PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Tax Day 2024: A Reminder About Why This Day is Not a Celebration

By at 12 April, 2024, 11:49 am

by Raymond J. Keating –

Tax Day – April 15, 2024 – is upon us. As many taxpayers will attest, this is not a day for celebration.

The income tax is a destructive tax in so many ways. It fuels class warfare thinking as well as the growth of government, for example. It’s quite efficient at draining resources from the private sector, where those dollars would be spent, saved and invested far more productively, and handed over to the government, where decisions are based on politics.

And since the income tax is a tax on working, saving, investing, and starting up and building businesses, it reduces or restrains such critical activities, especially at higher tax rates. As the old saying goes, the more you tax something, the less of it you get.

And by the way, speaking of tax rates, the top rate when the federal income tax was imposed was 7 percent. Today, the total top income tax rate is at least 40.8 percent.

Just in case, you buy into the class-warfare political rhetoric used to further jack up taxes on high-income earners, the Tax Foundation noted:

“In 2021, the bottom half of taxpayers earned 10.4 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 26.3 percent of total AGI and paid 45.8 percent of all federal income taxes.”

Keep in mind that those upper-income earners to a significant degree are small business owners.

As SBE Council has noted before, CNBC reported: “The 1% [in total wealth] own 57% of private companies, according to the Federal Reserve.” And Edward Wolff, professor of economics at New York University, was quoted pointing out the following about the wealthiest: “Small business is really key when you talk about the sources of their wealth.”

As for the Biden administration, the president seems intent on making matters far worse, with an assortment of proposed tax increases, including:

● Increasing the top personal income tax rate from 37 percent to 39.6 percent

● Pushing the additional Medicare income tax applied to wages, salary, and capital gains for those making at least $400,000 from 3.8 percent to 5 percent

● Jacking up the top individual capital gains tax rate from 20 percent to 39.6 percent

● Creating a “wealth tax” on the total value of individuals’ assets of more than $100 million

● And yes, there’s more, including beefing up IRS resources to target business partnerships, which are overwhelming small businesses

Given how deeply integrated the U.S. economy is, and how upper-income earners are business owners and investors, the ills of such tax increases will be felt up and down the income scale.

To see the American economy flourish, and return to a robust path of economic and income growth, then policymakers should be working to reduce the burdens of Tax Day, not increasing them.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

 

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