Biden’s tax plan will take a bite out of small businesses and destroy the economy taking down the middle class with it.
For decades now, the middle class has been shrinking, stagnating, and becoming less and less secure, even as the world enters its tenth year of economic growth and the U.S. experiences a decade-long bull market. While profitable for the upper class, the middle class continues to struggle. Enter Joe Biden lied during the NBC Democratic presidential debate when he said that taxes on small businesses would not go up in a Biden administration.
Well, he lied…
The President Elect has been open on his plans to hike taxes on big business, but until recently has had little to say on what his policies would mean for America’s 30 million owners of restaurants, construction businesses, and the other proprietorships that have long generated most of America’s new jobs. Particularly during these repeated shut-downs resulting from COVID-19.
We now know that he’s gunning to repeal the Tax Cuts and Jobs Act, effectively raising taxes on already-struggling small businesses by raising marginal income tax rates and eliminating the 20 percent small business deduction. In the midst of yet another nationwide shutdown, experts agree that this will be the final nail in the coffin for many, many small businesses that currently pay taxes through the individual tax system. If Biden gets his way, marginal tax rates will go up across the board, hitting millions of small businesses – and hitting them hard!
Biden’s threatened repeal of TCJA would also eliminate the law’s 20 percent deduction for small business pass-through income. There are nearly 30 million pass-through entities in the United States. Take a moment and think about that. When corporate taxes increase from 21 percent to 28 percent, this will severely impact small businesses organized as corporations. Biden’s corporate tax hike will also directly cause utility bills to rise in all 50 states, hitting small businesses yet again with higher electric, gas, and water bills.
Middle-class income growth has been subpar for decades. Not only has it failed to keep pace with income growth at the top, but it has actually lagged income growth among the bottom fifth of the income distribution. Specifically, income growth for the middle 60 percent of the distribution (those with incomes between $40,00 and $154,000 for a household of three) grew by 47 percent from 1979 to 2016 after accounting for taxes and transfers.
For many generations, being in the middle class meant the assurance of living in a comfortable house and affording a rewarding lifestyle. However, there are now signs that this bedrock of our democracies and economic growth is on the verge of extinction. By early 2021, many middle-income households face a considerable risk of sliding down into the lower-income class, a scenario that has been building up over the past two decades.