Biden tax hike will be bad for Minnesota businesses

With the “Delta Variant” of COVID-19 surging across the United States, the vigorous economic recovery which President Biden inherited from President Trump could be in danger: indeed, last week it was announced that Gross Domestic Product growth for the United States in the second quarter of 2021 had come in at 6.5 percent, well below expectations.

Given this, the Biden administration should be looking at policies that can boost economic growth. Instead, they continue to push policies that will hinder it.

For example, the administration is still pushing its plans to hike the corporate tax rate from 21 percent to 28 percent. As Doug Loon, president of the Minnesota Chamber of Commerce, wrote for Minn Post last week:

If the corporate tax rate were increased to 28%, Minnesota’s combined rate, along with a proposed federal tax increase, would mean a combined top corporate tax rate higher than in any other country in the industrialized world.

That isn’t the only aspect of the administration’s corporate tax plans to raise concern:

On top of that, companies headquartered in Minnesota would face higher U.S. taxes on global income.

In total, this tax hike would hit 28,295 Minnesota employers, including 20,000 small businesses with fewer than 500 employees. Many of these businesses are just now beginning to get back on their feet. Sudden and substantial tax hikes are one sure way to stop their recovery’s momentum dead in its tracks.

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The president’s plan would essentially double the tax rate on capital gains, hitting approximately two-thirds of capital investment in the United States. For some Minnesota investors the combined state and federal tax rate would exceed 50%. If you’re saving for retirement, to buy a home, or for your kids’ college education, you’d feel the pinch.

Adding further to the burden, the president’s proposal would levy a much higher tax burden on the transfer of assets of family-owned businesses at death. This would threaten the ability of the next generation of Minnesotans to keep those family-owned grocery stores, restaurants, auto body shops, construction companies and farms up and running.

It is mystifying how anyone could look at the state of the American economy right now and think, “What we need is higher taxes.” Yet here we are. We have to hope that sense prevails.