Across the United States, there are 2.6 million Black-owned businesses that account for more than $138 billion in revenue each year. This innovative and entrepreneurial passion is what has fostered long-term economic prosperity and sustainability in communities from coast to coast. These businesses should be celebrated as pillars of our local communities and the backbone of our nation’s economy.
Regrettably, just as we are starting to rebuild from the COVID-19 pandemic, some members of Congress are proposing a misguided business investment tax (HR 1068 and SB 1598) targeting carried interest that would make it harder for Black-owned businesses to receive the critical private investment they need to recover and succeed in the times ahead. The House Ways & Means Committee recently included this destructive tax increase in a proposal they are pushing to add into the upcoming $3.5 trillion spending plan. The Biden administration has marketed this proposal as an “investment in our economic future,” but it would hurt the very Black-owned businesses they purport to help.
Despite the many hardships already faced by Black business owners during the pandemic, private investments have been a promising new source of growth for the African American community. In fact, in the first half of 2021 alone, Black business owners secured nearly $1.8 billion in investment funding, an increase of 450% from the same period last year and nearly double the total investments made in Black entrepreneurs in all of 2020.
The numbers don’t lie, and the evidence is clear – now is not the time to impose restrictive tax hikes on one of the most promising avenues of growth for Black entrepreneurs.
With all this being said, the economic devastation that the COVID-19 pandemic continues to have on businesses across America is far from over. The pandemic has wreaked havoc on businesses of all sizes in all 50 states, yet African American-owned businesses have been disproportionately hurt more than any other racial group.
In fact, 58% of Black-owned businesses reported being financially distressed due to the COVID-19 pandemic. From February to April 2020, Black business ownership dropped by a crushing 41%. And although the total U.S. unemployment rate fell to 5.4% in July of this year, it remained a staggering 8.2% for Black workers. Which begs the question: Why [are] politicians even considering instituting economic policies that would harm Black-owned businesses, as opposed to helping them?
African American entrepreneurs and business owners have always faced immense structural and financial obstacles to grow their businesses and achieve the American dream, ranging from higher interest rates to lack of access to traditional banks. This ill-advised tax hike would only make it even harder for many of these businesses to receive the financial backing necessary to grow and promote innovation and economic opportunity.
All of this is also not to suggest that African American businesses would be the only ones hurt by this proposal. More than 14,000 businesses across America that employ nearly 12 million workers depend on similar investments to hire workers, grow or simply keep the doors open.
At the National Black Chamber of Commerce (NBCC), we are dedicated to economically empowering and sustaining African American communities through entrepreneurship and capitalistic activity within the United States, and via interaction with the Black community. The success and well-being of our nation’s Black-owned small businesses is vital to the overall health of our domestic economy, in communities nationwide. This is why it is as important as ever that leaders in Washington are supporting policies that promote investments in Black-owned businesses and job creation across the country.
America’s Black small business community is robust and strong, but now more than ever, it needs our leaders’ unwavering support. For this reason, on behalf of the NBCC, I am firmly urging members of Congress to oppose any and all efforts to include this misguided business investment tax in the upcoming $3.5 trillion budget proposal.
Larry D. Ivory is the chairman of the National Black Chamber of Commerce, a nonprofit, nonpartisan, nonsectarian organization dedicated to the economic empowerment of African American communities.