Posted on 05/14/2021 11:48:43 AM PDT by Kaslin
During the 2020 campaign Joe Biden promised that taxes on small businesses would not go up. So why is he now pushing numerous tax hikes that would hit small businesses?
His promise is not up for interpretation. During a Democratic debate in February 2020, Biden said: “No. Taxes on small businesses won’t go up.”
Now that he is safely in office, it appears he has no intention of keeping this promise. The $3.5 trillion in tax hikes Biden has proposed includes several small business tax hikes. His proposal to increase the top marginal income tax rate would hit small businesses organized as pass-throughs. His proposal to raise the corporate income tax rate would target the one million small businesses organized as C-corporations.
Finally, his plan to create a second death tax through repealing step-up in basis will hit family-owned businesses and add an immense amount of tax complexity.
Most small businesses pay taxes on the individual side of the code. Biden's increase in the top marginal income tax rate to 39.6 percent will hit small business organized as “pass-throughs” like sole proprietorships, LLCs, partnerships, and S-corporations. Therefore, by raising to top marginal income tax rate, Biden is raising taxes on these small businesses.
Currently, 90 percent of small businesses are organized as pass-throughs, employing 54 percent of the private sector workforce. In 2017, individuals reported $1.03 trillion in net income from pass-through firms, accounting for 9.3 percent of income reported on individual tax returns.
According to the National Federation of Independent Business (NFIB), a 5 percent increase in the individual income tax rate has historically reduced capital investments made by small businesses by 10 percent. Simply put, a significant amount of small businesses and small business revenues would be negatively affected by a top marginal income tax increase from 37 percent to 39.6 percent.
While the Left and the media portray corporations as large, extremely profitable businesses, many corporations are small businesses.
One million small businesses with less than 500 employees are organized as C corporations, as noted by the Small Business Administration. According to the Congressional Research Service, 55 percent of C corporations had fewer than five employees, and 99 percent of C corporations had fewer than 500 employees.
So Biden's plan to raise the corporate income tax would not just impact big businesses – it would also harm the many small businesses structured as C corporations.
Finally, Biden’s repeal of step-up in basis will impose a second death tax on small, family-owned businesses. Repealing step-up in basis will impose the capital gains tax, which Biden has also proposed raising, on the unrealized gains of every asset owned by a taxpayer when they die. This will be separate from and in addition to the existing 40 percent Death Tax.
Biden’s repeal of stepped-up basis means that Americans will be forced to pay a capital gains tax on decades of “gains” that are actually just inflation. Assets such as homes, buildings, and land are typically held for decades.
Because many family-owned businesses are asset rich but cash poor, under the current law families already have to liquidate equipment, land, and other assets in order to pay the Death Tax. The second death tax will compound this problem, forcing family-owned businesses to sell a significant portion of their business or go into significant debt to pay their tax liability.
This law would also create new complexities for these taxpayers. As noted by an Ernst and Young study, “Family-owned businesses may also find it difficult to comply because of problems in determining the decedent’s basis and in valuing the bequeathed assets. It seems likely that these administrative problems could lead to costly disputes between taxpayers and the IRS.”
Tax compliance is already a significant burden for small businesses. Biden's plan will both increase taxes and increase tax complexity.
As stated by the NFIB, tax compliance costs are 67 percent higher for small businesses than for big businesses, costing small-business owners $18 to $19 billion per year. Paperwork costs often come to $74.24 per hour. It’s also important to remember that few small businesses have internal staff who can handle taxes. As the NFIB notes, “administrative tasks fall to owners, diverting them from their core businesses. Lacking tax expertise, 89 percent of owners rely on outside tax preparers.”
Biden needs to withdraw these tax increases if he wants to keep his word to the American people.
He NEVER HAD ANY intention of keeping this promise. .......................
A small bite here and a small bite there and eventually small businesses will be gone. Let’s hear it for the plan going so well.
All to clear the decks for the multinational megacorps who paid for him.
Small Businesses are the BACKBONE OF OUR ECONOMY.
The Dems must BREAK THIS BACKBONE TO STAY IN POWER.
When will the morons that vote for Dems realize that if you have a political party made up of poor disaffected people, you are going to make damn sure you NEVER RUN OUT OF POOR DISAFFECTED PEOPLE!.............
When are people going to realize that when a Leftist DEM moves its lips, it’s lying? OMFG......people actually believed this “pledge”?! LMAO.
well, that is the kind of political base that they believe is easier to control.
Promises made, promises denied. It IS standard ops with 99% of politicians. 😕🐂💨💩
And they’ll only raise taxes on the rich. /s
The ghost of FDR.
Congressional Rs need to fight His Senile Lying Fraudulency tooth and nail, scorched earth, not an inch yielded on any policy matter.
I didn't think so.
Yes, he reneged on his campaign promise, but unfortunately that is not a violation of anything I am aware of.
Part 2, everybody who is breathing is rich.
And The Big Guy gets his 10%.
it’s estimated more than 1/2 of businesses could close permanently due to covid restrictions. Now biden wants to finish off the majority of those that are left i guess
They keep fiddling with the tax code and it does more than just change taxes it changes organizational structures and the way money is invested, used and spent. Trump’s reduction on C corp taxes actually created an incentive to keep assets inside of the corporations. Why take it as personal income or dividends (where it is taxed twice) if you just leave it in the corporation, pay the low/lower rate, and reinvest it in - well anything. Equipment, cars, homes, marketing, expansion, advertising, open export markets etc.
Change it again a couple years later, it moves the entire economy. People will reorganize their businesses and make different decisions. Government works for the people, not the other way around. Too many politicians constantly worrying about how much the government should take. Absurdity.
I sometimes laugh at Warren’s “Billionaire tax”. So you have $1 billion in your family. Good for you! Now you want to take 6% a year on it? Cheaper to get a divorce, split the assets. You can still live together, be married in the religion of your choice - just change your paperwork on file with the government.
Biden’s Administration “We know most of you won’t make it- so here’s a kick in the teeth to take your mind off that fact”
Scumbag liars lie.
I did not believe him when he said it.
Xiden could not care less about keeping his word about anything, at least because he likely does not remember what he promised. All Xiden cares about is keeping his Chinese masters happy - and wrecking the US (same thing).
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