On February 9, 2024, RealClearMarkets published an op-ed written by ATR’s director of financial policy, Bryan Bashur.
The op-ed discusses how the Credit Card Competition Act (CCCA) harms small businesses. Lawmakers should oppose the CCCA and support initiatives that will help small businesses, such as promoting tax cuts and regulatory relief.
The article starts by pointing out how a combination of excessive government spending and easy monetary policy exacerbated inflation. The Federal Reserve’s shoddy monetary policy is a good reason for why the CCCA should not be enacted. The piece states that:
Years of holding interest rates near zero and the initial reluctance to acknowledge price level increases falls on the Fed. It stands to reason that the Fed’s botched monetary policy decisions is exactly why the Credit Card Competition Act (CCCA) should never be enacted. The CCCA empowers the Fed by giving the agency essentially unlimited authority to draft rules to regulate credit card routing. This will not result in a one-time rulemaking change—its effect will reverberate for years to come. The Fed is currently proposing new rules to change the debit card landscape over a decade after the Durbin Amendment was enacted. This is evidence that the CCCA would be providing the Fed with a permanent foothold to dictate credit card routing.
Additionally, the CCCA harms small businesses. According to the article:
Small businesses lose under the CCCA. According to one new paper, small businesses may lose more than $1 billion in rewards. The paper also finds that the CCCA will reduce access to small businesses’ $700 billion in revolving lines of credit.
In order to actually help small businesses, lawmakers should roll back the Corporate Transparency Act (CTA). As Bashur points out:
On January 1st, the CTA went into effect and threatens to shackle small businesses and pass-through entities with onerous reporting requirements. Over 32 million business entities are expected to have to submit beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). Direct and indirect owners will have to submit their names, “birth date, address and a copy of a government-issued photo ID such as a driver’s license or passport” in addition to “the business name, current address, state of formation and tax identification number.” If a business does not comply with this mandate, the penalty is “$500 a day up to $10,000 and up to two years in jail (per occurrence).”
Lawmakers could also scrutinize the bank capital rule. Bashur explains that:
Small businesses are also impacted by federal regulators’ bank capital rule. The capital requirements imposed in the proposed regulations would disincentivize banks from expanding lines of credit via credit cards. This would potentially reduce the volume of consumer purchases at small businesses, and subsequently reduce interchange fee revenue which is used to fund privacy protections and the $12 billion in rewards that small businesses see every year. It also impacts community banks since they rely on larger banks to issue their cards. Congress should combat this rule because of the negative effects it will impose on community banks and small business lending. The negative repercussions of the rule will have a broad effect on a large swath of the U.S.—over 80 percent of U.S. adults have at least one credit card.
Congress also has the option of cutting taxes for small businesses. The op-ed highlights that:
Tax cuts should also be prioritized. Extending certain provisions from the Tax Cuts and Jobs Act, such as bonus depreciation, expanding the standard deduction, cutting individual rates, and enacting Rep. Lloyd Smucker’s (R-Pa.) bill to provide permanency to the section 199A small business deduction are paramount to helping small businesses weather the economic turbulence instigated by the government’s fiscal irresponsibility.
Cutting taxes and red tape can provide meaningful relief to small businesses that need it. Meanwhile, “CCCA harms small businesses and offers no perceptible relief.”
Click here to read the op-ed.