9 | 9 |
Restaurant Owner (Denver, CO)
Age: 42 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 15/20
Statement of Opinion:
- The policy won't impact us much, we're well past start-up phase.
- It's not strictly relevant to existing larger businesses.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Cost Estimates
Year 1: $5000000000 (Low: $3000000000, High: $7000000000)
Year 2: $5300000000 (Low: $3100000000, High: $7300000000)
Year 3: $5600000000 (Low: $3300000000, High: $7600000000)
Year 5: $6200000000 (Low: $3700000000, High: $8200000000)
Year 10: $7200000000 (Low: $4300000000, High: $9200000000)
Year 100: $10000000000 (Low: $6000000000, High: $14000000000)
Key Considerations
- The immediate fiscal impact shows a decrease in tax revenue due to enhanced deductions.
- Potential long-term economic growth could offset initial revenue losses.
- Effectiveness will depend on how many businesses can utilize the full benefit of the deductions offered.
- The economic environment and entrepreneurial response could vary widely, affecting the estimates.