by Raymond J. Keating-
The tax relief plan passed by Congress and signed into law by President Trump in December was a major, positive step forward for America’s entrepreneurs, small businesses, workers and economy.
For example, reducing the corporate income tax rate from 35% to 21%; providing a 20-percent deduction for pass-through business income for entities like S-Corps, LLCs and sole proprietorships; expanding expensing of capital investment; and doubling the exemption level for the death tax are measures boosting the incentives and resources available for business investment, growth and hiring.
We’ve certainly seen positives emerging throughout much of the economy, including robust job growth in the latest employment report, and a big jump in disposable (i.e., after-tax) income, along with continued robust optimism among small businesses, including one survey pointing to increased business investment, hiring and pay.
Of course, there’s still work to do on the tax front, such as deeper reductions in personal income tax rates; cutting or preferably eliminating the capital gains tax; killing the death tax and the individual alternative minimum tax (AMT); and making expensing permanent for all businesses.
Indeed, Senator Rand Paul’s idea that we should be advancing tax relief every year makes a great deal of economic sense.
The Democrat Plan to Roll Back Tax Relief
However, rather than making positive contributions to ongoing efforts to reform the tax system and make it more competitive and simple for businesses and individuals alike, congressional Democrats, according to their new tax plan, propose to roll back big chunks of the positives that already have been accomplished.
Specifically, the Democrats are calling for hiking the top marginal income tax rate from 37% to 39.6%; increasing the corporate tax rate from 21% to 25%; expanding the individual AMT; and increasing the death tax.
The plan is take more money away from U.S. entrepreneurs, businesses, workers and consumers, and hand it over to politicians so they can spend based on their political preferences. That’s a surefire way of undermining the positives that we now see developing in the economy thanks to real tax relief.
Perhaps the Democrats might want to go back and learn from President John F. Kennedy, a Democrat who understood pro-growth tax relief.
In the end, if one is concerned about healthy small business growth, more entrepreneurship, and strong economic, income, and job growth, then the policy objective should be to reduce governmental burdens on the activities and individuals driving that positive activity.
The Democrats’ proposed tax plan would do the exact opposite.
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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP: The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.