Small Business Owners Fight a New $200 Billion Tax That Would Impact Main Street
Updated August 11, 2022
With surging inflation, high gas prices, and workforce shortages, small businesses have suffered enough. But now, Congress is considering a brand-new tax on small businesses, wrongly characterizing it as closing of a tax loophole.
The U.S. House is soon expected to consider a revived Build Back Better Act. To finance this massive spending plan, some lawmakers have proposed to raise $200 billion with a new 3.8% tax on many small businesses. Fortunately, the latest version of the massive spending bill no longer includes the new 3.8% tax but it is likely to return as an amendment or in future legislation. Instead, the direct tax was replaced with what is unfortunately expected to be an indirect tax. It doubles the size of the nation’s Internal Revenue Service, and stresses enforcement, audits, and examinations over much-needed attention to backlogs and compliance assistance.
While members of Congress may wrongly characterize new small business taxes it as the closing of a loophole, the proposed 3.8% small business tax, also known as the Small Business Surtax, would have a devastating impact on Main Street, which is currently facing unprecedented challenges. If it returns to Congress’ spending bill, it would apply to small businesses organized as pass-throughs – LLCs, Sole Proprietorships, and others – on business income above $400,000. Because the threshold isn’t indexed for inflation, the tax will hit an increasing number of small business owners and an increasing percentage of pass-through business income every year.
Tell the U.S. House to say no to this new tax