With the Build Back Better (BBB) Act that passed the House last November now stalled in the Senate, many construction businesses throughout the country are hoping that their tax future remains certain as they continue to recover from the pandemic and begin the critical work needed to modernize the nation’s infrastructure. While Democrats in Congress look to shift their priorities toward other legislation, many construction businesses, including small and family-owned firms, are still concerned about the proposed tax hikes and policies that the Democratic majority has rolled out over the past year.

The Democrats’ tax policies and reconciliation package—supported by President Joe Biden—include numerous tax hikes that could have a detrimental impact on construction and exacerbate the current inflation and supply-chain crises facing the country. At the start of discussions on a multitrillion-dollar reconciliation package, Democrats focused on several policies that would roll back or eliminate critical provisions of Republicans’ signature tax-reform legislation of 2017, the Tax Cuts and Jobs Act (TCJA). This included increasing the corporate tax rate, capping the Section 199A deduction for small businesses, hiking the individual rate, altering Section 1031 of the tax code for like-kind exchanges and eliminating stepped-up basis for family-owned businesses.

Faced with opposition within their own party, some of these tax proposals were left on the cutting-room floor. The final product was the House-passed BBB, backed by the president and a majority of Democrats in Congress.

While the messaging around the tax provisions included in the bill focuses on the wealthy, the real-world effect of these tax hikes would hit many of the nation’s small and family-owned businesses if passed into law. Specifically, the bill’s new surtax imposes a 5% tax on modified adjusted gross income, and the expanded net investment income tax threshold would break President Biden’s promise not to increase taxes on Americans making less than $400,000 a year.

Additionally, the BBB includes labor provisions that would burden America’s construction industry—such as increases in monetary penalties for employers, prevailing wage and apprenticeship workforce requirements and tax credits, funding for electronic union elections, union neutrality mandates for federal grant recipients and tax deductions for union dues. These increased penalties and costs on employers would place an unrealistic burden on many small construction companies at a time when they are dealing with surging costs across the board.

While the BBB won’t pass in its current form, Sen. Joe Manchin, D-W.Va., recently opened the door to a scaled-back version of the bill, and during his State of the Union address in March, President Biden stated his support for raising taxes to help “lower the deficit.” But until Democrats abandon their pursuit of a partisan reconciliation bill, businesses will continue to face an uncertain future.

Meanwhile, as capital-intensive, low-margin, domestic businesses comprising largely small, family-owned and closely held merit shop construction firms, ABC members have felt the positive effects of the tax reform enacted by the 2017 TCJA. As a result of this comprehensive legislation, ABC contractor members hired more employees, invested in workforce development and increased compensation and benefits for their employees. Prior to the passage of the TCJA, according to analysis by the U.S. Department of Treasury, the construction industry paid the highest effective tax rate of any sector of the nation’s economy—27% compared to an average of 22% for other industries—from 2007 to 2011.

Preventing tax hikes and preserving the tax provisions included in the TCJA will be critical to U.S. recovery from the pandemic, address the serious inflation and supply-chain issues facing the economy and tackle the challenges of modernizing the nation’s infrastructure through the implementation of the bipartisan Infrastructure Investment and Jobs Act.