Biden’s budget threatens main street

The Tax Cuts and Jobs Act (TCJA) brought historic relief to taxpayers. Taxpayers and small business owners across Iowa benefited from the economic growth created by the TCJA. Many businesses expanded, hired new workers, and increased wages or provided bonuses to their employees. The TCJA also sparked a tax reform effort in Iowa with Gov. Kim Reynolds and the Republican-led Legislature enacting income tax rate reductions starting in 2018 and leading to last year’s historic tax reform measure that will create a flat 3.9 percent rate by 2026. But key provisions of the TCJA will expire in 2025 and President Joe Biden’s 2024 budget proposal threatens significant tax increases.

The TCJA cut individual and corporate income tax rates and reduced taxes for small businesses. All individual rates were lowered while the corporate rate fell from 35 percent to 21 percent. The TCJA also lowered and widened tax brackets that benefited middle and lower class taxpayers. In addition, the TCJA made significant tax reforms that finally aided small businesses creating the small business deduction, which is a 20 percent tax deduction for small business income. Nevertheless, since the reforms in the TCJA were not permanent, many are set to expire after Dec. 31, 2025. If this occurs most taxpayers will be faced with a large tax increase.

Further, Biden’s $6.8 trillion budget proposal calls an estimated $4.7 trillion in new tax increases that will be especially harmful for small businesses. Some of the proposed tax increases would reverse the TCJA including raising the top income tax rate back to 39.6 percent, creating a new 5 percent tax on small business income, increasing the corporate tax rate to 28 percent, among other increases. President Biden is arguing that these tax increases will only impact those at the very top but what is often forgotten is that many small businesses will be greatly impacted as they pay their business taxes via the individual personal income tax rates.

Iowa taxpayers and small businesses have struggled to recover from the pandemic and the impact of high inflation. Biden’s tax increases would be especially harmful.

Critics of the TCJA make the argument that the tax cuts only benefited the wealthy which is blatantly false. The TCJA was a tremendous economic benefit to both the middle-class and small businesses. In addition, the TCJA actually increased revenue to the federal treasury through economic growth.

Iowa taxpayers and small businesses would be better served if federal policymakers followed the example of the Iowa Legislature and Reynolds by focusing on lowering taxes and limiting spending. This is the economic formula that has made Iowa’s economy strong. This means making the TCJA permanent, pushing back on proposed tax increases, and fighting inflation by cutting government spending.

Federal policymakers must make the TCJA permanent. Small businesses are the engines of economic growth. Raising taxes and increasing spending will only result in more economic harm.

Matt Everson is Iowa’s state director for the National Federation of Independent Businesses and John Hendrickson is policy director for Iowans for Tax Relief Foundation.

Opinion content represents the viewpoint of the author or The Gazette editorial board. You can join the conversation by submitting a letter to the editor or guest column or by suggesting a topic for an editorial to editorial@thegazette.com