HomePersonal FinanceTax Increase for Small Businesses: Around $1.75 trillion!

Tax Increase for Small Businesses: Around $1.75 trillion!

Small business owners, small business employees, and small business investors may be heavily impacted by a proposed a retroactive tax increase in the $1.75 trillion reconciliation bill.

The National Taxpayers Union Foundation said, “One reason President Biden and key Democrats may want a capital gains tax increase to be retroactive is because there are numerous studies demonstrating that whenever a capital gains tax increase is about to take effect, there is a rush of sales (“realizations”) and a one-time spike in capital gains tax collections, followed by multiple years of lower levels of collections. 

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The reverse is also true, with capital gains collections soaring in the years following a rate reduction.

Experts differ on why, but the general theory is that hiking the capital gains tax pushes people to shift from long-term investment activity toward short-term consumption activity, cashing out and spending the money since the tax rate on investing the money is the same or higher.

If a tax increase is structured so that the effective date already happened months ago, investors would obviously have no chance to unload assets at favorable tax rates before the new policy kicks in.”

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Under the present tax system, when companies do consistently avoid paying tax, it is usually because they are able to claim preferential tax credits that are only available to favored businesses or industries.

Unfortunately, there are dozens of provisions now being considered that would expand corporate tax credits.

Minimum taxes are burdensome to administer and comply with, as they effectively represent entirely new parallel tax systems. In addition to the corporate profits minimum tax, Congress is also weighing expansion of another minimum tax system in the international tax code.

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This may be good news for auditors and accountants, but bad news for businesses that want to focus on improving the goods and services they provide.

According to the NTUF, “Retroactive taxes violate the fundamental principles of transparency and stability. Retroactive tax increases undermine certainty in the law and the ability of taxpayers to plan their affairs by relying on the law today, not based on what legislators in the future decide the law was.”

Read more: Biden Plans to Tax 700 Wealthiest People in the U.S.!

They continued, “Retroactivity also undermines public respect for the law and belief that the system is fair.

Where retroactive tax obligations have been imposed on taxpayers in the past, they have avoided substantial public and legal backlash largely because they are usually narrowly imposed on small subsets of people or businesses, and because of a general lack of public awareness that the imposition of retroactive taxes is even possible, much less that it happens.”

Stay updated with more news here at the East County Gazette. 

Celine German Lagundi
Celine German Lagundihttps://theeastcountygazette.com/
Celine is an experienced news writer, artist, and advocate based in Cebu. She is passionate about pop culture and current affairs.
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