Democrats are looking for ways to pay for their $3.5 trillion spending plan, including raising corporate taxes.
President Joe Biden’s original plan was to increase the corporate tax rate to 28 percent, up from 21 percent, though the figure has been revised slightly lower to 26.5 percent. The proposed rate is higher than Communist China’s corporate tax rate for perspective and would reportedly be the largest tax increase since 1968 “compared to the size of the economy and the largest tax increase ever in nominal dollars,” Americans for Tax Reform reported. According to the advocacy group:
This tax increase will be passed along to working families in the form of higher prices, fewer jobs, and lower wages. This will give the U.S. a combined state-federal rate of 30.9 percent, higher than our foreign competitors including China, which has a 25 percent corporate tax rate, and Europe which has an average rate of 21.7 percent.
Studies from a variety of sources have shown how increased corporate taxes directly fall onto laborers. On Tuesday, the Joint Committee on Taxation (JCT) confirmed that corporate tax hikes decrease workers’ wages.
“Literature suggests that 25 percent of the burden of the corporate tax may be borne by labor in terms of diminshed wage growth,” JCT Chief of Staff Thomas Barthold said while testifying before the House Ways & Means Committee.
Rep. Mike Kelly (R-PA) told Barthold to clarify himself once more, asking: “Who is going to bear the brunt of this [corporate income tax hike].
“Labor. Laborers,” he answered.
Americans for Tax Reform even cited the left-of-center Tax Policy Center, which found that “20 percent of the burden of the corporate income tax is borne by labor.”
The advocacy group argued that raising the corporate income tax rate will “hit Americans with higher utility bills as the country tries to recover from the pandemic,” among other drawbacks. Increases to everyday costs ultimately fly in the face of Biden’s promise [again] not to tax any Americans making under $400,000. The group claimed:
Customers directly bear the cost of corporate income taxes imposed on utility companies. Investor-owned electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. Therefore, if Democrats raise the corporate tax rate, they will have voted to raise utility bills.
The proposal of corporate tax hikes has met criticism from both sides of the aisle. Back when Biden was still aiming for 28 percent, Rep. Alexandria Ocasio-Cortez (D-NY) tweeted that Biden’s effort was lacking urgency. “This is not nearly enough,” she said:
This is not nearly enough. The important context here is that it’s $2.25T spread out over 10 years.
For context, the COVID package was $1.9T for this year *alone,* with some provisions lasting 2 years.
Needs to be way bigger. https://t.co/eTQ7cxuTzF
— Alexandria Ocasio-Cortez (@AOC) March 30, 2021
Ann Wagner (R-MO) agreed. “Why, as this country begins to reopen and recover economically, would the Biden administration be proposing tax policy which would, in the end, hurt the American family and millions of struggling small businesses?”
Senate Minority Leader Mitch McConnell (R-KY) said on March 16 that Republicans would not support tax increases to pay for infrastructure. “I don’t think there’s going to be any enthusiasm on our side for a tax increase,” he said.
Congressional committees are hurrying to finish drafting their spending bill and are aiming to have it up for a House vote by Oct. 1.
Wendell Husebø contributed to this report.