Small Business Tax Relief Act

Key Points

• Small businesses earning under $5 million a year would get a lower tax rate. The first $400,000 in income would be taxed at 18% instead of the current 21%, saving qualifying corporations up to $12,000 per year.
• The bill closes the carried interest loophole used by investment fund managers. Their share of fund profits, currently taxed at lower capital gains rates, would instead be taxed as ordinary income at higher rates.
• Self-employed workers earning under $400,000 would get a bigger tax deduction. They could deduct 75% of their self-employment taxes instead of the current 50%, reducing their overall tax bill.
• The tax on corporate stock buybacks would increase from 1% to 1.5%, raising revenue from large companies that repurchase their own shares rather than investing in workers or growth.
• Investment managers would have to pay Social Security and Medicare taxes on their carried interest income, treating it more like regular wages rather than investment gains.