A recent analysis found that Americans’ tax expenses for last year were larger than their spending on healthcare, food, entertainment, and clothing — combined.
Nevertheless, Democrats in Congress are attempting to pass a $2.9 trillion tax hike. The legislation would raise the income tax, the corporate tax, the capital gains tax, and the estate tax.
Democrats are marketing the legislation as a tool to “tax the rich” — while leaving the pocketbooks of working-class Americans unscathed. As President Biden argued: “I’m not out to punish anyone. I’m a capitalist. If you can make a million or a billion dollars, that’s great. God bless you. All I’m asking is you pay your fair share. Pay your fair share just like middle-class folks do. But that isn’t happening now.”
The Democrats’ bill, however, breaks President Biden’s promise to not raise taxes on Americans earning less than $400,000 per year. It is effectively a reversal of the Tax Cuts and Jobs Act of 2017 — the chief legislative victory of President Trump’s administration, which decreased the tax burden for Americans across the income spectrum.
In an interview with The Daily Wire, Rep. Kevin Brady (R-TX) — the Ranking Member of the House Ways and Means Committee, which is responsible for deliberating taxes and other fiscal policy measures — discussed the implications of the Democrats’ new tax hike.
Brady believes it is “nonsense” to assert that the Democratic legislation would merely force wealthy Americans to “pay their fair share.” Instead, it is an “economic surrender” that would reverse the Trump tax cuts — to the detriment of all Americans.
Small Businesses
Among the most dangerous aspects of the Democratic tax hike is a larger burden placed upon small businesses — which employ roughly half of the workers in America.
“A lot of our small businesses, most of them don’t pay taxes as corporations,” explained Brady. “They pay them as individuals. They are raising taxes on small businesses that make more than about $2 million per year, which are a lot of our small businesses. That’s not that big of a business, frankly.”
Indeed, 95% of American businesses — such as sole proprietorships, LLCs, partnerships, and S-corporations — are organized as pass-through entities. Rather than paying the corporate tax, they pay the income tax rate — which will observe an increase from 37% to 39.6% for the highest bracket.
Brady noted that the Tax Cuts and Jobs Act did the opposite.
“Three out of four dollars of our tax cuts went to individuals, families, and small businesses,” said Brady. “It was really focused on the low and middle-income taxpayer, as well as our local main street businesses. As a result, our economy flourished, but more importantly, people flourished.”
Other elements of the Democratic tax hike will also slam small businesses. “They are raising the capital gains rate, which is an incentive we have for individuals and small businesses to invest in their local economy — their own business, expansion, new equipment, issues like that. They also may expand the Obamacare investment tax. We’re going to expand that to 3.8% across to every small business. So that’s going to take money from their pocketbooks.”
“One I think is the most disheartening is they’re going to expand the death tax to tens of thousands of more family-owned businesses and farms,” he continued. “We doubled the exemptions in the Republican tax reform to protect family-owned businesses and farms from having to sell off to pay Uncle Sam rather than passing it to their kids and grandkids. They reversed that — and that is going to be devastating for these multi-generational farms and businesses.”
Brady again contrasted the Democrats’ pending policy with the Republicans’ bill — noting that income inequality began to shrink for the first time in fifty years under the legislation.
“Three out of four dollars of our tax cuts went to individuals, families, and small businesses. It was really focused on the low and middle-income taxpayer, as well as our local main street businesses. As a result, our economy flourished, but more importantly, people flourished.”
“President Trump’s proud of that. All of that is reversed and at risk with these Democratic tax hikes.”
Corporations
In 2017, Republicans lowered the corporate tax rate from 35% to 21%. Under the Democrats’ bill, however, a corporation’s first $400,000 of income would be taxed at 18%. Income up to $5 million would then be taxed at 21%, and any additional earnings would be subject to a 26.5% tax.
Brady noted that increasing taxes on corporations will drive American jobs abroad: “Raising the taxes our businesses in America pay to one of the worst in the world… When you have a tax rate higher than others, our businesses can’t compete.”
“One of the biggest changes in the Republican tax reform,” explained Brady, “wasn’t just that we lowered rates to be competitive. We redesigned the tax code so our American businesses could compete and win anywhere in the world, including in America. And when they did, they could bring those profits back tax-free to be invested in the United States, not abroad.”
“We saw $1.5 trillion of profits flow back immediately. We gained a quarter of a million manufacturing jobs — the fastest growth in decades. We saw a surge of new research and patents — American intellectual property — flowing back to the United States.”
In contrast, Brady estimates that the Democrats’ legislation “will kill up to three million American jobs over time, and certainly send jobs, manufacturing, and research and investment overseas.”
“Raising these corporate business rates so high, and then making other international tax changes that favor foreign companies over America — without question, we are going to take a big step backward to those days where Americans regularly went online or opened the paper and saw another company pulling up roots and moving their plants overseas. I’m really worried about how economically crippling those high tax rates will be.”
Subsidies
Beyond raising the taxes that produce most of the federal government’s revenue, the Democrats’ legislation introduces several extraneous levies and subsidies — including a nicotine tax and a renewable energy credit.
As with the heightened taxes on small businesses, the tobacco tax constitutes a breach of the President’s promise to not raise taxes on the middle class.
“They do it with $100 billion in taxes on tobacco, nicotine, and vaping that directly hits working families and taxpayers,” said Brady. “Congress’s own Joint Committee on Taxation says that low and middle-income families will see tax increases starting next year. So there’s no question he breaks the pledge there.”
With respect to green energy subsidies, Brady detailed that the Democrats’ legislation mimics the approach of the Green New Deal.
“They aren’t simply creating and expanding new tax credits for renewable energy. They are doing what’s called ‘direct pay,’ which means you don’t have to have a tax liability. You’re simply getting a government check. Whether you’re the biggest business in America or the smallest, you’re actually getting a government subsidy for developing a green project, and then subsidies to operate.”
For example, the electric vehicle credit is expanding from $7,500 to $12,500. “And again, it doesn’t come off your taxes — you get a check for this.”
“Under this bill, a family making $800,000 per year is eligible for a $12,500 check to buy a luxury electric vehicle with up to a $74,000 price tag,” noted Brady. “That check they’re getting will be paid for by the maid who comes to clean their house. It’s a stunning giveaway to the wealthy.”
Odds of Passing
As it moves through Congress, Brady expects the legislation to get “worse before it gets better.”
“Democrats will be looking for more tax increases or budget gimmicks before this measure goes to the floor, because their demand for more spending is even greater,” he explained. “The question then, of course, is what happens in the Senate. I think the key people to look for are those six House Democrats endorsed by the U.S. Chamber as supposedly pro-business. We’ll see if any step forward as Main Street moderates.”
“It really is whether there are any moderate Democrats left willing to fight for their local jobs and against spending.”
The views expressed in this piece are the author’s own and do not necessarily represent those of The Daily Wire.