More than 1 million small businesses would be hit by President Joe Biden’s corporate tax rate increases, according to an analysis prepared by the U.S. Chamber of Commerce. This study indicates that the Biden administration’s claim that their tax rate increase would only hit the largest corporations is false.
The Chamber analyzed IRS and Census data and found that 1.4 million small businesses would be hit by the corporate tax rate increase. Although many small businesses file as sole proprietors, LLCs, or S-Corps, and pay individual income taxes, many are structured as C-Corps and are subject to the corporate income tax. According to the Chamber, the nation’s 1.4 million C-Corps employ about 13 million workers. Over 84% of these businesses have fewer than 20 employees. None of them are the big corporations Biden says do not pay their fair share.
But these small businesses would be hit by the higher corporate tax rate. Many of them are neighborhood retailers, small manufacturers, and providers of professional services. They represent every sector of the economy, including agriculture, retail, construction, healthcare, real estate, and more.
The Chamber analysis shows the substantial number of small businesses in each state that would be forced to pay the higher corporate tax rate. For example, the number of small firms hit by the higher rate would be 21,646 in Arizona, 35,475 in Pennsylvania, and 45,053 in New Jersey.
Small businesses have traditionally been a major source of job growth in the economy, but the Biden tax increase would hit these job creators with the highest combined federal-state tax rate in the industrialized world. Even at 25%, the combined federal-state rate would be higher than most other countries.
America’s small businesses have already been hit hard by the pandemic. According to one estimate, one-third of small businesses closed during the pandemic. Today, many small businesses are struggling to get back on their feet. Many more are leading the economic recovery.
The last thing these small firms need right now is a corporate tax rate increase. Instead of raising tax rates on these job creators, let’s focus on getting the coronavirus under control and getting the economy going again.
Bruce Thompson was a U.S. Senate aide, an assistant secretary of the treasury for legislative affairs, and a director of government relations for Merrill Lynch for 22 years.
