President Biden unveiled his budget proposal for the upcoming fiscal year yesterday and, as we predicted, it’s packed with tax hikes and other poorly-conceived policies that directly target the Main Street business community. The document calls for $4 trillion in tax hikes, nearly half of which would fall on the backs of small and family-owned businesses.

In response, S-Corp joined with 85 trade associations yesterday – including the American Farm Bureau Federation, Associated General Contractors, and the National Restaurant Association – to urge lawmakers to strongly oppose these provisions. The letter reads:

The President claims his budget will only go after “super-wealthy” tax cheats, but it targets over one million small and family-owned businesses. It would hurt their ability to hire new employees, offer better benefits, and invest in the equipment and technology necessary to sustain their businesses and help them grow. The President might claim his tax proposals close loopholes, but America’s small and family-owned businesses are not a loophole.

…the President’s budget would raise the top rates paid by pass-through businesses and corporations alike, increase the Net Investment Income Tax and expand it to cover the active business income of pass-through business owners, make permanent the harmful loss limitation rules, make it harder for family-owned businesses to survive from one generation to the next by gutting the existing grantor trust rules, nearly double the tax rate on capital gains, and impose a new minimum tax on larger family businesses that appears to redefine how income is measured. The combination of these policies would raise top tax rates on these businesses to close to 50 percent, both on their operating profits and on any gain when they sell the company.

It also points out that the proposed tax hikes are in addition to those resulting from the upcoming “fiscal cliff”:

Our members already face a massive tax increase when the small and family-owned business deduction, the lower individual rates, and other individual provisions expire beginning in 2026. The tax hikes proposed in today’s budget release would come on top of these pending tax increases, adding to the threat our members face.

Finally, the letter highlights a point we made last month – that individuals and pass-through businesses already “pay their fare share,” evidenced by record-high tax collections:

The huge deficits forecast in the President’s budget are not the result of a revenue shortage. The Congressional Budget Office reports that federal tax collections were nearly $5 trillion last year, a record high and a 47-percent increase from when the Tax Cuts and Jobs Act (TCJA) was enacted in 2017. Taxes paid by individuals and pass-through businesses reached a record $2.6 trillion last year and represented their largest share of total taxes paid in any year since the TCJA.

The good news is this budget is going nowhere in the Republican-controlled House.  The bad news is this week’s reprise of the harmful policies from the past two years, coupled with the continued rhetorical focus on tax cheats and loopholes, is further proof that no bad idea ever truly dies in Washington. We expect to continue the fight against these ill-conceived provisions for years to come.

Click here to download a full copy of the letter