Joe Biden on Thursday proposed raising the corporate tax rate from 21 percent to 28 percent, a scheme that will likely burden both large and small businesses.
While the term “corporation” is widely used to depict large companies such as Microsoft, Walmart, and McDonald’s, C-corporations are both small and large businesses, the most prevalent of corporations. Individual shareholders of C-corporations already have profits taxed both on a corporate and personal level (double taxation).
In addition, small businesses account for 65.1 percent of net new jobs created from 2000 to 2019 and comprise 99.7 percent of firms with paid employees, according to the Small Business Administration (SBA). About 31 million small businesses exist in the United States. Eighty-one percent, or 25.7 million, have no employees (run and operated by a single person).
Biden announced a proposal on Thursday in Philadelphia to raise the corporate income tax by seven points, mostly erasing the Trump-era tax cuts Republicans enacted.
“The Budget would set the corporate tax rate at 28 percent, still well below the 35 percent rate that prevailed prior to the 2017 tax law,” the proposal reads.
During his remarks, Biden did not appear to clarify if his proposal would only impact big businesses that have the resources to avoid as many taxes as possible. However, he did mention his readiness to negotiate the budget with House Speaker Kevin McCarthy (R-CA).
“I’m ready to meet with the speaker anytime,” Biden said as he rolled out $6.9 trillion budget proposal. “My budget reflects what we can do to lift the burden on hard-working Americans.”
Though Biden appeared excited to raise corporate taxes, House Republican stand in the way of allowing the measure to become law. Republican Conference Chair Rep. Elise Stefanik (R-NY) told reporters Thursday the budget should be small-business friendly.
“When I think about the budget challenges we face, I think about hardworking families in my district, hardworking farmers, small business owners,” she said. “When they are facing challenges, they open their books and look for common sense ways to find savings to ensure that they can continue to grow for future generations.”
Some Democrats appear to be worried about the tax hike proposal in an election year. Raising taxes on small businesses would likely impact about 31 million small businesses and their prospects of hiring and employing workers — many of whom vote.
Embattled Democrat senators up for reelection, such as Sen Joe Manchin (D-WV), Sen. Jon Tester (D-MT), and Sherrod Brown (D-OH), appear to be the most worried.
“I don’t know what he’s going to raise taxes on, that’s critical,” Tester responded when asked about Biden’s tax increase promises last week.
“If it’s about tax equity we’ll take a look at it. If it’s about across-the-board tax increases for everybody it’s probably the wrong time to do it because of inflation,” he added.