Democrats snuck a pile of surprise tax hikes on businesses in President Joe Biden’s sweeping coronavirus relief program that combined total over $60 billion.
One part of the bill limits deductions for companies that pay their top people over $1 million. Another extends a limit on how much business owners can deduct their non-business income to lower their tax liability, and the third cracks down on how corporations do their taxes.
To offset the price of the stimulus bill, Democrats extended a $500,000 cap on how much pass-through entity businesses can deduct losses from nonbusiness income such as stocks by another year.
Critics say this change violates President Biden’s promise to not raise taxes on Americans earning under $400,000.
An analysis done by the Joint Committee on Taxation, found that the change would raise taxes on some taxpayers who make less than $200,000.
“If Biden wants to keep his promise, he should cancel the bill or add language exempting people who make less than $400,000 per year,” said the director at the Americans for Tax Reform, Alexander Hendrie.
Democrats want to create $22 billion in revenue by removing a measure in law that gives U.S. multinational companies the options to choose how to account for their internal costs when filing their taxes.
The bill will also raise around $6 billion in revenue by going for executive compensation; under current law, companies are allowed to deduct most employees’ pay — except for that of the CEO, CFO and three other highest-compensated officials — from their tax bill.
But Democrats changed the law to include five more high paid employees in the restriction, increasing the total number to 10.
Of course, the tax increases are far counter-balanced by the tax revenue cut by the relief bill, worth a total $590 billion, according to the Joint Committee on Taxation.