An increase in income tax rate means you'll pay a higher percentage of your income to the government. This directly reduces your disposable income, the money you have left after taxes for spending or saving. This can make it harder to afford basic necessities, save for retirement, or invest in your future.
It’s been tried, abandoned, and tried again, but Congress still toys with the idea of a “Wealth Tax.”
Bad taxes don’t die or fade away, they just hide in the shadows and wait for another day.
Early this summer, the Supreme Court ruled seven to two in favor of the constitutionality of the Mandatory Repatriation Tax (MRT), validating Congress’s power to tax shareholders on the undistributed income of corporations in the recent Moore v. United States case.
Even if Supreme Court didn’t nod to a new wealth tax, conversations on Capitol Hill concerning a new “Billionaire’s Tax” are more than whispers.
In our annual survey among family business leaders, including those in the automatic merchandising and convenience services business, a “Wealth Tax” is now ranked as among the top new worries.
In the survey, the top tax worry was personal income taxes, that is, they’re too high. But five percent said a “new wealth tax” is the most troubling tax. It may not seem like much, five percent, but in last year’s survey the percentage was zero.
Since last year, three Senate hearings were held on different forms of a “wealth tax,” with the biggest headline grabs coming from the Senate’s proposed “Billionaire Tax.”
Senate Finance Committee Chairman Ron Wyden (D-Ore.), introduced the Billionaire’s Income Tax Act in June. The legislation is aimed at getting billionaires and millionaires to pay “their fair share.”
Initially, 15 Democratic senators signed on to the bill, including media savvy Sheldon Whitehouse (D-RI), Elizabeth Warren (D-Mass.,) Sherrod Brown (D-Ohio), and Bernie Sanders (I-Vt.), to name a few.
The measure, Wyden says, is to, “for the first time, end legal ways billionaires avoid paying taxes.”
A hearing of the US Senate Budget Committee on 12 June 2024 convened by Chairman Sen. Whitehouse ostensibly to discuss “making Wall Street pay its fair share” in taxes, quickly revealed some deep divisions between Democrats and Republicans, as they confront the pending expiration at the end of 2025 of much of the Trump-era Tax Cuts and Jobs Act of 2017.
What exactly are we talking about when it comes to a Wealth Tax? What does it mean for convenience services family businesses? For everyone?
Wealth taxes are recurrent taxes on an individual’s wealth, net of debt. It’s a tax on top of all the current taxes paid personally, by your business, and on the full value of assets owned.
The concept of an annual net wealth tax is like a real property tax. But instead of taxing just real estate, it covers all wealth an individual owns, including the value of a family business. And it changes as a business or household’s fortunes change from year to year. This means everyone will need to value their total wealth, up or down, annually. This wealth is then taxed, up or down.
Who calculates these personal and business evaluations? Does a Wealth Tax even work? Does it generate much tax revenue?
According to a 2018 report from the Organisation for Economic Co-operation and Development (OECD), an international policy organization of 38 democracies, wealth taxes not only collect little revenue, but they create a lot of legal uncertainty and they “kill the entrepreneurial spirit.”
The report, titled “The Role and Design of Net Wealth Taxes,” argues wealth taxes can “disincentivize entrepreneurship, harm innovation, and impact long-term growth.”
The report says, instead of reforming and hiking wealth taxes, “countries should repeal it.”
In Europe, for example, wealth taxes are in several countries, including Norway, Spain, and Switzerland. France and Italy levy wealth taxes on selected assets, but not on an individual’s net wealth.
How much are we talking about?
Here are a few examples, and what Senators are eyeing.
In 2018, France abolished its net wealth tax and replaced it with a real estate wealth tax.
Countries that used to have wealth taxes, but then also abolished them in the 1990s and 2000s include Austria (1994), Denmark (1997), Germany (1997), the Netherlands (2001), Finland, Iceland, Luxembourg (all three in 2006), and Sweden (2007).
The Wyden and Whitehouse plan looks to overhaul the tax code to fix carried interest, create a minimum corporate income tax on foreign profits, raise taxes on stock buybacks, enact minimum taxes on the richest Americans, and increase estate and gift tax exemption amounts, among a few of the proposals.
All these new taxes are under the “pay a fair share” umbrella, but the obvious targets to pay more are family businesses like those in the automatic merchandising and convenience services industry, with over 80% being pass through entities that are already disadvantaged over corporations paying a low 21% in taxes, versus pass-through entities paying up to 37% in federal taxes.
While the Senate mulls the Billionaire Tax, the House Ways and Means Committee Chairman Rep. Jason Smith (R-MO) and Tax Subcommittee Chairman Rep. Mike Kelly (R- PA) announced the formation of ten Tax Teams, comprised of Ways and Means members, to study key tax provisions from the 2017 Trump tax cuts set to expire at the end of 2025. The goal for each team is to identify legislative solutions that will continue to help families, workers, and small businesses.
To help that process along, the Committee has launched a new Comment Portal, where convenience services family business stakeholders and members of the public can share information on the impact tax policies will have on their families, businesses, and communities.
The new portal allows family businesses and individuals to submit their personal comments to the ten Tax Teams set up last April by Committee Chairman Jason Smith (MO-08) and Tax Subcommittee Chairman Mike Kelly (PA-16).
The Tax Teams were created to study key tax provisions from the 2017 Tax Cuts and Job Act set to expire at the end of 2025, and to identify legislative solutions.
The portal offers instructions on how to submit comments and share stories via email sent directly to the committee. Once comments are written by family businesses, they can be sent via email to RepublicanTaxTeams@mail.house.gov.
The Tax Teams and co-chairs are: American Manufacturing (Chair: Rep. Buchanan), Working Families (Chair: Rep. Fitzpatrick), American Workforce (Chair: Rep. LaHood), Main Street (Chair: Rep. Smucker), New Economy (Chair: Rep. Schweikert), Rural America (Chair: Rep. Adrian Smith) Community Development (Chair: Rep. Kelly), Supply Chains (Chair: Rep. Miller), U.S. Innovation (Chair: Rep. Estes), and Global Competitiveness (Chair: Rep. Hern).
For more information go to: https://waysandmeans.house.gov/2025-tax-teams/
Another option is to go to www.familyenterpriseusa.com where family businesses can fill out a pre-designed Comment Form.
In the form there is a subject line, a section to write comments, and a list of the Tax Team co-chairs. The form also sends comments directly to RepublicanTaxTeams@mail.house.gov.
If action is not taken, according to Rep. Smith, and the 2017 tax cuts expire, an average family of four earning $75,000 would see their taxes increase by $1,500 a year. A family of five with two earners making around $100,000 are expected to see a tax increase of nearly $7,500 a year.
Unfortunately, what may seem like a fair tax for some often means an unfair tax for others. Again, unfortunately, that unfairness too often falls on the shoulders of America’s convenience services family businesses, and all family businesses, the largest private employer in the country, accounting for 83.3 million jobs.
The only fix to making sure successful individuals and family businesses don’t fall victim to misguided “fair share” tax proposals is to speak out on Capitol Hill.
The next Congressional Family Business Caucus Meeting is scheduled for Sept. 18. The meeting will address “pass-through taxes,” enterprise structuring, and proposed wealth tax legislation.
Let’s make sure our representatives in Congress don’t kill the spirit, and success, of America’s convenience services family businesses and successful individuals.
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The need for fact-based reporting of issues important to multi generational businesses and protecting a lifetime of savings has never been greater. Now more than ever, multi generational businesses and family businesses are under fire. That's why Family Enterprise USA is passionately working to increase the awareness of issues important to generationally-owned family businesses built on hard work, while continuing to strengthen our presence on Capitol Hill. The issues we fight for or against with Congress in Washington DC include high income tax rates, possible elimination of valuation discounts, increase in capital gains tax, enactment of a wealth tax, and the continued burden of the gift tax, estate tax and generation skipping tax.
Family Enterprise USA promotes generationally owned family business creation, growth, viability, and sustainability by advocating for family businesses and their lifetime of savings with Congress in Washington DC. Since 2007, Family Enterprise USA has represented and celebrated all sizes, professions and industries of family-owned enterprises and multi-generational employers. It is a bi-partisan 501.c3 organization. Family foundations can donate.
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