IMPACT OF THE INFLATION REDUCTION ACT AND DOW DROP ON small businesses
My name is Naomi Smith and I am the new Policy Program Manager at Main Street Alliance. My responsibility is to keep our staff and membership informed on the current economic state of our country so small businesses can be prepared for any opportunities and challenges the economy presents. Just six days into my role we celebrated, in person, the passage of the Inflation Reduction Act (IRA) and, at the same time, witnessed the Dow Jones Industrial Average plummet 1,200 points. These two separate occasions can have a large impact on the small business economy. Here are the ways in which the IRA and Dow drop may impact your small business.
The Inflation Reduction Act Impact on Small Businesses
President Biden signed the Inflation Reduction Act into law on August 16, 2022. This legislation helps small businesses by reducing healthcare costs and the costs of prescription drugs; creating new opportunities for small businesses, and addressing issues around tax fairness. It’s also hailed as the largest ever clean and renewable energy investment in US history. Here are some ways the IRA will specifically uplift small businesses:
Families and small businesses making less than $400,000 will not see a raise in taxes
Preserves the American Rescue Plan’s premium tax credit support for Affordable Care Act (ACA) plans by extending them through 2025
Small businesses can receive a tax credit that covers 30% of the cost of switching over to low-cost solar power – lowering operating costs
Doubles the Research and Development (R&D) tax credit for small businesses
Tax loopholes used by the wealthy have been closed, and a 15% corporate minimum tax has been implemented
Imposes a 1% surcharge on corporate stock buybacks that will encourage businesses to invest.
For more information: Inflation Reduction Act
Drop of Dow Stock Exchange Market on Small Businesses
The drop in the Dow Stock Exchange Market has raised concerns for many of our partners and members because the Dow and other exchange markets are often used as an indicator of the overall health of our nation’s economy. The steep decline of the Dow, on September 16, 2022, was a red flag for many that our nation may be near a harmful recession that could impact small businesses across the nation. Here are the potential impacts of a recession on small businesses:
Slow and reduced cash flow. Revenue and profit margins may become much tighter limiting any room for delays or payment cancellations
Decrease demand. Small businesses may see fewer customers during times of economic uncertainty which can lead to a significant loss of income
Increase in budget restrictions. With a reduced cash flow and low demand, small businesses may need to conduct serious budget reviews to identify where cutbacks can be made
Black and brown businesses historically face more challenges in times of recession
At Main Street Alliance we are here to work with our members through prosperous and difficult times and will continue to share federal, state, and local policy updates that impact small businesses.