US Chamber Warns Against Government Tax Proposals
- 4 million American small businesses, employing almost 13 million Americans, would see higher rates under tax proposals in Washington.
- The huge accumulation of savings means there should be plenty of fuel to stoke spending in the coming months.
Small Business Would Be Hit Hard by Corporate Tax Increase
Proposed tax increases will hurt both big businesses and small businesses alike, explains Chamber Senior Economist Curtis Dubay in a blog post. In fact, 1.4 million American small businesses (organized as C-Corporations), employing almost 13 million Americans, would see higher tax rates.
Hardest hit: Manufacturing small business C-Corps employ the most workers out of the group (1.8 million workers). Professional, scientific, and technical services are next (employing 1.3 million), followed by retail (employing 1.2 million).
Why it matters: Tax increases would put U.S. businesses (large and small) at a severe competitive disadvantage with counterparts across the globe and add another burden as many of these small businesses are just now beginning to return to normalcy.
“We have already started a hiring freeze. Between the tax increase, and what we see as a tough regulatory environment, we have to prepare," said Michael Canty, President of Ohio-based Alloy Precision Technologies, a manufacturing company that employs roughly 85 people and is structured as a C-Corp under the federal tax code.
Big picture: Higher rates on over a million small businesses would suppress wage growth and job creation for American workers at a time when we need to strengthen the middle class and create more higher-paying jobs here at home.
Income, Spending, and Savings All Rose in March
Income, spending, savings, and inflation all rose sharply in March, almost entirely because of the latest round of government stimulus checks, the Bureau of Economic Analysis (BEA) reported Friday. The track of all these important data points follow the government stimulus payments this year. There were payments in January, when the data spiked, no payments in February when they fell, and bigger payments in March when all surged more than in January.
Income rose an all-time record 21% in March. It had fallen 7% in February. In January it grew more than 10%. Income is now 27% higher than it was pre-pandemic. Astounding.
Spending rose over 4% after falling 1% in February and rising 3.4% in January.
Consumers couldn’t spend all the money they received from the government in March. The personal savings rate was almost 28%. It was 14% in February and 20% in January. In total, Americans saved $503 billion in March alone. Since March 2020 they’ve saved almost $3.7 trillion, which is $2.3 trillion over what they normally would’ve saved.
Inflation also picked up in March, rising 0.5% for the month and 3.5% for the year. However, the year data is skewed by the low level from last year when we were in lockdown. We’ll get a better sense of inflation in May and June when the year-ago data normalizes some.
Looking ahead: All these data points have been on a rollercoaster because of government stimulus. Now that those payments are likely at an end with the end of the pandemic in sight, these data points should smooth out. The strength of the economy means they should continue to grow, but at more modest rates.
Spending may buck that trend a bit. The huge accumulation of savings means there should be plenty of fuel to stoke spending in the coming months, especially on services that consumers have been prevented from spending on the last year.
—Curtis Dubay, Senior Economist, U.S. Chamber of Commerce
U.S. Chamber of Commerce
1615 H Street, NW
WASHINGTON, DC, 20062, US