Michael Van Norstrandt
Although some in Congress have touted multiple tax hikes as a way to raise funds for infrastructure and get big corporations to pay their fair share, so would such hikes by Main Street corporations and the hardworking Americans who they operate, be felt.
These effects will be compounded if Congress also increases taxes on community banks, small businesses, family businesses, and individuals. As a whole, these tax hikes will have a devastating impact on small business livelihoods at a time when we should focus on economic recovery.
The disproportionate damage caused by the pandemic to small businesses can be observed across the country, as around 200,000 additional businesses were permanently closed in 2020 – above historical level. Many small business owners and operators struggle to make their profits. If they are burdened with additional tax payments, they could be forced to close or restrict certain operations, prolonging our economic recovery.
The Independent Bankers of Colorado (IBC) is the exclusive voice of the community banks of Colorado. With more than 50 members, we represent the interests of our members and customers, as well as the communities they serve.
Community banks are key pillars of Main Street that reinvest local dollars to help small businesses grow and help families build financial security. Given that many Colorado small businesses use our services to support their business, we believe that increases in corporate and other taxes on community banks, family businesses, and individuals are inappropriate for these small businesses and other Main Street businesses around the world would harm the country.
These tax hikes would hit small businesses in any segment of the economy and jeopardize the progress we have made in our recovery from the pandemic. In the case of the corporate tax hike, a study by the US Chamber of Commerce found that 1.4 million small businesses – employing nearly 13 million American workers – would be forced to pay the higher corporate tax rate. This includes those small businesses that are classified as businesses but earn less than $ 400,000 a year.
Even the workers and employees who run small businesses would not be exempt from feeling a corporate tax hike. Research by non-partisan groups like the Tax Policy Center and Tax Foundation has found that between 50% and 100% of corporate tax is passed on to workers. This is reinforced by analysis by the Joint Tax Committee and the Congressional Budget Office, both of which concluded that workers bear disproportionately high corporate tax burdens.
In addition, American companies could fall behind due to corporate tax rate increases and become less competitive than foreign companies. The combined US state and federal tax rate on corporate income is already over 25%, above the average of the 38 member states of the Organization for Economic Cooperation and Development (OECD). If it increased further, American companies would pay the highest corporate taxes in the industrialized world.
To prevent American small businesses from being left behind in competition and drowning in excessive taxes, lawmakers must consider other federal funding solutions.
For example, closing the tax gap – the amount of uncollected money wealthy individuals and corporations owe the government – is a viable way to raise similar funding without harming small businesses. The current tax gap is estimated to be around $ 600 billion, more than double what it was ten years ago. It is expected to grow to $ 7 trillion in 20 years. If the government were to collect even 20% of that amount, it would be almost the same amount of money generated from a corporate tax increase.
While these tax hike proposals are aimed at large corporations or other industries, the effects of small businesses will be felt just as strongly at a time when we should instead focus on their economic recovery. Our lawmakers must say no to these tax increases and instead consider other fund-generating alternatives that will not harm the well-being of Colorado small businesses and the communities they serve.
Michael Van Norstrand is Executive dDirector of the Independent Bankers of Colorado, which supports and drives the mission of local community banks