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Washington Examiner: Democratic SME Additional Taxes Will Crush Main Street Recovery

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People are upset by the pain of pumps, the impact of grocery aisles, and the continuous erosion of salaries. Buying a home is becoming increasingly out of reach for many families. Many people struggle just to pay for their monthly electricity bill.

Government priorities help ease the financial burden many face, as inflation continues to be hit by runaway inflation, lower real wages, and increased likelihood of a recession. Should be that. Instead, Democrats are trying to raise taxes, kill jobs, choke wages, and implement price controls.

One of the murder tax increases under consideration is the expansion of net investment income tax on so-called “pass-through businesses,” that is, businesses where income is levied on the owner’s personal tax return. NIIT is a 3.8% tax primarily on passive income, but the Democratic Party has proposed expanding the tax to apply to active pass-through income (or what remains after the company pays the cost). I am. This proposal is essentially an extra charge for SMEs, which will punish the most affordable job creators.

The Democratic Party wants to pass this business tax surcharge in addition to the federal income tax that the employer already has. Currently, business owners are required to pay up to 37% of their share of the net profit of their business. Even if you decide to reinvest all those profits in your business and take nothing for yourself. Enhanced NIIT means that employers can face marginal tax rates of up to 40.8%. This was before the state income tax was taken into account. Forty-three states have personal income tax, with an average maximum marginal tax rate of 6.4%. So, after all, pass-through employers could be slapped at a total marginal tax rate of 47.2%. moreover.

This small business surcharge punishes hard work, investment, growth, and successful small businesses by removing nearly half (or more) of what the owner makes. This is a success tax that imposes a penalty even if a small business achieves a moderate level of success. Hitting these businesses with a large new tax hike, which the Independent Taxation Joint Commission estimates totaling $ 252 billion, will hurt the very people Democrats say they defend, workers and entrepreneurs. prize.

It is also a marriage tax that punishes marriage by treating co-declared spouses and business owners who provide more income than unmarried people.

In addition, higher taxes on producers affect everyone, workers and consumers, business owners and non-employers alike. If the Democratic Party gives way, companies will have no choice but to raise prices. This is bad news for economies that are already looking to a recession.

Why do we make it difficult for SMEs and workers to compete, continue to succeed, and help drive us out of the current economic bog? This catastrophic tax and overspending strategy goes against logic.

There are more than 32 million SMEs in the United States. Together, they support over 61,000,000 jobs. They are essential for rebuilding and strengthening our economy. However, labor shortages, rising inflation, the collapse of new regulations and supply chain disruptions have made many SMEs struggling to maintain ups and downs. Indeed, the National Federation of Independent Enterprises has found that SME optimism is at historically low levels and expectations for better conditions are deteriorating every month this year.

Democratic SME surcharges will fill the main street even further. It is not in the best interests of the business owner, American family, or economy.

With a consumer price index of 9.1% and a wholesale inflation of 11.3%, it is clear that the Democratic Party’s irresponsible spending and proposed tax increases need to be permanently braked. Otherwise, there is a risk of accelerating the path of inflation and recession spikes in the wrong direction.

Mike Klapo is a senator in Idaho and a ranking member of the Senate Finance Commission. He is also a member and former chairman of the Senate Banking Commission, a senior member of the Senate Budget Committee, and a member of the Senate Taxation Joint Committee.