Bill Overview
Title: Small Business Prosperity Act of 2022
Description: This bill modifies the tax deduction for qualified business income to (1) make such deduction permanent, (2) limit to 21% the top tax rate on qualified business income, (3) repeal the limitation on the deduction based on amount of wages paid, and (4) revise the definition of qualified trade or business to mean any trade or business other than the trade of business of performing services as an employee. The bill provides that a change in the organizational structure of a corporation is not a taxable event if there is no change among the owners, their ownership interests, or the assets of the organization, The bill repeals the estate tax after 2022.
Sponsors: Rep. Biggs, Andy [R-AZ-5]
Target Audience
Population: Small business owners and individuals subject to estate taxes
Estimated Size: 33200000
- The bill modifies tax deductions for qualified business income, affecting small business owners globally who have similar operations to those in the U.S.
- The estate tax repeal impacts anyone globally with estates that would have been subject to such taxes in the U.S.
- Small and medium-sized enterprises make up a significant portion of global economies.
Reasoning
- The Small Business Prosperity Act focuses on modifying tax rates and deductions in a way that largely benefits small business owners. This group includes a broad range of occupations but particularly those owning small to medium enterprises.
- The repeal of the estate tax primarily benefits individuals with substantial estates, which is a much smaller group but may include wealthy business owners or successful entrepreneurs.
- The budget constraints suggest that the policy is designed to have long-term fiscal sustainability while targeting a broad swath of the business-owning population.
- The policy will likely yield varying degrees of impact, with some persons seeing significant benefit while others see little or no change due to the specifics of their business structure or employment status.
Simulated Interviews
owner of a boutique clothing store (Austin, TX)
Age: 32 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- I think the tax deduction is huge for small businesses like mine, especially since we pay a lot in wages.
- The estate tax repeal does not affect me now, but it might be important if I expand significantly.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 7 | 5 |
| Year 20 | 6 | 5 |
real estate investor (Bend, OR)
Age: 45 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- I'm already structured for tax efficiency but the changes could streamline future investments.
- Estate tax repeal means my children could inherit more without complex planning.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 6 |
| Year 20 | 8 | 6 |
freelance graphic designer (Miami, FL)
Age: 29 | Gender: other
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 18/20
Statement of Opinion:
- I’m not sure this affects me much directly, as I'm a sole proprietor with no permanent hires.
- Repeal of estate tax seems good, but not something I worry about now.
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 | 4 |
| Year 10 | 4 | 3 |
| Year 20 | 4 | 3 |
retired business owner (Los Angeles, CA)
Age: 61 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 8/20
Statement of Opinion:
- I am glad about the estate tax repeal as it allows me to plan for my estate more confidently.
- The tax deduction part is less relevant to me now, but certainly a positive for my colleagues.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 7 |
| Year 20 | 8 | 6 |
tech startup co-founder (New York, NY)
Age: 38 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 14/20
Statement of Opinion:
- The policy could help lower our operational costs and incentivize our growth ambitions.
- Not having to worry about estate tax implications now or later is freeing.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 9 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 8 | 6 |
| Year 20 | 7 | 6 |
lawyer in a partnership firm (Chicago, IL)
Age: 53 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 12/20
Statement of Opinion:
- The repeal of the estate tax changes the landscape significantly for many clients.
- From a business perspective, this could shift my practice's focus.
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 | 5 | 6 |
| Year 10 | 5 | 5 |
| Year 20 | 6 | 5 |
automotive parts manufacturer owner (Detroit, MI)
Age: 42 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 13/20
Statement of Opinion:
- The removal of the deduction limitation is great given our high wage bill.
- Further savings would help reinvest in equipment and training more.
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 | 7 | 5 |
| Year 10 | 6 | 4 |
| Year 20 | 5 | 4 |
farmer and rancher (Omaha, NE)
Age: 50 | Gender: other
Wellbeing Before Policy: 7
Duration of Impact: 20.0 years
Commonness: 11/20
Statement of Opinion:
- Changes could save money on taxes, there's more to put back into the farm.
- Estate tax repeal is especially good news for passing down the farm without burdens.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 6 |
| Year 20 | 8 | 5 |
freelance journalist (San Francisco, CA)
Age: 30 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 16/20
Statement of Opinion:
- Since I don't have business deductions, I'm not directly impacted.
- It's good to have estate tax considerations if I ever accumulate significant assets.
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 | 4 |
| Year 10 | 4 | 3 |
| Year 20 | 4 | 3 |
CEO of a logistics company (Dallas, TX)
Age: 60 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- The deduction changes are beneficial for continued growth and keeping competitive.
- Repeal of the estate tax helps secure the business for the next generation.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 7 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 8 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 5 |
Cost Estimates
Year 1: $85000000000 (Low: $75000000000, High: $95000000000)
Year 2: $87500000000 (Low: $77500000000, High: $97500000000)
Year 3: $90000000000 (Low: $80000000000, High: $100000000000)
Year 5: $95000000000 (Low: $85000000000, High: $105000000000)
Year 10: $100000000000 (Low: $90000000000, High: $110000000000)
Year 100: $120000000000 (Low: $108000000000, High: $132000000000)
Key Considerations
- The introduction of permanent tax deductions and the estate tax repeal significantly impact federal revenues.
- While the policies may provide short-term economic boosts, long-term fiscal impacts and inequalities should be considered.
- Small businesses stand to benefit substantially from tax reconfigurations, potentially driving economic growth.
- The repeal of the estate tax might promote wealth retention among wealthy individuals.
- Changes in the organizational tax structure could promote efficiencies but may result in decreased tax liabilities.