The Tax Scam Continues: Small Business Pays 45%, Wall Street Pays 15%
By Justin Jest – Gonzo Journalist, Reluctant Realist, Connoisseur of Chaos
If you run a small business—whether you call yourself a freelancer, a contractor, a shop owner, or an entrepreneur—you need to understand something right now:
Project 2025 isn’t here to help you. It’s here to make sure you pay more while the wealthiest pay less.
The proposed tax overhaul eliminates deductions that thousands of small businesses rely on to reduce taxable income. The numbers might sound simple, but the real-world impact is brutal.
Let’s break it down.
1. The Pass-Through Deduction Vanishes—And Your Gross Revenues Just Became Your Taxable Income
What’s Happening:
- The 20% Qualified Business Income (QBI) deduction is disappearing.
- This means small business owners who operate as sole proprietors, LLCs, or S-Corps will lose the ability to shield 20% of their earnings from taxation.
- More of your gross revenues will be subject to federal taxes—raising your total taxable income.
How This Affects You (or Someone You Know):
🔸 You’re a self-employed plumber who “earns” $100,000 in gross revenues.
- Under current law, you can deduct 20% ($20,000), leaving a taxable income of $80,000.
- Under Project 2025, you lose that deduction—meaning you now pay tax on the full $100,000.
- That’s $6,000 more in taxes owed at a 30% tax rate.
🔸 You’re a freelance writer earning $75,000 in gross revenues.
- You used to deduct $15,000 under QBI, paying tax on $60,000 instead of $75,000.
- Now, you pay tax on the full $75,000—raising your tax bill by $4,500.
🔸 You run a small marketing firm grossing $200,000.
- Your taxable income just jumped from $160,000 to $200,000 overnight.
- That’s an extra $12,000 in taxes due—just from losing a single deduction.
Bottom Line: The removal of QBI disproportionately hits middle-income entrepreneurs—the ones earning between $75,000 and $250,000 in gross revenues. These aren’t mega-corporations—these are the people running your local businesses.
2. No SALT Deduction? Say Hello to Double Taxation
What’s Happening:
- The State and Local Tax (SALT) deduction is being completely eliminated.
- Small business owners already pay state taxes on their earnings—but those taxes used to be deductible on federal returns.
- Under Project 2025, state tax payments no longer reduce your taxable income.
How This Affects You (or Someone You Know):
🔸 You’re a small law firm partner in New York earning $150,000 in gross revenues.
- Your state tax bill is $15,000.
- Under current law, $10,000 of that is deductible, reducing your federal taxable income.
- Under Project 2025, none of it is deductible.
- Your federal taxable income just went up by $10,000—adding $3,000 to your tax bill.
🔸 You run a boutique retail shop in California earning $175,000 in gross revenues.
- Your California state tax bill is $17,500.
- Under current law, you deduct $10,000, lowering your taxable income.
- Now, you pay federal taxes on that $10,000—raising your federal tax bill by $3,000.
🔸 You operate a small construction business in New Jersey with $120,000 in gross revenues.
- You already pay high state taxes—and now you’re paying federal taxes on money that’s already gone to the state.
- This is a tax increase—disguised as “simplification.”
Bottom Line: If you run a business in a high-tax state, you just got screwed. Your taxable income is now artificially inflated—forcing you to pay federal tax on money you already lost to the state.
3. Employer Benefits? Not Deductible Anymore.
What’s Happening:
- Businesses used to deduct the cost of providing health insurance and benefits.
- Project 2025 caps deductible employee benefits at $12,000 per worker.
- Anything above that is now taxable income for the business.
How This Affects You (or Someone You Know):
🔸 You’re a small business owner who provides health insurance for your employees.
- Under the new rules, you can only deduct $12,000 per employee for health benefits.
- If you offer a premium plan, any benefits beyond that limit are now taxable.
🔸 You’re a self-employed contractor paying for your own health insurance.
- Your entire insurance premium is now subject to taxation—driving up your tax bill.
🔸 You run a small tech company offering competitive benefits to retain employees.
- Your tax-deductible benefit costs are now capped.
- Hiring and retaining workers just became more expensive.
Bottom Line: Small businesses that offer good benefits are now penalized. Many will be forced to cut benefits or shift costs onto workers.
4. Payroll Taxes Still Apply—Making the Real Tax Rate Even Higher
What’s Happening:
- Small business owners don’t just pay income tax. They also pay payroll taxes (Social Security and Medicare).
- Even after paying 15% or 30% in income tax, they still owe another 15.3% in payroll taxes on net earnings.
What This Means for You (or Someone You Know):
🔸 You’re a self-employed graphic designer earning $120,000 in gross revenues.
- Under Project 2025, your income is taxed at 30% = $36,000 in federal tax.
- Then, you still owe self-employment tax of 15.3% = $18,360.
- Total effective tax rate? 45.3%.
🔸 You’re a gig worker making $90,000 in gross revenues.
- You owe 30% in federal income tax = $27,000.
- You still owe 15.3% in payroll tax = $13,770.
- Your real tax rate? 45.3%.
🔸 You run a food truck pulling in $160,000 in gross revenues.
- Under Project 2025, you owe $48,000 in income tax.
- Then, another $24,480 in payroll tax.
- That’s $72,480—almost half your gross revenue—gone.
Bottom Line: The real tax rate for small business owners is far higher than advertised.
The Reality: Small Businesses Get Screwed, Big Corporations Get a Break
- Mega-corporations get an 18% tax rate.
- Investors only pay 15% on capital gains.
- Small businesses? They’re stuck paying 30% on income, plus 15.3% in payroll taxes, plus the loss of deductions.
For small business owners, this isn’t a tax cut. It’s a tax hike.
The rich pay less.
The middle class pays more.
And if you own a small business, your profits just became Washington’s next tax target.
So next time someone says Project 2025 will “help small businesses,” ask them this:
Why does a Wall Street investor pay 15% while a Main Street entrepreneur pays 45%?
Because that’s the real plan.
