Business Groups Act Quickly To Oppose Taxes Increases In White House Budget
President Joe Biden released his fiscal year 2024 budget proposal on March 8. White House officials said the plan would reduce the federal budget deficits by nearly $3 trillion over a decade by cutting unnecessary spending and increasing some taxes on businesses.
Among the tax increases the president called on Congress to approve are plans to:
- Raise the corporate income tax from 21 percent to 28 percent, which will affect more than one million smaller businesses that are organized as C corporations;
- End certain tax programs for oil and gas companies, which will raise taxes on energy producers by $37 billion;
- Impose a 25 percent minimum tax on taxpayers who pay through the individual income tax system and who earn more than $100 million a year, increasing taxes on S corporations by nearly $225 billion; and
- Raise estate and gift taxes, which will make it more difficult for family owned businesses to stay afloat.
The budget also includes a plan to increase Medicare taxes from 3.8 percent to five percent on people who earn more than $400,00 annually. As the S Corp Association reminded readers last week, this Net Investment Income Tax would include the active income of pass-through business owners. As such, the provision would raise the top rate paid on all S corporation income to 42 percent, or twice the current rate on large public companies. When rates go up in 2026, the top S corporation rate would rise to nearly 45 percent.
The S Corp Association estimated the total tax increase on small businesses for this provision alone would exceed $300 billion. That’s why the Metals Service Center Institute, S Corp Association, and dozens of other organizations acted quickly to write and send a letter to the leaders of the U.S. House and Senate budget and tax writing committees asking that they oppose these tax increase.
The letter, available here, argued small businesses “already face a massive tax increase when the small and family-owned business deduction, the lower individual rates, and other individual provisions expire beginning in 2026. The tax hikes proposed in today’s budget release would come on top of these pending tax increases … 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.”
As The New York Times said, the spending plan has “no chance of driving tax or spending decisions in Congress this year” since it clashes with priorities of Republicans, who control the U.S. House of Representatives. For their part, Republicans are expected to counter this spring with a budget proposal that would reduce spending on health care, food assistance, housing programs, and foreign aid.