March 15, 2023
White House Budget Proposal Includes Tax Increases for Small Business
Major Tax Increases Proposed
in the White House’s 2024 Budget
Current Law: | Proposal: | Cost to Taxpayers: |
Corporate tax rate is flat 21%. | Increases corporate tax rate to flat 28%. | $1.3 trillion |
Investment income is subjected to 3.8% tax. | Expands 3.8% tax to all small business income over $400,000 (not indexed). Claims small businesses use loophole to avoid this tax. | $305.9 billion |
Investment income tax rate is 3.8%. | Increases 3.8% tax rate to on small business income over $400,000 to 5% (not indexed). Claims small businesses use loophole to avoid this tax. | $344.4 billion |
Top individual rate is 37% for income over $578,125 single/$693,750 joint. | Increases top individual rate from 37% to 39.6% and threshold to $400,000 single/$450,000 joint. | $235.3 billion |
Top capital gains rate is 23.8%. | Nearly doubles top capital gains rate to 44.6% for income over $1 million, relevant when selling small businesses to fund retirement. | $213.9 billion |
Family business assets’ tax basis “steps-up” to current market value when passed to the next generation. | Repeals “step-up in basis,” so when family-business assets are passed to the next generation, the assets will be subjected to capital gains taxes, with very limited exceptions. Claims small businesses use “step-up in basis” as a loophole to avoid taxes. | $213.9 billion |
Last year, Congress allocated $80 billion to the Internal Revenue Service (IRS) with a disproportionate amount earmarked for enhanced enforcement. | Even though the IRS has not shared a plan for $80 billion, this budget proposes an additional $29.1 billion for enforcement activities in 2032 and 2033 (after the $80 billion presumably runs out.) | $134.1 billion |
COST TO TAXPAYERS: $2.5 TRILLION
Major Tax Increases Proposed
in the White House’s 2024 Budget
Current Law:
Corporate tax rate is flat 21%.
Proposal:
Increases corporate tax rate to flat 28%.
Cost to Taxpayers:
$1.3 trillion
Current Law:
Investment income is subjected to 3.8% tax.
Proposal:
Expands 3.8% tax to all small business income over $400,000 (not indexed). Claims small businesses use loophole to avoid this tax.
Cost to Taxpayers:
$305.9 billion
Current Law:
Investment income tax rate is 3.8%.
Proposal:
Increases 3.8% tax rate to on small business income over $400,000 to 5% (not indexed). Claims small businesses use loophole to avoid this tax.
Cost to Taxpayers:
$344.4 billion
Current Law:
Top individual rate is 37% for income over $578,125 single/$693,750 joint.
Proposal:
Increases top individual rate from 37% to 39.6% and threshold to $400,000 single/$450,000 joint.
Cost to Taxpayers:
$235.3 billion
Current Law:
Top capital gains rate is 23.8%.
Proposal:
Nearly doubles top capital gains rate to 44.6% for income over $1 million, relevant when selling small businesses to fund retirement.
Cost to Taxpayers:
$213.9 billion
Current Law:
Family business assets’ tax basis “steps-up” to current market value when passed to the next generation.
Proposal:
Repeals “step-up in basis,” so when family-business assets are passed to the next generation, the assets will be subjected to capital gains taxes, with very limited exceptions. Claims small businesses use “step-up in basis” as a loophole to avoid taxes.
Cost to Taxpayers:
$213.9 billion
Current Law:
Last year, Congress allocated $80 billion to the Internal Revenue Service (IRS) with a disproportionate amount earmarked for enhanced enforcement.
Proposal:
Even though the IRS has not shared a plan for $80 billion, this budget proposes an additional $29.1 billion for enforcement activities in 2032 and 2033 (after the $80 billion presumably runs out.)
COST TO TAXPAYERS: $2.5 TRILLION
NFIB is a member-driven organization advocating on behalf of small and independent businesses nationwide.
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