Supporting our small businesses in the midst of the pandemic

By Sen. Dave Miramant | Feb 18, 2021

The COVID-19 pandemic has not been kind to anyone, and it’s no secret that it’s hit our small businesses hard. Many have had to completely shift their business models just to make ends meet. As a small business owner myself, I know how difficult it’s been for businesses to make the best of a bad situation in order to protect themselves, their workers and their customers. These sacrifices haven’t been easy, but Maine people have stepped up and adapted for the good of our communities.

Here in Maine, our small businesses are the backbone of our economy, employing nearly 290,000 people and accounting for 56.5 percent of the state’s private workforce. That means that many of our neighbors work for a small business, whether it’s the mom-and-pop diner down the street, a local physician’s office or the community market. Small business owners deserve our support during this difficult time, and the health of our economy and communities depend on it.

In March 2020 at the beginning of the pandemic, the federal government passed the CARES Act relief package, which created a new loan program called the Paycheck Protection Program, commonly known as PPP. These loans were designed to give small businesses the funds they needed to keep their employees on payroll. If at least 60 percent of the loan went directly to payroll, and employee and compensation levels remained the same, the loans would be forgiven, turning the loan into a grant. The federal government also exempted forgiven PPP loans from federal income tax and later went a step further to allow businesses to claim deductions for eligible expenses paid for with the PPP money. This is an unusual move because it means that not only do businesses receive a tax cut for receiving the money, but they also receive a tax cut for spending it.

I want to be clear about something: This double tax benefit wasn’t designed to help our local small businesses; it was designed to provide special benefits for profitable companies and corporations. By contrast, the 50,000 Mainers currently collecting unemployment do not get a tax cut for the benefits they received in 2020. They sure aren’t receiving any extra tax cuts for spending that money either.

When the federal government makes a tax rule, states have to decide if that rule will apply to state taxes too. Unlike the federal government, Maine’s constitution requires that we have a balanced budget. Because of the pandemic, Maine’s budget is already strained, and if we were to fully conform to the federal income tax, Maine would face a loss of $100 million. This would dramatically affect our ability to support vital services including public health programs and broadband infrastructure. There’s no doubt that the PPP helped a number of small businesses in Maine, but a double tax benefit for large corporations who turned a profit isn’t the way to help those who need support.

On Feb. 9, the Taxation Committee voted to support Gov. Janet Mills’ compromise tax conformity proposal. This proposal is about supporting our small businesses across the state, not bailing out corporate law firms and hedge funds, giving them a leg up when the rest of us are just trying to survive. Gov. Mills’ partial tax conformity proposal would exempt 98.9 percent of Maine businesses and nonprofits that received PPP funds from paying income taxes on these loans-turned-grants. This means that struggling small businesses will get the relief they need while large, profitable companies pay their fair share. That’s why this proposal has earned the support of the National Federation of Independent Businesses.

Maine people deserve and expect their lawmakers to fight for what’s right and come up with solutions that work for everyday people. Let me be clear: My number one goal is to make sure our local small businesses have the support and information they need while making sure our economy can recover from this pandemic. We shouldn’t have to sacrifice funding for vital public services like education, health care and infrastructure for the sake of giving tax loopholes to big businesses.

As part of the second coronavirus relief bill passed in December, the federal government opened another round of PPP loans, dedicating $284 billion in funding. If you have a small business or are self-employed, I encourage you to learn more about your eligibility for a PPP loan, and to consider applying. And as always, if you ever have any questions, or if you need assistance, please don’t hesitate to send me an email at david.miramant@legislature.maine.gov or to give my office a call at (207) 287-1515.

Senator Dave Miramant represents coastal Knox County in the Maine Senate.

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