Biden’s tax hikes will hit small businesses
In remarks in Pittsburgh on Wednesday, President Biden announced his roughly $2 trillion tax plan, which, if passed, would be the biggest tax increase in the country in generations.
Mr. Biden‘s tax hikes wouldn’t only impact major corporations as he implies. They’d also devastate many small business job creators at the worst possible time as they emerge wounded from the coronavirus pandemic and associated business restrictions.
In his Wednesday remarks, Mr. Biden called for raising the corporate tax rate by 33 percent — a move that will impact about one million American small businesses structured as corporations. This huge tax increase would make it far more difficult for affected employers to compete with their international counterparts that often face far lower burdens.
Yet Mr. Biden‘s corporate tax announcement is just table ante for what small businesses are about to face. Biden‘s broader tax agenda reveals that the president has many more small business tax increases up his sleeve.
Mr. Biden‘s tax plan calls for raising individual income tax and lowering the income thresholds under which tax rates apply. Such changes would raise taxes on the vast majority of small businesses that are structured as pass-through entities.
According to Bloomberg, Mr. Biden also wants to curtail the 20 percent small business tax deduction on which about 15 million small businesses rely. Small employers across the country, including American manufacturers such as Guy Chemical in Pennsylvania and HT Metals in Arizona, have used this deduction to expand, hire and raise wages.
Mr. Biden is also in favor of nearly doubling the capital gains rate for successful pass-through small businesses, hitting employers who have worked their whole lives to build the value of their companies especially hard. His likely support of Senate Democrats’ plans, announced this week, to curtail so-called “step up” capital gains would disincentivize a major justification for starting a small business — to create a lasting family legacy.
In sum, Mr. Biden’s full tax plan — not just the tip of the iceberg he announced on Wednesday — would suck hundreds of billions of dollars from Main Street to Washington, D.C.
For some small businesses, the double-whammy of higher taxes and customers with less disposable income will put them out of business. For others, it will make doing business a lot harder — as if that’s possible after what’s happened over the last year.
Mr. Biden wants to nationalize these small business earnings to pay for “infrastructure” spending, which includes further socializing American health care, child care, and higher education. His team has reportedly been studying the economic record of former President Franklin D. Roosevelt, whose big government micromanagement of the economy under the New Deal prolonged the Great Depression.
“This is the first time we’ve been able to, since the Johnson administration and maybe even before that, to begin to change the paradigm,” Mr. Biden said in March.
But does the paradigm need changing? Between 2017 and 2019, small businesses and hardworking Americans enjoyed historic economic advancement fueled by former President Trump’s tax cuts and deregulation. Economic growth surged, the unemployment rate fell to generational lows, income inequality plummeted, and 6.6 million Americans were lifted out of poverty. Real median household income rose $6,000 — more than five times as much as the preceding eight years combined.
The best cure for today’s social and economic problems is robust job creation. By targeting small business job creators with new taxes, Mr. Biden threatens to worsen the problems he is trying to solve.
Alfredo Ortiz is the president and CEO of the Job Creators Network.