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S Corp, Main Street trade groups against Biden’s new budget proposal

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Associations | Legal
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The S Corporation Association and 72 other associations and trade groups have sent a letter to Congress members that highlights why they believe President Joe Biden’s federal budget proposal, released on March 9, would hurt individual- and family-owned businesses and should be strongly opposed.

Calling the budget plan a continuance of the Biden administration’s attack on small business, S Corp said in its letter the more than $4 trillion in proposed tax hikes target businesses “responsible for most of the jobs and growth in this country and come at a time when federal tax collections are at record levels.”

“The President claims his budget will only go after ‘super-wealthy’ tax cheats, but it targets over 1 million small and family-owned businesses,” the letter states. “It would hurt their ability to hire new employees, offer better benefits, and invest in the equipment and technology necessary to sustain their businesses and help them grow. The President might claim his tax proposals close loopholes, but America’s small and family-owned businesses are not a loophole.”

In a March 10 statement, White House Press Secretary Karine Jean-Pierre said Republicans are against the budget because they want to make sure “the super-wealthy and corporate special interests can enjoy their tax breaks and cheat on their taxes.”

“Yesterday, the President laid out his budget – one that lowers costs for families, protects Medicare and Social Security, invests in more manufacturing positions the United States to win the global competition with China, strengthens our defense, funds the police, and reinforces the border,” she said. “This is what he values – and poll after poll shows Americans agree.”

The Associated Press reports that Biden’s budget plan would cut deficits by $2.9 trillion over the next decade — a proposal that Republicans already intend to reject with no counteroffer so far.

The Biden blueprint includes tax increases on the wealthy that could form the policy backbone of the president’s yet-to-be-declared campaign for reelection in 2024, the AP wrote.

The deficits forecast in the president’s budget are not the result of a revenue shortage, according to S Corp. They said the Congressional Budget Office reports that federal tax collections were nearly $5 trillion last year, a record high and a 47% increase from when the Tax Cuts and Jobs Act (TCJA) was enacted in 2017. And taxes paid by individuals and pass-through businesses reached a record $2.6 trillion last year and represented their largest share of total taxes paid in any year since the TCJA.

According to S Corp, Biden’s budget would raise the top rates paid by pass-through businesses and corporations alike and:

    • “Increase the Net Investment Income Tax and expand it to cover the active business income of pass-through business owners;
    • “Make permanent the harmful loss limitation rules;
    • “Make it harder for family-owned businesses to survive from one generation to the next by gutting the existing grantor trust rules;
    • “Nearly double the tax rate on capital gains; and
    • “Impose a new minimum tax on larger family businesses that appear to redefine how income is measured.”

“The combination of these policies would raise top tax rates on these businesses to close to 50%, both on their operating profits and on any gain when they sell the company,” S Corp wrote. “These policies should not be considered in a vacuum. Layered on top of past proposals put forward by the President, the Chairman of the Senate Finance Committee, and the Ranking Member of the House Ways and Means Committee, they would raise top marginal tax rates on small and family-owned businesses from today’s 29.6% to a staggering 575. Add in state taxes and most businesses would face rates exceeding 60%. Businesses in California would face rates of over 70%.”

The letter notes that S Corp members are already facing a massive tax increase when the small and family-owned business deduction, the lower individual rates, and other individual provisions expire beginning in 2026.

“Instead of seeking ever higher taxes from the pass-through business sector, the Administration should work with Congress to make the small and family-owned business deduction permanent and provide these business owners with some certainty following three years of COVID, slow growth, high inflation, and supply-chain disruptions,” the letter states.

The letter concludes by stating that the trade groups who signed, including the Society of Collision Repair Specialists (SCRS) and Tire Industry Association (TIA) — on behalf of millions of businesses and workers they represent — ask Congress “to stand with Main Street and strongly oppose raising taxes on individually- and family-owned businesses.”


Featured image credit: Mikhail Makarov/iStock

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