A new paper by EPI Budget Analyst Hunter Blair answers frequently asked questions about whether or not the Republican tax plan will help small businesses.
Republicans have been touting the benefits of their tax plans for small businesses—specifically, their proposal to cap taxes on “pass-through” income—income that is not taxed at the business level, but is instead “passed through” entirely to the business owners, who are then responsible for paying personal income taxes on it. However, Blair says that small businesses will not benefit from the proposed cap of 25 percent in the Republican House tax plan (or a higher cap in the Senate plan).
“The GOP’s use of the term ‘small business’ conjures up images of neighborhood stores run by hardworking Americans carving out a modest living. However, 86 percent of households with pass-through income already pay income tax rates of 25 percent or less,” said Blair. “None of these households would benefit from the Republican plan.”
However, the richest 1 percent of households already claims 69 percent of pass-through income. Blair finds clearly that the Republicans’ proposed cap on the taxation of pass-through taxes would disproportionately benefit the top 1 percent and not the small businesses that Republicans claim to be helping.