1.4 million small businesses organized as C-corporations will face a tax hike under President Biden’s corporate income tax hike, according to the U.S. Chamber’s analysis of IRS and Census data.
President Biden’s proposal would raise the corporate income tax rate from 21 to 28 percent. What the administration fails to mention is that numerous small businesses are organized as C-corporations. Thus, the tax rate these small businesses pay would be increased by one-third. The rate would also be higher than Communist China’s corporate income tax, which stands at 25 percent. This comes at a time when main street businesses are still trying to recover from months of shutdowns, restrictions, and increased costs.
To be clear, the corporate tax hike will not be the only tax increase on small businesses. Biden’s increase in the top marginal income tax rate to 39.6 percent will hit small business organized as sole proprietorships, LLCs, partnerships and S-corporations. Also, Biden seeks to eliminate stepped up basis, creating a second death tax on small business. Thus, the amount of small businesses negatively affected by Biden’s tax hikes will certainly exceed 1.4 million.
As noted by the U.S. Chamber of Commerce, the corporate income tax hike will hurt small businesses in every sector of the economy: “agriculture, construction, health care, real estate, finance, and more.”
The analysis also details the state-by-state impact of this tax hike on small businesses:
- In Arizona, 31,315 employers will see their taxes increased, including 21,646 small businesses with fewer than 500 employees. Under Joe Biden’s plan, Arizona’s combined state and federal corporate tax rate would be 31.5 percent.
- In West Virginia, 6,081 employers will face tax hikes, including 4,203 small businesses. West Virginia’s state corporate tax rate, in addition to the federal 28 percent, would result in a 32.7 percent tax rate for these small businesses.
- In New Jersey, which has the highest corporate tax rate, 45,053 small businesses would face a combined state and federal corporate tax rate of 36.3 percent.
Construction, retail trade, and professional/scientific/technical service industries across the nation would be hit the hardest by Biden’s tax hike.
Biden’s corporate tax hike will lead to fewer jobs and lower wages. In a 2017 report, Stephen Entin of the Tax Foundation notes that 70% of corporate taxes are borne by labor. Other economists argue that anywhere from 20% to 50%, to even 100% of the tax hits workers.
During his campaign, President Joe Biden promised the American people that he would not raise taxes on small businesses. The promise was made on Feb. 20, 2020 before a national audience during a Democratic debate hosted by MSNBC:
MSNBC’s Hallie Jackson: “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: “No. Taxes on small businesses won’t go up.”
Now that he is in office, he has shown no sign of keeping this promise. Many of the tax increases proposed by Biden including the corporate income tax hike directly violate this pledge.
Despite Democrats’ claims, millions of main street businesses will foot the bill for their wasteful spending projects.