As Congress debates a $3.5 trillion budget plan, most Georgians are unaware of a new provision put forth by the Biden Administration that would discourage the creation of new jobs and new development.
Known as a tax on carried interest, investors who build shopping centers, office parks, develop apartment complexes or like myself – the developer of 20 new car wash locations across Georgia – currently invest because of one tax code caveat. We do not have to pay taxes on the money we put into a project until it turns a profit. That way we can try to earn back our investment before paying federal taxes.
Investors and small businessmen don’t expect any special breaks, but we do need time to earn back our major layout of capital before having to pay hefty tax rates on profits.
Unfortunately, Congress wants to tax us immediately, thus discouraging private equity and small business owners like myself from taking any risk and building or investing in new projects. That certainly would discourage entrepreneurs from investing capital and creating new jobs and new development – especially in low-income communities that need it.
According of the American Investment Council, 86 percent of small businesses last year received private equity investments. Roughly a third of those were businesses with 10 employees or less.
Currently, I have 900 employees many of which work in our 20 car wash locations across the state, most of those in metro Atlanta. Those who work at my business, and many new start-up small businesses, are low-skilled workers struggling to pay the bills. With federal unemployment benefits ending, they need employment options – not fewer small businesses offering them work.
Almost half of the nation’s workforce is employed by a business with less than 500 employees. Small business depends on private equity and investment from entrepreneurs like myself who take risk to grow business and create jobs.
Separating carried interest would punish those who contribute their hard-earned savings and discourage the hiring of additional employees. That means no additional car wash locations, no extra dry cleaners, no second restaurant locations and no additions to thriving projects, for example, that raise tax dollars for a local community.
The Covid-19 pandemic has put an enormous strain on small business. Many are just starting to thrive and invest in their cities and counties again. There is no need to punish those who want to grow and expand by taxing investors up front for development that not only provide jobs but contributes to local communities.
With that in mind, it’s time for Congress to put the brakes on this enormous tax and spend plan and take a look on the effect it will have on those who will suffer the most.
Dennis is the CEO of Mammoth Holdings LLC of Atlanta, the owner and operator of 20 cars washes in Georgia including 15 in metro Atlanta. The company also operates locations in Alabama, South Carolina, Mississippi, Louisiana, Tennessee, Kentucky, Indiana, Illinois and Utah.