During the 2020 campaign Joe Biden made a promise to voters that he would not raise taxes on small businesses. Biden said: “Taxes on small businesses won’t go up.” But his official budget to be unveiled Thursday breaks that promise.
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 said: “No. Taxes on small businesses won’t go up.”
But Biden now wants to impose tax increases on small businesses.
1. Biden’s budget calls for an increase in the top marginal income tax rate from 37% to 39.6%. This will hit Main Street hard: small business sole proprietorships, LLCs, partnerships and S-corporations will all be hit.
2. Biden’s budget imposes a corporate income tax rate hike from 21% to 28%. This tax increase will hit small employers organized as C-corporations. According to the US Small Business Administration, 24.8% of C-Corporations are small employers.
3. Biden’s budget raises Medicare taxes by 31% — from 3.8% to 5.0% — while aggressively widening the net of taxable income. As noted by Wall Street Journal tax reporter Richard Rubin, “these taxes don’t have an income cap and effectively create a new top tax bracket.”
This tax hike combined with the increase in the marginal income tax rate would saddle the U.S. with the highest income tax rate in decades. As Rubin notes:
“If Mr. Biden again proposes raising the top marginal income tax to 39.6% from 37%, he would be seeking a combined top federal tax rate of 44.6%, higher than at any point since the mid-1980s. If that became law, the combined marginal tax rate on top earners would exceed 50% in many states.“
To honor his small business tax pledge to the American people, Biden must forego the above tax increases.