Although several tax increases have been touted by some in Congress as a method to raise funds for infrastructure and make large corporations pay their fair share, such increases would also be felt by Main Street businesses and the hardworking Americans that operate them.

This impact will be compounded if Congress also increases taxes on community banks, small businesses, family farms and individuals. As a package, these tax increases will be devastating to the livelihood of small business at a time when we should be focused on economic recovery.

The disproportionate damage to small businesses done by the pandemic is something that has been observed across the country, as roughly 200,000 additional establishments closed permanently in 2020 – above historic levels. Many small business owners and operators are struggling to meet their bottom lines. If they are burdened with extra tax payments, they may be forced to close or curtail certain operations, which prolongs our economic recovery.

The Independent Bankers of Colorado (IBC) serves as the exclusive voice of Colorado’s community banks. With more than 50 members, we are dedicated to representing the interests of our members and clients and the communities they serve.

Community banks are key pillars of Main Street, reinvesting local dollars to help small businesses grow and families build financial security. Given that many of Colorado’s small businesses use our services to help run their operations, we believe that increasing the corporate tax rate as well as other taxes on community banks, family farms and individuals would unduly harm these small businesses and other Main Street enterprises across the country.

These tax increases would affect small businesses in every segment of the economy, imperiling the progress we have made in our recovery from the pandemic. In the case of the corporate tax increase, a study by the U.S. Chamber of Commerce found that 1.4 million small businesses – employing almost 13 million American workers – would be forced to pay the higher corporate tax rate. This includes the small businesses that are classified as corporations, but make less than $400,000 annually.

The workers and staffers that operate small businesses would not be exempt from feeling a corporate tax increase either. Research by nonpartisan groups like the Tax Policy Center and the Tax Foundation have found that anywhere from 50-100% of corporate tax is passed on to laborers. This is further compounded by analysis from the Joint Committee on Taxation and the Congressional Budget Office, which both concluded that laborers disproportionately bear the burden of corporate tax.

Furthermore, American businesses could be left behind and become less competitive in comparison to foreign counterparts due to increases in the corporate tax rate. The current U.S. combined state and federal tax rate on corporate income is already over 25%, higher than the average of the 38 member nations of the Organization for Economic Co-operation and Development (OECD). If increased further, American businesses would pay the highest corporate taxes in the industrialized world.

To prevent American small businesses from being left behind competitively and drowning in excessive taxes, other solutions to raise federal funds must be considered by lawmakers.

For instance, closing the tax gap – the amount of uncollected funds owed to the government by wealthy individuals and corporations – is a viable path that could raise similar amounts of funding, but without harming small businesses. It is estimated that the current tax gap is around $600 billion, more than double what it was a decade ago. Within 20 years, it is projected to grow to $7 trillion. If even 20% of that figure were to be collected by the government, it would be near equivalent to the amount of money generated from a corporate tax increase.

While these proposals to increase taxes are aimed at big companies or other industries, the impact will be felt as keenly by small businesses, at a time when we should be focusing instead on their economic recovery. Our lawmakers must say no to these tax increases and instead, consider other fund-generating alternatives that do not endanger the welfare of Colorado’s small businesses and the communities they serve.

Michael Van Norstrand is executive director of the Independent Bankers of Colorado, which supports and advances the mission of locally-owned community banks