IRS Office by Alpha Photo is licensed under CC BY-NC 2.0
Michigan Democrat Senate nominee Abdul El-Sayed wants to impose a payroll tax hike, a capital gains tax hike, a personal income tax hike, a Death Tax hike, and a second Death Tax by eliminating stepped-up basis for families when parents die. This is a forced capital gains tax at death.
List of El-Sayed’s tax hikes:
Death Tax Hike. Tens of thousands of Michiganders will get stuck paying El-Sayed’s Death Tax, which will hit families with a steep tax when their parents die. El-Sayed wants to impose this tax on households inheriting a home, land, a farm, lake house, stocks or a small business totaling $1 million or more, at a top rate of 37%. This would destroy many small businesses and family farms and leave Michiganders reeling in the aftermath of losing their Mom or Dad.
El-Sayed’s plan is radical. It would drastically widen the IRS Death Tax maw. Under current federal law, the Death Tax is applied only to individuals inheriting more than $15 million in total assets, at a tax rate of 18% – 40%. El-Sayed wants to start hitting people with Death Tax at just $1 million.
The plan makes it more difficult for family-owned businesses and farms to remain in the family. For example, many heirs inherit business, farmland, or other illiquid assets instead of cash. Large tax liabilities could force families to sell their land, business, or other assets to pay the tax bills.
This is especially staggering for a state in which family businesses account for a quarter of all businesses in the state and ninety five percent of farms remain family owned. Higher taxes on inheritance discourage investment and saving and punish families for seeking to pass their life’s work to the next generation.
ANOTHER Death Tax by Elimination of Stepped-Up Basis When Parents Die. As if the El-Sayed’s Death Tax hike wasn’t bad enough, he wants to pile on a SECOND Death Tax by eliminating stepped-up basis when parents die.
Yes, El-Sayed wants to impose a second Death Tax — separate from and in addition to his first Death Tax — by taking away stepped-up basis. This tax would automatically “deem” inherited assets as “sold” for the purpose of generating a forced capital gains realization at death. This El-Sayed tax would bury households and small businesses with invasive audits and expensive and burdensome IRS paperwork. 78% of small business owners say this tax will be crippling.
Capital Gains Tax Hike
El-Sayed also wants to raise capital gains taxes. In his own words, El-Sayed states:
“I support taxing capital gains over $1 million at the same rate as ordinary income.“
The year you sell your house or small business, El-Sayed considers you “rich.”
Say you’ve built up a small business for 30 years and move to sell the building and the land, that one year you could have $1 million in “income.” El-Sayed will have the IRS stick you with a 37% capital gains tax instead of the current 20%.
Taxing capital gains as ordinary income significantly increases the tax burden on investment, discourages business expansion, and capital formation in the long term. The El-Sayed tax hike plan also reduces incentives to deploy capital into new businesses and enterprises.
Further, capital gains taxes are levied on nominal gains rather than inflation-adjusted (real) growth, meaning investors can owe extra taxes on phantom gains that have pushed their value over $1 million.
Top Income Tax Rate Hike that would Hit Michigan’s Main Street Employers
Many Michigan small and mid-sized businesses file their taxes on the owner’s individual tax form.
El-Sayed said: “I support raising the marginal tax rate on earnings over $1 million.” Key employers on Main Street often meet or exceed this threshold and would be subject to a job-killing tax hike.
This tax increase would hit key Michigan employers, the small to mid-sized businesses that provide jobs in every town in the state.
Recently ninety groups representing American builders, machinists, manufacturers, farmers, retailers, and contractors sent a letter to congress to oppose any effort to increase the top tax rate:
“Pass-throughs comprise over 95 percent of all businesses and employ 62 percent of the nation’s workforce. Most pass-through business income is taxed at the top rates, so raising these rates would harm Main Street businesses engaged in just about every aspect of the economy. They are responsible for employing millions of Americans, driving investment, and supporting local economies nationwide.“
El-Sayed’s tax hike would be devastating to Michigan workers.
Federal Property Tax
El-Sayed also wants to impose a federal property tax on everything you own. He calls it a “billionaires tax” but as the history of taxation shows us, once a tax is in place on “the rich” it is gradually ratcheted down until it hits everyone.
This El-Sayed tax hike would hurt America’s competitiveness vs. China and other nations. Wealth taxes are so destructive that even most European countries that imposed the tax eventually repealed it.
Payroll Tax Hike
El-Sayed vows to increase payroll taxes by removing the payroll tax cap. The result is a top combined federal-state tax rate of 57.45% on Michiganders. This would hit contractors and the self-employed especially hard.
The math is as follows:
37 percent top federal income tax rate
12.4 percent El-Sayed payroll tax applied to income above $184,500.
2.9 percent Medicare payroll tax
0.9 percent additional Medicare payroll tax
4.25 percent top state marginal income tax rate
= 57.45% top combined federal-state tax on Michigan households and businesses.
Small business groups such as the National Federation of Independent Business has weight in against the payroll tax hike.
In testimony to congress, NFIB said:
“85% of small businesses are organized as pass-through entities for federal tax purposes and report their business earnings and expenses on their individual tax returns.”
“As a result, business income earned through pass-through entities such as S-Corps, sole proprietorships, and partnerships would be subject to these additional Social Security taxes.”
“At a time when small businesses continue to struggle with inflation, labor shortages, rising borrowing costs, and general economic uncertainty, Congress should not impose another significant tax increase on entrepreneurship and job creation.”
In summary, El-Sayed’s lost list of new taxes will punish success and make it harder for Americans to build a better future. The tax hikes will kill jobs and hurt Michigan’s economy.
El-Sayed tries to claim he will put more “money in your pocket,” but in reality he is reaching into your pocket and raising your taxes.