We both fought hard and victoriously for the Trump Big Beautiful tax bill, which lowers the average family tax bill by about $2,000 a year.
The bill was designed to benefit all American-grown businesses large and small. Well at least it was supposed to.
But in some ways it inadvertently disadvantages some small businesses compared to their large corporate behemoth competitors.
One group inadvertently treated unfairly was the nation’s 300,000 local independent financial advisors. Their competitors include every giant Wall Street bank and investment brokerage.
These independents add value to investors and senior citizens by building longstanding personal relationships and offering first-hand financial advice tailored to the client’s personal situation.
But now they face an unfair and unreasonable additional hurdle: tax rates higher than Congress intended. Instead of having their top marginal income tax rate cut from 39.6% to 29.6%, like other small businesses, they face a 37% rate because Treasury Department bureaucrats excluded them from the full benefit of the small business tax deduction.
Why? They are the very definition of small businesses. Sometimes they are a two-, three-or four-person small office family company. That’s the situation with my own advisor.
The Trump tax cut Congress put in place a 20% deduction that lets small businesses lower their federal tax rate. This has led to the strange situation where big financial advisory firms can pay lower tax rates than the little guys who set out their own shingle.
This happened because the Treasury Department slapped independent financial advisors with a “Specified Service Trade or Business” label, subjecting them to higher taxes. Meanwhile, insurance agents and brokers, who operate under nearly identical business models, qualify for the full exclusion.
This isn’t just unfair; it’s economically foolish. Independent advisors are the backbone of financial guidance on Main Street America, where big Wall Street firms rarely tread. They provide personalized advice to millions of Americans saving for retirement, college, or a rainy day. Why should they face steeply higher tax rates than the mega financial corporations? Or from the insurance agents next door?
When we’ve asked members of Congress about this, they hem and haw glance down at their hands and walk away – mum. That’s because they can’t defend the policy.
Financial advisors face the same market pressures as insurance pros. So why should one group fully benefit from the Trump tax cuts while the other gets capped and phased out?
The Trump tax cuts were supposed to lower the top marginal rate on small business income from 39.6% to 29.6%, and last year Congress wisely made that reduction permanent. Unfortunately, independent financial advisors still face a 37% top rate. This is a real-life travesty of the little guys — the James Baileys — getting run out of town via tax advantages by the Henry Potter fat cats, as fans of It’s a Wonderful Life will recall.
There’s a simple solution. President Donald Trump and Treasury Secretary Scott Bessent can fix this without having to wait for Congress. All the president needs to do is direct Bessent to correct the flawed guidance. Main Street shouldn’t have to compete with Wall Street at steeply higher tax rates.
Phil Kerpen is president of American Commitment and a principal of Unleash Prosperity Now. Stephen Moore is co-founder of Unleash Prosperity Now, an organization that promotes policies fostering economic growth and job creation.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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