Don’t tax these forgivable life-saving loans
DESPITE THE DIVISION and animosity that pervades national politics, then-President Donald Trump, Speaker Nancy Pelosi, and Senate Majority Leader Mitch McConnell were able to put aside their political differences and pass the Paycheck Protection Program (PPP), one of the most important and helpful programs for small businesses during this pandemic.
There is no doubt in anyone’s mind that the PPP helped countless small and independent businesses weather the initial shock of lockdowns and forced closures. Unfortunately, the work of the PPP may be undone if Gov. Charlie Baker, House Speaker Ron Mariano, and Senate President Karen Spilka don’t act soon to protect it.
While everyone knows that tax day for individuals falls on April 15, for businesses, taxes are due on March 15. As that March deadline grows closer, countless struggling businesses that sought and accepted federal PPP loan money to keep their doors open and employees on the payroll, are now faced with a dilemma. They struggled through the pandemic and managed to stay above water. They followed the rules and the loan was forgiven, but now Baker, Mariano and Spilka are trying to force some businesses to pay income taxes on that loan. They seem to have missed the point of the “forgivable” loan to businesses that are on the verge of collapse.
The businesses that would most likely have to pay the state’s 5 percent tax are more than likely small pass-through companies, such as limited liability corporations, partnerships, independent contractors, sole proprietors, and those who are self-employed. While Trump, Pelosi and McConnell were trying throw a lifeline to these struggling employers, Baker, Mariano and Spilka threw them an anchor.
You would think that Mariano and Spilka, in particular, would strive to avoid the “Taxachusetts” moniker as much as possible. Common sense would lead you to believe any better than mediocre politician would want to address this issue as their first legislative action after the New Year. However, Mariano and Spilka used the months of January and February to pass a controversial and rushed climate change bill instead.
Some states and governors were prepared for the COVID-19 vaccine distribution, while others were not. The data continues to change, and sometimes improve, but Baker faced a lot of initial criticism for his handling of the COVID-19 vaccine distribution. The uproar started a few weeks ago. The good news then was that Massachusetts was doing better than Kansas in vaccine distribution, but the bad news was that 48 other states were doing better than Kansas and Massachusetts.
While the state patiently waits for Baker’s vaccine rollout to pick up steam, which it has started to do at a slow pace, small businesses are increasingly getting worried that their concern won’t be addressed until March 15 has already come and gone. There are some really complicated matters our state’s leaders need to focus on, but making the PPP loan forgivable for all businesses is simple and should be done quickly.
Without immediate legislative action by Baker, Mariano, and Spilka, the PPP loan which saved many struggling businesses in 2020 will become a burden in 2021. Tax accountants are now preparing their clients for the reality that the loan they were told would be forgiven will now have a hefty tax bill attached to it in 30 days. No one thought the dysfunction in Washington could have been eclipsed by Massachusetts state government, but it is appearing that way. No one could have thought 2021 would have been worse than 2020, but it’s looking that way for some Massachusetts small businesses.
Paul D. Craney is a spokesman for the Massachusetts Fiscal Alliance.