Americans for Tax Reform (ATR):
During his campaign, President Biden promised the American people that he would not raise taxes on small businesses. Now he is violating that promise, and next week House Democrats will vote on the framework to make the tax hikes possible.
Biden’s small business tax promise was made on Feb. 20, 2020 before a national audience during a Democratic debate hosted by MSNBC:
MSNBC’s Hallie Jackson: “I want to ask you about Latinos owning one out of every four new small businesses in the United States. Many of them have benefited from President Trump’s tax cuts, and they may be hesitant about new taxes or regulations. Will taxes on their small businesses go up under your administration?”
Biden: “No. Taxes on small businesses won’t go up.”
Despite Biden’s pledge, his tax hikes will hit small businesses.
The White House this week tried to downplay it by asserting Biden’s increase in the top marginal income tax rate would “only” hit three percent of small businesses.
Three percent of 31.7 million small businesses is 951,000 small businesses. And the White House failed to mention the one million small businesses organized as C-corporations: the Biden plan calls for a federal corporate tax rate increase to a higher-than-communist China rate of 28 percent.
So that’s at least 1.9 million small businesses that will get hit with Biden tax increases — which does not even include the number of small businesses that would get hit from Biden’s elimination of stepped-up basis.
The Tax Foundation notes that IRS statistics “show more than half of pass-through business income could face tax increases” under Biden.
Biden is pushing a series of tax increases on small businesses:
1. Biden’s increase in the top marginal income tax rate to 39.6 percent will hit small business sole proprietorships, LLCs, partnerships and S-corporations.
Biden wants to raise the top marginal income tax rate to 39.6 percent which will hit many small businesses.
According to the Congressional Research Service, “The majority of both corporations and pass-throughs in 2011 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA).”
2. Biden’s corporate income tax rate hike from 21 percent to 28 percent targets one million small businesses across the country organized as corporations.
As noted by the Small Business Administration Office of Advocacy, there are 31.7 million small businesses in the U.S. Of those, 25.7 million have no employees, while 6 million have employees. Of these 6 million small employers, 16.8 percent, or 1 million of these businesses are classified as c-corporations. The SBA classifies a small employer as any independent business with fewer than 500 employees.
Biden claims his spending plan makes large corporations pay their “fair share.” However, the plan will raise taxes on many small businesses that are structured as corporations.
Also of note: a recent study from the U.S. Chamber of Commerce found that 1.4 million small businesses organized as C-corporations will get hit by Biden’s corporate tax rate hike.
The Chamber noted the corporate income tax hike will hurt small businesses in every sector of the economy: “agriculture, construction, health care, real estate, finance, and more.”