In a May 22 CNBC interview, former Vice President Joe Biden confirmed once again that he wants to repeal the Tax Cuts & Jobs Act (TCJA) if elected this November. During that interview Biden also pledged he will not raise taxes on households making less than $400,000 annually.
Biden’s campaign tax proposal already violates that commitment. Joe Biden is calling for a corporate tax hike that takes the rate from 21% to 28%, which would give the U.S. a higher corporate tax rate than China and the European average. The burden of this corporate rate hike, the Joint Committee on Taxation is likely to confirm, will be borne in part by households earning less than $400,000.
Whereas Biden’s corporate rate hike would reduce the earnings of C corporations, his proposal to raise personal income tax rates for upper income households, along with the repeal of the TCJA’s 20% passthrough deduction, would also diminish the job-creating and sustaining capacity of millions of small businesses that file under the individual income tax system.
Marketing tax hikes that harm small businesses as a way to target rich people has long been a go-to strategy for those pushing for higher taxes. An example of this approach was on display this week in Oregon’s largest city, where voters in Portland and surrounding counties approved Measure 26-210, a regional income tax hike on upper income households.
The income tax hike approved by Portland area voters will soon transfer $250 million annually from household and employer bank accounts to government coffers. In reporting on the passage of these tax hikes, the Associated Press misleadingly described the approved income tax hike as “a 1% marginal income tax on the wealthiest residents.”
In reality this income tax is applied irrespective of wealth, to individual taxpayers who earn more than $125,000 and joint filers earning more than $200,000. Yet this income tax hike, sold as a way to raise taxes exclusively on the well off, will also hit more than 30,000 small businesses across the three counties comprising the metro Portland region: Multnomah, Clackamas, and Washington.
Measure 26-210’s supporters, the most prominent being unions and progressive organizations, celebrated its passage this week, touting the fact that it will take more income from certain households. What is not advertised by this soak-the-rich messaging is the fact that this tax hike will also reduce the job-sustaining capacity of tens of thousands of small businesses in Portland and surrounding counties.
According to IRS data, more than 13,100 sole proprietors across the three affected counties file under the individual income tax system and would be hit by the income tax hike approved this week. In addition to those sole proprietors, there are also more than 18,000 S corporation and partnership owners across the three affected counties that would also be adversely impacted by Measure 26-210.
The same inaccuracy in tax policy advertising and marketing is also seen coming from Joe Biden’s presidential campaign. Biden portrays his proposal to repeal the TCJA as a way to hike taxes strictly on the rich. Biden’s proposed tax hike would, however, hit the vast majority of Americans.
The hard cold truth, confirmed by non-partisan scorekeepers, is that Biden’s proposal to repeal the TCJA would impose a net tax hike on more than 80% of American households. Not only that, the higher personal income tax rates for upper income levels proposed by Biden, though intended to disproportionately harm high income households, would also hit millions of small businesses who file under the individual income tax system.
Joe Biden’s tax plan, which is considered more moderate than what many congressional Democrats desire, is still “the most expensive Democratic tax plan we’ve seen from any Democratic candidate in recent history.” CNBC’s Robert Frank noted on Friday.
“Hillary Clinton’s plan was $1.5 trillion,” Frank added, whereas “Biden’s is $4 trillion and basically it’s because he’s raising the ordinary income tax rate on those who make more than $400,000, he’s raising the capital gains rate to be 39.6% from 20% — that is by far the biggest cap capital gains tax increase ever, and then he’s raising the corporate income tax rate from 21% to 28%.
Unlike businesses in most states, Biden’s tax hike would do additional harm to Oregon employers, as it would come on top of the gross receipts tax hike enacted by Governor Kate Brown that took effect this year. At a time when many companies are losing money, Oregon’s new gross receipts tax (one of only seven such such taxes in the entire country) will apply to business income irrespective of whether a profit is generated. This means businesses that are losing money, and there are many of those right now, will still face a gross receipts tax liability when many can least afford it.
Oregon taxpayers – individuals, families, and employers – have faced a multi-year tax and regulatory onslaught from state legislators in Salem. Now taxpayers in Portland and the surrounding area will be hit with a locally-imposed income tax hike. If Joe Biden wins in November and has a Democrat-led congress to work with, Oregonians can expect a federal tax hike in 2021 to complement the state and local tax increases enacted in 2020.
Source: Forbes Business