As legislators continue to negotiate to find the areas of the now-defunct Build Back Better package that can garner the support of 50 senators, this complicated process of wrangling is doing little to filter out the worst policies. One such is a deceptively-framed proposal to increase taxes on small business owners.
The Net Investment Income Tax (NIIT) is a 3.8 percent tax on investment income such as capital gains, dividends, or interest. Imposed as part of the Affordable Care Act (ACA), the tax was intended to fall upon “passive” income, or income earned from a venture in which the beneficiary has little active role.
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