by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Joe Biden is planning on increasing taxes levied on small businesses – despite explicitly promising on the campaign trail not to do so.
The White House proposal – backed by the president himself – will begin winding its way through Congress next week.
Last week the Senate passed a $3.5 trillion budget resolution that would pave the way for legislation based on Biden’s plans, and the Democrat-majority House is expected to vote on the budget resolution next week, meaning it will almost certainly pass.
The scheme will see the top marginal tax rate rise from 37 per cent to 39.6 per cent. A marginal tax rate is the additional amount of tax paid on every dollar of income above a previous tax bracket.
The think tank Americans For Tax Reform calculated that 1.9 million small businesses will be affected.
Most are small business owners who run their enterprises as C-corporations. They are entities which sit separately from their owners finances, and shield their owners from any personal liability should their businesses fail.
Biden wants C-corps to be hit by a seven per cent federal tax jump, from the current rate of 21 per cent to 28 per cent.
Biden was directly asked on the campaign trail, in his February 20, 2020, debate with Donald Trump, whether taxes would rise on small businesses.
MSNBC’s Hallie Jackson said: ‘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 replied: ‘No. Taxes on small businesses won’t go up.’
On Thursday the administration defended the u-turn, insisting the tax hike was necessary.