STEPHEN MOORE: Biden’s Shadow Looms Over Small Businesses — Can Trump Finally Break the Spell?

By Stephen Moore

Donald Trump is advocating for the creation of millions of new high-paying jobs. A strategic initial move would involve repealing regulations imposed by the Biden administration that impact approximately 4 million business partnerships, also known as S-corporations. These entities are significant job generators, currently employing around 10 million Americans and disbursing $800 billion in salaries and benefits.

For context, Microsoft derives “95 percent of its commercial revenue” through its partner ecosystem, with profits flowing directly to the business partnerships, which then pay taxes based on their earnings.

Historically, the tax rules for partnerships have remained stable over the decades. However, the Biden administration opted to bypass congressional approval, modifying these long-standing regulations through its Treasury Department in a bid for a more “fair” tax system.

The focus of the new tax regulation targets a legal tax strategy known as “basis shifting,” which partnerships use to manage tax liabilities. While the mechanics of basis shifting can be intricate, it is a lawful practice entrenched in the tax landscape for years. The Internal Revenue Service (IRS) does not possess the authority to alter tax laws unilaterally; that power lies with Congress.

Under the current administration, business partnerships have been unjustly portrayed as tax evaders. The hiring of 87,000 new IRS agents included about 4,000 tasked specifically with enforcing regulations on complex partnerships, marking these entities as a suspicious category.

Additionally, the administration sought to impose retroactive taxation—potentially illegal—by adjusting regulations that could affect transactions from as far back as six years. Such changes could expose previously legal tax structures to scrutiny, audits, and penalties.

In a further escalation, Treasury Secretary Janet Yellen established a new unit to monitor partnerships, contributing to an environment of fear and uncertainty within small businesses.

Notably, over 90% of partnerships are classified as small businesses, according to a study by Ernst and Young in collaboration with the Small Business & Entrepreneurship Council. These partnerships play a vital role in providing access to capital, enabling small firms to scale and significantly contributing $1.3 trillion to the GDP.

The partnership model nurtures small companies, evolving them into larger enterprises—a hallmark of American entrepreneurship. The current system is functional; it shouldn’t be dismantled. A call to action for the Trump Treasury Department is imperative: halt the IRS’s misdirected focus on destroying these partnerships.

This situation exemplifies a broader conflict against American wealth and business prosperity. It poses a direct challenge to Trump’s promise to “make America great again.”

Originally published by the Daily Caller News Foundation.

Stephen Moore is a contributor to The Daily Caller News Foundation, a senior fellow at the Heritage Foundation, and co-author of “The Trump Economic Miracle.”