Small business tax increase: The new tax will hit 1.9 million business

Joe Biden

 

Small business tax increase: The new tax will hit 1.9 million businesses and tax people who inherit their loved ones' businesses

During the campaign, Biden was asked if he would raise taxes on small businesses.

On February 20, 2020, he said: No, small business taxes will not rise.

House Democrats will vote next week on a tax-raising framework.

Biden wants to raise the highest marginal income tax rate to 39.6 percent from 37 percent.

Americans for Tax Reform calculates that 1.9 million small businesses will be affected.

Moreover, Biden plans to remove "ascension" based on inherited property.

The rule was that the person who inherits a property could sell it immediately without paying any loophole Biden wants to clear.

The White House proposal will begin working through Congress next week.

The Senate last week passed a $3.5 trillion budget resolution that would pave the way for legislation based on Biden's plans, and the Democratic-majority House of Representatives is expected to vote on the budget resolution next week, meaning it is almost sure to pass.

The scheme will see the higher marginal tax rate rise from 37 percent to 39.6 percent. 

On Friday, Joe Biden promised during the campaign not to raise taxes on small businesses — but his new plan would see an increase of 1.9 million.

The US Tax Reform Research Foundation has calculated that 1.9 million small businesses will be affected. Most small business owners run their companies as C corporations. They are separate entities from the owners' finances, and they protect the owners from any personal liability should their business fail.

Biden wants C-corps to see a 7 percent federal tax jump, from the current rate of 21 percent to 28 percent.

In his debate with Donald Trump on February 20, 2020, Biden was asked directly during the election campaign whether taxes would rise on small businesses.

MSNBC's Haley Jackson said: "I want to ask you about Latinos owning one in four new small businesses in the United States. Many have benefited from President Trump's tax cuts, and they may be hesitant about new taxes or regulations. Will taxes rise on their businesses? ? minor under your management?

Biden replied: No. Taxes for small businesses will not go up.

Small businesses, pictured in San Francisco in April, have suffered tremendously during the pandemic. Now many of them are facing an increase in their tax burden.

The administration on Thursday defended the switch and insisted the tax increases were necessary.

"President Biden's small business agenda is about more than just helping companies move to the other side of this crisis," said Wally Ademo, deputy secretary of the Treasury.

"It's about building back better and creating an economy that is fair for all Americans."

The administration also said that 3.9 million small business owners would receive tax breaks under Biden's proposals to extend child tax benefits and Affordable Care Act subsidies included in the President's Coronavirus Relief Act.