PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

BAD IDEA: Raising Taxes While Economy Tries to Recover From a Pandemic

By at 17 August, 2021, 12:35 pm

by Raymond J. Keating –

Raising taxes as the economy tries to recover from a pandemic is not a smart idea.

Small business owners certainly understand this bit of economic common sense. Unfortunately, politicians often lack economic common sense, and hence, we have President Joe Biden and assorted Members of Congress looking to inflict additional economic harm via tax increases.

In fact, the list of tax increases being considered is striking, from higher personal income taxes to higher corporate income taxes to higher capital gains taxes, and more. See SBE Council briefs on assorted tax increase proposals here, here and here.

Small business owners, however, certainly grasp the negatives of government imposing additional costs as entrepreneurs, businesses, their employees and investors work to bring our economy back. As noted in SBE Council’s recent survey of small business owners, the following was reported:

● “Over three-quarters of family/private enterprises, farmers & ranchers, and non- profits took a severe hit due to the COVID-19 pandemic.”

● “61% of small business owners believe tax increases and new regulations will hurt their ability to recover from the pandemic.”

● “By a wide margin (65%), respondents believe NO federal tax increases should be considered until the economy has had time to fully recover from COVID-19.”

● On the proposal to eliminate the step-up basis on capital gains at death, 78% “believe retroactive capital gains taxes on assets passed on to beneficiaries following a business owner’s death will have crippling consequences for small businesses, as well as their employees and the communities they call home.”

● In addition, “Nearly, or more than half, of respondents believe having to pay retroactive capital gains taxes of 43.4% on the accumulated value of assets would hurt the ability of family members or heirs to (1) keep existing employees (47%), (2) financially support their own families (48%), (3) support local charitable organizations (49%) or (4) carry on the family business (50%).”

● “More than half think the proposed doubling of the capital gains tax will negatively impact capital investments, support for charitable causes, family finances, hiring, and taxpaying abilities.”

● “Changes to capital gains tax and elimination of the step-up in basis are likely to act as a double whammy on small enterprises, according to 63% of those surveyed.”

Raising taxes always carries real negative costs for the economy, but increasing taxes during a downturn or when trying to recover from severe economic ills, such as from a pandemic, makes absolutely no sense.

The Biden administration and Congress help all Americans by tuning in to what small businesses are saying on such matters as taxes and the economy.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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