A new tax plan in the Pennsylvania legislature would increase taxes on small businesses almost fourfold, the National Federation of Independent Businesses said.
Recently, the Pennsylvania House Finance Subcommittee on Tax Modernization and Reform recently held a hearing on HB 1773, the “Fair Share Tax Plan.” The legislation proposed to increase taxes on passive income for small businesses from 3.07 percent to 12 percent. Those businesses would include S-corporations, partnerships and sole proprietors, the NFIB said.
Sponsored by state Rep. Chris Rabb (D-Philadelphia), the legislation would also reduce the state income tax on wages and interest to 1.9 percent. Passive income covers income from such things as lottery and gambling winnings, net profits, dividends, and gains from rents, royalties, patents, copyrights, and income from estates and trusts. Bill sponsors said the legislation is designed shift the tax load from vulnerable populations to small businesses.
“This legislation will not only make the tax system fairer, but it will help to reduce the overall budget deficit and raise $6.22 billion in new tax revenue,” Rabb said when the bill was introduced in October 2023.
Pennsylvania State Director Greg Moreland called the proposal “asinine.”
“Small business owners are much different than Elon Musk and Jeff Bezos and aren’t asking for a quadrupling of their tax rate,” said Moreland. “There would be severe consequences to our mom-and-pop shops should this proposal become law. But maybe that’s what the sponsor wants? You can’t tax your constituency into prosperity. Wasn’t it President Reagan who said the nine most dangerous words in the English language were, ‘I’m from the government, and I’m here to help?’”