White House Budget for Fiscal Year 2025 Impacts Small Business

Date: March 19, 2024

Proposals will have a negative impact on small business

On March 11, the White House released the 2025 Fiscal Year Budget. The budget included specific small business elements, such as tax increases that will impact small businesses. NFIB is opposed to a new Small Business Surtax, a C-Corp tax rate increase, and a one-size-fits-all Paid Sick and Family Leave plan.

“The White House continues to wrongly characterize proposed tax hikes as the closing of ‘loopholes,’ but this is inaccurate and would make it tougher for small business to operate, invest in their business, and create jobs,” explained Jeff Brabant, Vice President of Federal Government Relations. “The 2025 White House budget proposes raising taxes and mandating Paid Sick and Family Leave, which would disproportionately impact small businesses.”

Small Business Surtax

The inclusion of the Small Business Surtax is the biggest concern for NFIB members. This is a 5% surtax on all business income over $400K, and the ‘loophole’ it refers to is money that is re-invested in the company. Social Security and Medicare tax do not come out of that since it is never taken home.

Small business owners pay Social Security and Medicare taxes twice: when they pay the employer half of FICA during payroll and when they take home money from the company in the form of the Self Employment Contributions Act (SECA). The self-employed pay both the employee and the employer shares of SECA.

Congress should not tax money put back into the company, which the surtax seeks to do at 5% with this proposal.

NFIB members took part in an advocacy campaign last year to tell Congress their small business is not a tax loophole. Petitions were gathered by small business owners nationwide and presented during two different committee hearings throughout the year. NFIB will continue to raise awareness and fight against the Small Business Surtax.

C-Corp Hike

The White House budget seeks to raise the C-Corp rate to 28%. This would be a direct tax on small businesses. About 20% of all small business employers are C-corps.

At a time when small businesses are dealing with inflation and other potential tax hikes, they need financial stability to plan for the future of their business. NFIB will fight to remove this direct tax increase on C-Corps from the budget proposals.

Paid Sick and Family Leave

One-size-fits-all paid leave mandates have a disproportionate negative impact on small businesses who have trouble complying with the mandates. Workforce shortages continue to challenge small businesses, and paid leave mandates that work for big business would add an unnecessary burden to small business owners.

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