Wealthy Business Owners Are at Center of Fight Over Biden's Tax Plan

Still, business groups say that the planned tax increases would hurt small businesses.

Last week, Schumer announced a proposal to extend Medicare solvency through tax hikes. The plan would expand the existing 3.8% net investment income tax to the profits pass-through entities distribute to their owners, so long as those individuals earn more than $400,000. Under current law, the investment tax only applies to individuals and estates.

“We estimate up to 1 million small and family-owned businesses, representing over half of all pass-through business activity, would be at risk of having their rates increased under this policy,” hundreds of business groups, including the US Chamber of Commerce, wrote in a letter this week. “This small business tax hike would hurt the ability of businesses that survived the worst global pandemic in a century to remain viable in the coming months.”

Republicans have used this proposal as an opening to attack Democrats, particularly those who face close races in the mid-terms this fall. In battleground states of Georgia, Nevada, Arizona and New Hampshire, the majority of workers are employed by pass-throughs, Minority Leader Mitch McConnell said on the Senate floor on Tuesday.

“And in West Virginia — just to pick another state out of the blue, in West Virginia a whopping 95% of businesses are pass-throughs,” McConnell said about Manchin’s state.

Schumer has said he wants to pass the bill by early August, a tight deadline for legislation that has languished for months. Manchin has suggested the negotiations could go up to the Sept. 30 deadline, when the Democrat’s ability to fast-track the bill in the Senate expires.

– With assistance from Laura Litvan.

(Photo via White House)