A study conducted by Rice University economists John W. Diamond and George R. Zodrow found raising taxes similar to President Joe Biden’s tax hike of 28 percent would kill American “economic activity” and one million jobs in the first two years.
According to the study, “Total employment, measured by hours worked, would fall by 0.7% initially before moderating. The reduction in hours worked would be equivalent to an employment decline of approximately 1 million full-time jobs in 2023.”
The report details the negative impact:
- The average annual reduction in employment would be equivalent to a loss of 600,000 jobs each year over 10 years.
- By 2023, GDP would be down by $117 billion, by $190 billion in 2026, and by $119 billion in 2031.
- Ordinary capital, or investments in equipment and structures, would be $80 billion less in 2023 and $83 billion and $66 billion less in 2026 and 2031, respectively.
- Investments in intangibles, or “firm-specific capital,” are highly mobile and more sensitive to marginal tax rate changes. Such investments would fall 2.7% by year two and would be down a total of 3.8% by year five.
- Real wages would fall by 0.6% in the long run, and total labor compensation, including wages and benefits, would decline by 0.6% initially before falling by 0.3% after 10 years. In the long run, total compensation would also decline by 0.6%.
National Association of Manufacturers, for whom the study was conducted, stated in an emailed press release, “[T]his study tells us quantitatively what manufacturers from coast to coast will tell you qualitatively: ‘increasing the tax burden on companies in America means fewer American jobs,'” adding, “One million jobs would be lost in the first two years, to be exact.”
National Republican Congressional Committee spokeswoman Torunn Sinclair also spoke to study’s findings. “While our country is still reeling from the coronavirus, Democrats want to destroy 1 million American jobs to fund their socialist agenda,” she wrote in a press release.
The study was conducted in relation to Biden’s infrastructure proposal, which aims to increase the corporate tax rate from 21 percent to 28 percent, raising the rate above the 25 percent American businesses are taxed in Communist China.
Breitbart News reported Thursday the jobless claims grew to 744,000 for this week ending April 3rd. The economic outlook has many Democrats worried it might be too soon to raise taxes during a pandemic in which the economy is struggling to recover fully. Indeed, Sen. Joe Manchin (D-WV) conveyed Monday there are six or seven Democrats who oppose raising the corporate tax rate to 28 percent.
House Minority Whip Steve Scalise (R-LA) believes this is the wrong time to raise taxes. “When you raise taxes … companies start moving their jobs overseas again, like they were doing when we had high taxes a few years ago. That means we lose middle class jobs.”
Trump has also voiced hostility towards Biden’s “radical” and “largest tax hike in American history” as a “massive giveaway to China” that will displace thousands of “factories, millions of jobs, and trillions of dollars to these competitive Nations.”