Senate Democrats are set to introduce legislation that contains a $252 billion tax increase on over one million small businesses. With the economy struggling and inflation out of control, now is a particularly bad time to increase taxes on businesses. The Democrat tax increase also violates President Biden’s pledge: “Taxes on small businesses won’t go up.”
This tax increase would be included in the Democrat’s trillion-dollar tax and spend proposal that is being negotiated by Senate Majority Leader Chuck Schumer (D-NY) and Senator Joe Manchin (D-W.Va.).
Democrats are proposing to expand the 3.8 percent net investment income tax (NIIT) which was created under Obamacare. Currently, the tax is imposed on individuals’ passive business income, including interest, dividends, annuities, and royalties. It is not imposed on wage income or nonpassive business income. Democrats want to expand the tax to apply to nonpassive business income. This would apply to taxpayers filing as individuals making more than $400,000 and joint filers making more than $500,000.
While the Left argues this would close a “loophole,” it would actually be a substantive policy change that would increase taxes on small businesses across the country. When Congressional Democrats created this tax in 2010, they deliberately had it apply to passive income, not active business income because of the concern that it would raise taxes on small businesses.
Below is a list of the number of small businesses that would see a tax increase nationwide and in each state. This is not an exhaustive list, as it only includes data from filers with a reported net income of over $500,000 from a partnership or S-corporation. There would be even more filers subject to the Democrats’ tax hike.
STATE | Number of Filers Subject to Tax Hike |
United States | 992,740 |
Alabama | 9,700 |
Alaska | 1,820 |
Arizona | 17,000 |
Arkansas | 4,930 |
California | 148,000 |
Colorado | 22,330 |
Connecticut | 17,540 |
Delaware | 2,200 |
District of Columbia | 4,180 |
Florida | 84,540 |
Georgia | 27,910 |
Hawaii | 2,680 |
Idaho | 4,320 |
Illinois | 40,960 |
Indiana | 13,740 |
Iowa | 6,360 |
Kansas | 7,210 |
Kentucky | 7,250 |
Louisiana | 10,420 |
Maine | 2,610 |
Maryland | 19,120 |
Massachusetts | 31,050 |
Michigan | 22,350 |
Minnesota | 16,000 |
Mississippi | 3,980 |
Missouri | 12,340 |
Montana | 2,810 |
Nebraska | 4,620 |
Nevada | 9,220 |
New Hampshire | 3,960 |
New Jersey | 38,220 |
New Mexico | 3,080 |
New York | 85,870 |
North Carolina | 24,700 |
North Dakota | 2,200 |
Ohio | 23,760 |
Oklahoma | 7,780 |
Oregon | 10,170 |
Pennsylvania | 32,600 |
Rhode Island | 2,720 |
South Carolina | 11,190 |
South Dakota | 2,650 |
Tennessee | 15,120 |
Texas | 88,200 |
Utah | 8,950 |
Vermont | 1,400 |
Virginia | 25,120 |
Washington | 25,090 |
West Virginia | 1,870 |
Wisconsin | 12,750 |
Wyoming | 2,300 |