Provisions in the Affordable Health Choices Act of 2009 could hurt small businesses, a coalition of freshmen Democrats wrote in a letter to House Speaker Nancy Pelosi (D-Calif.).
Under the proposed legislation, tax cuts set by the previous administration would be allowed to expire, “causing the marginal rate paid by wealthy individuals and small businesses to increase by 4.6% to 39.6%,” according to the letter, which was signed by more than 20 House Democrats.
Lawmakers announced this tax on the wealthy last week, as a means to pay for healthcare reform.
This levy, however, would tax income above $1 million at a new rate of 45%, according to the letter. “This surcharge, combined with state taxes, could result in many successful small businesses being taxed at over 50%,” the letter to Pelosi stated.
Although the House Ways and Means Committee claims the proposed surcharge would only impact 4.1% of small businesses, this does not paint a complete picture of the situation, the letter said. Seventy-five percent of all small businesses are S corporations, where the business income is passed through to the business owners’ individual tax return, “increasing the chances that it will be impacted by the proposed surcharge,” the letter states.
“By concentrating the cost of healthcare reform in one area, and in one that will negatively affect small businesses, we are concerned that this will discourage entrepreneurial activity and job growth,” the letter stated.
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