WASHINGTON, D.C. – Today, the House Committee on Small Business Subcommittee on Economic Growth, Tax, and Capital Access is holding a hearing titled “Enabling Success: Examining the Competitive Landscape for Small Businesses.”

Subcommittee Chairman Dan Meuser’s opening statement as prepared for delivery:

Good morning and welcome to today’s hearing where we’ll delve into the critical issue of how regulatory decisions, particularly by the Federal Reserve, are impacting our nation's small businesses— the backbone of our communities and the strength of our economy.

Small businesses are already navigating a maze of challenges – including inflation, regulatory costs, and difficulty accessing capital to name a few. The last thing they need is additional roadblocks, particularly from institutions like the Federal Reserve, that limit their access to capital and ability to succeed.

Take, for instance, the issue of interest deductibility. To address inflation brought on by excessively high levels of spending, the Fed has raised interest rates to a two-decade high, yet small businesses are capped at the relief they can receive. The current cap on interest deductions at 30% of adjusted taxable income unfairly penalizes small businesses that utilize large capital expenditures to grow their business and hire employees.

This not only hampers domestic investment but also erodes the global competitiveness of U.S. businesses. Most developed nations don't place such constraints on their companies, putting American entrepreneurs at a disadvantage.

But it doesn’t stop there. The Federal Reserve, despite its own data in the Beige Book and the Senior Loan Officer Opinion Survey, is in the process implementing stricter capital standards on banks, known as the Basel III Endgame proposal. The proposal will require banks to keep more money on the sidelines, where it won’t be utilized to fulfill the lending needs of small businesses. This move will exacerbate the already tightening capital access problem for small businesses. If banks have to hold back on lending due to these requirements, it's small businesses that will suffer.

Larger financial institutions may be able to mostly absorb these regulatory shocks, but what about small businesses? What happens when a business needs to replace crucial equipment or repair damages urgently and can’t access affordable capital? These aren't theoretical concerns; these are real issues that can close the doors of small businesses, impacting the lives and livelihoods of everyday Americans. Banks will have less flexibility than ever, and small businesses will receive the brunt of lending pullback.

We have a duty on this Committee to address the problems facing small businesses, not exacerbate them. Simple measures like restoring 163(j) interest deductibility and reconsidering the Basel III Endgame can go a long way in ensuring we do not add to the problems already facing small businesses.

Despite the headwinds of inflation and a turbulent economic landscape, our small businesses are fighting to thrive. Let's not allow misguided proposals to tie their hands behind their backs. I look forward to hearing the insights of our witnesses today on these topics.

Thank you. I now yield to our Ranking Member, Mr. Landsman.

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