Make Your Voice Heard On Budget Reconciliation Tax Increases

The $3.5 trillion budget reconciliation championed by Senate Budget Committee Chair Bernie Sanders (I-Vt.) and President Joe Biden continues to make its way through Congress. The U.S. House Ways and Means Committee approved its portion of the reconciliation last week on a 24-19 vote.

The bill would change the tax code in several ways.

• Coporate. The bill would increase the top corporate tax rate from 21 percent to 26.5 percent and make it more difficult to deduct interest on business loans.
• International. The bill would make changes to provisions that impact companies buying and selling materials and products overseas, raising $300 billion over 10 years by making two international tax provisions (GILTI and BEAT) more onerous.
• Pass-Through Businesses. Metals companies organized as pass-throughs would face a range of tax increases, leading to a significantly higher tax burden. Provisions impacting pass-through businesses include an increase of 2.6 percentage points in the top individual income tax rate, as well as the virtual elimination of the 20 percent pass-through deduction and a new a percent surtax on individuals (including owners of pass-throughs) with income greater than $5 million.
• Family-Owned Businesses. These businesses would be impacted by an increase in the top capital gains tax rate, as well as a reduction of the estate tax exemption down to $10 million — more than 50 percent below its current level.

Click here to read a full summary of the provisions in the Ways and Means Committee bill. According to several analyses (found here, here, and here) from the nonpartisan Tax Foundation, the tax policies outlined in the committee’s bill would:

• Increase net federal taxation by $1.06 trillion over the next decade;
• Reduce long-term economic output by 0.98 percent;
• Eliminate 303,000 full-time equivalent jobs in the United States;
• Reduce after-tax incomes for the top 80 percent of taxpayers over the long-run;
• Increase taxes on more than half of pass-through business income; and
• Raise the U.S. corporate tax rate to the third highest in the world. (Companies in 21 states and Washington, D.C. would face a higher corporate rate than in any country in the OECD.)

Congress’ Joint Committee on Taxation (JCT) also has affirmed that this bill will have a significant impact on small businesses. As the S-Corp Association explained, according to the JCT, taxpayers earning more than $1 million a year would see their average rate rise from 30.2 percent 37.3 percent. Approximately four out of five taxpayers with incomes exceeding $1 million are business owners. The JCT also found that, within 10 years of a corporate tax increase, 66.3 percent of the corporate tax burden would be borne by lower- and middle-income taxpayers.

The nonpartisan Tax Policy Center, meanwhile, found President Biden’s tax plan, which included tax increases on corporations and pass-through businesses, would raise taxes on 75 percent of middle-class families.

MSCI urges its member company employees and leaders to use the U.S. Chamber of Commerce’s (USCC) website to send a letter to federal lawmakers asking that they oppose these tax increases. The National Association of Manufacturers also has created an Action Center where individuals can make their voices heard. Click here to visit NAM’s page.

Last week, MSCI joined a coalition of business trade associations led by the USCC to opposes the tax plans contained in the budget reconciliation. Stay tuned to Connecting the Dots for more information as this coalition starts its work.

Business sector advocacy matters. At least two senators have expressed opposition to the bill’s $3.5 trillion price tag and corporate tax rate increase and so far seem unwilling to support the reconciliation even though they are getting significant pressure from the White House. Last week, Sen. Kyrsten Sinema (D-Ariz.) and Sen. Joe Manchin (D-W.Va.) met with President Joe Biden. Neither came out of their meeting with a changed mind.