Small businesses owned by women and people of color, have historically been under-represented and under-capitalized. More specifically, women-owned businesses’ share of business revenues has consistently remained at roughly 4% for the past 20 years. This is what a new legislation called the Providing Real Opportunities for Growth to Rising Entrepreneurs for Sustained Success, also known as the PROGRESS Act. This new legislation is aimed at helping women and minority-owned businesses grow by promoting increased investment in them.
This bill could not come in at a better time, as women and minority-owned businesses have been hit particularly hard by the pandemic. By boosting investments in these businesses, there is increased opportunity to help them get back on their feet and rebuild for the future. In addition, it would also be a way to level the playing field for women and minority-owned businesses that are usually at a disadvantage as compared to their male-led counterparts. Male-led entrepreneurial ventures start with twice as much capital as those that are women-led. Access to third-party capital is even more precarious, with only 2.3% of venture capital funding that went to female-founded companies. As part of this, Black and Hispanic-owned firms, which constitute 50% of all women-owned businesses, could only obtain 0.0006% and 0.32% of venture capital funding in the past 10 years.
The bill includes the First Employee Credit, which would give a credit equal to 25% of W-2 wages claimed annually, up to an amount of $10,000 in a single tax year. The lifetime limit for this credit would be $40,000. This credit would applied against a business’ payroll tax, which would help many businesses that are unable to generate a profit in their first years. Businesses eligible for this credit would be required to be majority US-owned, with their owners earning $100,000 or less a year (or $200,000 for joint filers).
Another tax credit, the Investor Credit, is to promote third-party investments in small businesses. This would apply to up to 50% of a qualified equity investment or debt, up to $10,000 in a single year, with a lifetime limit of $50,000. To be eligible, businesses would need to have at least one full-time employee. Additionally, majority owners would have to be American and earn $100,000 or less a year (or $200,000 for joint filers).
This bill is part of a larger effort by Congressional Democrats to reduce income inequality. In line with this goal, the American Jobs Plan to fund social programs and improvements in infrastructure with an increased corporate tax rate of 28%, was also unveiled last month. There is also an expectation that an American Families Plan, with the goal to extend the Child Tax Credit by providing additional tax credits to for families through an increased top tax rate for individuals and the taxing of capital gains as ordinary income, will also be introduced.
The Corporate Sis.
