Donald Trump has promised to create millions of new high-paying jobs.
One easy first step to doing that is to repeal Biden-regulations on America’s 4 million business partnerships (sometimes known as S-corporations) that are prolific job creators. The latest estimates find 10 million Americans employed by these business partnerships, with $800 billion paid in worker salaries and benefits.
For example, “95 percent of Microsoft’s commercial revenue flows directly through” its “partner ecosystem.” The profits from these enterprises are passed through to the 4 million partners, who make tax payments based on their share of those earnings.
These have been the tax rules governing partnerships for many decades. The Biden administration didn’t like the tax rules, so instead of asking Congress to change them, Biden’s Treasury Department worked through the back door to unilaterally modify the rules, as part of its “fairness” agenda.
The precise tax target is a technique used by partnerships to lower their tax liability called “basis shifting.” While technically complex (because everything with the U.S. tax code is complicated), it is also entirely legal and has been used by partnerships for decades to adjust the value of their assets during a transaction or transfer. Whatever one thinks of basis shifting, the Internal Revenue Service (IRS) doesn’t have the unilateral authority to change the tax laws — only Congress does.
The Biden crackdown treated business partners as tax cheats. When they hired 87,000 agents to harass companies and individuals, nearly 4,000 of these IRS tax collectors were hired to among other things, “expand enforcement focusing on complex partnerships.”
The more than four million business partnerships became an overnight suspect class, as did the tax returns of millions of partners.
To pry money out of these partnerships, the Biden team wanted to create a retroactive tax (which should be illegal) by changing the rules and apply them going back six years in time. So a tax structure that may have been perfectly legal in the past could now trigger investigations, fines, and litigation.
Biden Treasury Secretary Janet Yellen also created a new investigative office to oversee and harass partnerships. That should be shutdown.
So a tax structure that may have been perfectly legal in the past could now trigger investigations, fines, and litigation.
More than 90% of partnerships are small businesses, according to an Ernst and Young study prepared for the Small Business & Entrepreneurship Council (SBE Council) last year. The business partnership arrangement allows these firms to have ready access to needed capital to expand their operations. In all these companies generated $1.3 trillion to our GDP.
These partnership arrangements allow promising small companies to grow into large ones. This uniquely American business structure is a hallmark of U.S. entrepreneurial success — a path for businesses to go from good to great.
It isn’t broken. The system works. That’s why the Trump Treasury Department needs to immediately command the IRS to cease and desist the Biden witch hunt against these partnerships.
It’s a war on wealth. A war on U.S. businesses. And it’s a direct assault on the Trump promise to “make America great again.”
Stephen Moore is a senior fellow at the Heritage Foundation and a co-founder of Unleash Prosperity. His latest book co-authored with Arthur Laffer is “The Trump Economic Miracle.”
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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