If Joe Biden wins the election next week and is sworn in as President, he will seek to change the way that small businesses taxation and regulation works. Former Vice President Biden and Senator Harris have both paid lip service to helping small businesses succeed but their plans tell a different story.
Biden tax plan
Simply put, the full Biden tax plan if implemented fully has the potential to bury small businesses. During this campaign, the Biden/Harris ticket’s rhetoric on taxes has changed from repealing all of Trump tax cuts to repealing just some of them for the “wealthy”. The problem is that Democrats have trouble distinguishing wealthy individuals from healthy small businesses. Many small businesses, among them S-corps, LLCs, and sole proprietors are called “pass-through” businesses, meaning their businesses taxes flow through and are reported on a business owner’s individual income tax form. Most of these small businesses were given a new 20% small business deduction, lower rates, and better capital expensing laws under the 2017 Tax Cuts and Jobs Act. Some of these tax changes were paid for by decreasing the number or amount of business tax deductions. Democrats have threatened to repeal the changes that lowered taxes if they sweep Congress and the Presidency in the upcoming elections, but would not restore many of the deductions, this means businesses would face even higher effective tax rates than before the tax cuts. In addition to paying higher income and business tax rates, small businesses will also be subject to higher death taxes and more regulations. Political drama has kept taxes from becoming a top tier issue, but President Biden is proposing the most radical tax plan on record for Democrats – they hope to raise taxes by over $3 trillion total on the American people.
Small businesses have thrived in an environment of low regulations and taxes. Last year, before the virus, small businesses set records on expansion and hiring. Small business confidence reached record highs on the NFIB small business survey before the virus hit. Polls show that most voters given this stellar record still trust President Trump over Biden to rebuild the economy. Regulations have been slashed under the Trump administration and red tape has been cut giving businesses the confidence to hire more workers and take more risks. According to the White House, for every new regulation put in place nearly 8 have been repealed during this administration. If Joe Biden is elected, we will likely see a much more burdensome regulatory environment for America’s small businesses.
The economy and small businesses
Independent analyses from both left and right leaning think tanks show that Biden’s plan would shrink the economy, and lower after-tax income on almost every group of Americans. Don’t expect the media to report on the economic impact of Biden’s taxes before the election though. These numbers have been publicly available for months, but the severity of the potential Biden tax increases and their effect on the economy has not seen the press it deserves. During debate and passage of the Trump tax cuts, media reported that the Trump tax cuts only helped the wealthy. After many independent analysis were conducted, even liberal outlets were forced to acknowledge that the Trump tax cuts helped middle class families. In addition to cutting the corporate and individual rates, the Trump tax cuts lowered marginal rates on the middle class, doubled the standard deduction, and increased the child tax credit. These undeniable facts led the New York Times to report “Most people got a tax cut” the Washington Post to report “most Americans received a tax cut” Jake Tapper from CNN to report “the facts are, most Americans got a tax cut” and H&R block to confirm “the vast majority of people did get a tax cut.”
Biden tax hikes on small businesses and corporations would have a negative affect on jobs and the economy as a whole. Taken together, the Biden tax hikes, increase in regulations, and as a result poorer economy overall would spell trouble for many of America’s small businesses.