Over the past year many of us and our neighbors have done what we can to save the small businesses that make our communities home. We’ve ordered takeout, tipped as generously as we can, bought gift cards and, when each of us feels comfortable, we will hopefully return to those bars, restaurants and stores that make our communities the places we love.
We’ve individually done our part, both to prevent the spread of COVID-19 and to help save our struggling businesses, so it stands to reason that we’d expect our elected officials to do their part as well. In some ways they have. Toward the end of 2020 the federal government assured small business owners who took Paycheck Protection Program loans from the government (loans that specifically allowed them to maintain payrolls and keep as many Minnesotans off of unemployment for as long as possible) that those rescue funds would NOT be taxed.
Which makes sense – the funds had to be spent quickly, sometimes in as few as 8 weeks, and no allowance was made to save for future tax on those funds. In other words, the money has long been spent, businesses were not allowed to save any of it, and therefore any tax on that money would come out of the often very small amounts those businesses were able to otherwise make in 2020.
Unfortunately, not all of our state elected officials agree. Minnesota does not automatically conform to Federal tax changes, and would have to opt to conform to avoid taxing PPP rescue funds at the state level. In the Minnesota Senate debate about a proposal to conform and avoid this tax burden for small business owners, we heard many of our electeds claim that PPP conformity would not help workers. One legislator went so far as to read an article about the disparity in pay between Fortune 500 CEOs and their employees. It was a definite “us vs. them” discussion, but is that really the case?
No. Small business owners in MN (those with 500 or fewer employees, the only businesses eligible for PPP funds) are certainly not Fortune 500 CEOS. In fact, on average, they earn about $50,000 per year from their businesses. And that’s in good years, not in a year where a pandemic hit and the economy tanked. For the vast majority, those business owners are not getting wealthy off of the labor of others, because they are out there laboring right beside their employees.
They’re delivering your takeout orders, ringing up your purchase of the masks they started selling when they had to sharply pivot last year, burning the midnight oil to make sure they can keep as many of their community members as possible on staff. And the list goes on and on. But they’re definitely working.
So in addition to the support you’ve shown our neighborhood small business owners, perhaps you can do one more thing. Contact your state legislators to let them know that you expect them to do their part and help our small business owners by not trying to tax emergency funds that have already been spent on things that helped the state economy. And maybe remind them that in nearly all cases, those small business owners are working hard, too. The “workers vs. owners” framing helps no one and hurts us all.
Davis Law Office
Co-Chair, Mainstreet Alliance of MN