After Infrastructure Legislation, Senate Tries To Tackle Budget Reconciliation Bill And Its Tax Increases

Now that the U.S. Senate is one step closer to approving its $1.2 trillion physical infrastructure bill, the chamber is expected to begin work on a $3.5 trillion budget reconciliation bill that would approve new spending for “human” infrastructure priorities like education, housing, and healthcare. Specifically, the Senate will hold several votes this week on the budget resolution that will define the parameters for the $3.5 trillion spending bill. If the Senate approves that resolution, it will kick off work in committees to craft the actual provisions that will be contained in the bill.

As Connecting the Dots has reported previously, this piece of legislation also is expected to contain several tax policies that the White House and Democrats in Congress believe will make the U.S. tax system fairer and that will reduce income inequality.

As the S-Corp Association has explained, several of these proposals threaten family-owned businesses and private companies. Among the initiatives being considered are proposals to:

• Increase the top capital gains rate from 23.8 percent to 43.4 percent on taxpayers with annual incomes of more than $1 million;
• Impose a new “capital gains at death” tax at the higher rate on an estate’s unrealized gains of more than $1 million, on top of any estate tax liability; and
• Raise the top estate tax rate to 65 percent, reduce the exemption amount to $3.5 million per spouse, eliminate minority and lack of marketability discounts, and limit the use of trusts.

According to the S-Corp Association, “The cumulative effect of these policies would be to impose effective tax rates of 60 percent or more on family businesses, endangering their ability to survive from one generation to the next and resulting in increased consolidation in many industries and fewer job opportunities in many parts of the country.”

Both Democrats and Republicans have voiced their opposition to these proposals, which also are not popular among U.S. voters. According to a poll sponsored by the S-Corp Association, for example, two-thirds of voters agreed with the statement, “If you own a business, you should be able to pass your business on to your children without the children having to pay a tax on the appreciated value of the company until they sell it.” Read more here.

As a reminder, the U.S. Chamber of Commerce has launched an initiative providing detailed data about how these proposed tax increases will impact small businesses in each state. This initiative outlines how many employers in each state would see their taxes increase, including how many small businesses with fewer than 500 employees would be impacted. The data is broken down by industry. Find the information — and a portal to send a letter to members of Congress asking that they oppose the tax increases — here.