EMA Opposes Tax Hikes In Biden’s Build Back Better Plan

Last week, EMA joined other associations in a letter urging Congress to oppose tax hikes on “Main Street businesses” that are in the Biden Administration’s  Build Back Better Framework.

The BBB would expand the 3.8 percent Net Investment Income Tax (NIIT) to all pass-through business income; impose a new surtax of up to 8 percent on all forms of income, including family businesses; and make permanent and expand the loss-limitation rules under Section 461.

Moreover, the tax rate hikes in the Framework would apply to businesses making significantly less than the advertised levels.

The White House fact sheet suggests the new surtax would impose a 5 percent tax on a taxpayer’s modified adjusted gross income over $10 million, and 8 percent in excess of $25 million.

 For pass-through businesses held in trust, however, these thresholds are fifty times lower — $200,000 and $500,000, respectively.

The same is true for the expansion of the 3.8 percent NIIT. The expanded NIIT’s threshold for joint filers with S corporation or partnership income is $500,000, but it is just $13,000 for a family business with ownership shares held in taxable trusts.

Due to the prevalence of trusts, the higher tax rates included in the Framework would harm tens of thousands of modestly sized family businesses located across the country.

The rate increases contemplated by the Framework are significant. The Tax Foundation estimates they will push the marginal rates of family businesses making more than $500,000 to over 50 percent.

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