By Emily Stewart
As the second anniversary of the 2017 Trump tax overhaul comes around, I’ve read a lot about the giant corporate decrease from 35 percent to 21 percent. What gets lost, however, is the nuance that not only did a huge payout go to the wealthy, but the tax code became way less progressive overall.
The corporate tax rate did not used to be 35 percent for everybody. It was a graduated scale, depending on revenue, going from 15 percent up to 35. The 2017 tax law made 21 percent a flat rate – one of the most regressive ways to tax. So when the larger corporations saw their taxes slashed to 21 percent (and some to $0), they took their payouts off the backs of the smallest businesses who were bumped up to the flat rate. This happened to my small business.
Six years ago, I founded BreadHive Bakery & Cafe along with two colleagues. Because of our values, we decided to become a worker co-op, where all employees could buy in as owners of the business. We started selling wholesale, to restaurants and a local food co-op. By the fifth year we were up to 10 worker-owners, with an additional seven employees on that pathway, and doing up to $1 million in sales.
In Buffalo, where BreadHive is based, to file as a co-op you file under the C-corp umbrella. We thought it was important for transparency to find the best incorporation status to reflect our values, so it was important for us to file as a cooperative.
We learned that in 2018, after the tax law passed, our taxes would actually be increasing. Prior to 2017, the first $50,000 in net income was taxed at 15 percent, now it would be bumped up to 21 percent. We are a business that believes in paying taxes, to support our roads, social programs, schools and community. But the latest tax law ended up cutting rates for the wealthy, while the administration continues to whittle away at social services.
What was even more frustrating was that the new tax code was pushing people away from filing as co-ops. To be a co-op in New York, you file under a C-corp designation. But to take advantage of the new 20 percent pass through deduction, you must be an S-corp or other non C-corp according to the new law.
For taxes, details matter. But these nuances are affecting how we are moving money, power and values around our society. Businesses, of all sizes, should be paying their fair share. Small businesses already do.
The fact that I’m hearing lawmakers are even considering a second round of cuts clearly shows the deep pockets of corporate interests. Lawmakers should instead consider the small businesses, co-ops and workers who need support to create thriving communities.
Emily Stewart is the co-founder of BreadHive Bakery & Cafe in Buffalo.