A New Small Business Surtax = New Small Business Job Killer
Since 1992, small businesses have been responsible for between 74% and 81% of gross job gains, and 63% of the net new jobs created. Remarkably, in the current and most recent recessions, small businesses have been responsible for 79% of the job gains compared to 75% of the job losses. Small businesses’ share of job gains have been higher and their share of job losses have been lower than in non-recessionary quarters.ii With small businesses leading the way in job preservation and creation during recent recessions, policy makers should exercise a higher degree of caution when pursuing policies that will disproportionately and negatively impact
small businesses.
Under the Democrats’ proposal, many of the most successful small businesses would be hit by a series of job-killing tax hikes. All combined, small businesses could be subject to marginal tax rates as high as 49%. This would not include an average 7% in state and local taxes. It would also not include the Democrats’ wage tax of up to 8% on businesses that do not offer health insurance or do not pay for “enough” of their employees’ coverage or the Democrats’ 2.5% income tax on individuals who have not purchased health insurance. Furthermore, the Democrats’ plan to limit itemized deductions for taxpayers in taxbrackets above 35% would act as an additional tax on small businesses.
Data from the Joint Committee on Taxation shows that at least 55% of the revenue raised by increasing the top two rates would come from small business income. At a time when creating jobs should be a priority, it is important to minimize harm to small businesses. According to the Small Business Association, one-third of new employer establishments fail within two years, and a major factor in a firm’s survivability is their ability to grow large enough to hire employees.
small businesses.
Under the Democrats’ proposal, many of the most successful small businesses would be hit by a series of job-killing tax hikes. All combined, small businesses could be subject to marginal tax rates as high as 49%. This would not include an average 7% in state and local taxes. It would also not include the Democrats’ wage tax of up to 8% on businesses that do not offer health insurance or do not pay for “enough” of their employees’ coverage or the Democrats’ 2.5% income tax on individuals who have not purchased health insurance. Furthermore, the Democrats’ plan to limit itemized deductions for taxpayers in taxbrackets above 35% would act as an additional tax on small businesses.
Data from the Joint Committee on Taxation shows that at least 55% of the revenue raised by increasing the top two rates would come from small business income. At a time when creating jobs should be a priority, it is important to minimize harm to small businesses. According to the Small Business Association, one-third of new employer establishments fail within two years, and a major factor in a firm’s survivability is their ability to grow large enough to hire employees.
