By BRUCE THOMPSON
This column first appeared in the Washington Examiner:
President Joe Biden has proposed trillions of dollars of tax increases on businesses, including raising the corporate tax rate from 21% to 28%. The president claims his new taxes will not touch anyone earning less than $400,000.
Most economic experts, however, disagree. They believe that working people will be hurt by these tax increases. That harm will come in the form of slower economic growth, fewer jobs, higher prices, and lower wages. Numerous studies have shown that raising corporate taxes lowers workers’ wages. Economists debate how much these tax increases lower wages, but economic and tax experts all agree that corporate tax hikes will reduce workers’ wages.
About two-thirds of Biden’s tax increases fall on corporations, as opposed to wealthy individuals. This means more of the tax increases will fall on average working people.
The Congressional Budget Office and the Joint Committee on Taxation estimate that workers bear 25% of the burden of a corporate tax increase. The Tax Policy Center assumes only about 20% of corporate tax increases are borne by workers. But it still reports that “most households would pay more in 2022” due to the Biden corporate tax increases. According to the center’s analysis of the Biden plan, “about three-quarters of middle-income households would face a tax increase” because of the higher corporate taxes.
Other economic research estimates that workers will bear as much as 50% to 70% of the tax burden, costing them much more a year in lower wages. The Tax Foundation has found that a “significant portion of the economic cost of the corporate income tax falls on workers” and that a corporate income tax increase will reduce economic growth, reduce employment, and reduce wages. The foundation adds, “workers across the income scale would bear much of the tax increase,” but the “bottom 20%” would see the largest drop in income.
A Federal Reserve Board study found that corporate tax rate increases “are uniformly harmful to workers” and that an “increase in corporate tax rates would lead to significant reductions in employment and income.”
According to the Federal Reserve study, “a 1% increase in the corporate tax rate would reduce wages by between 0.3% and 0.6%.” The Biden corporate tax rate increase could thus cost a household earning $80,000 a year as much as $3,360 a year in lower wages. A 25% rate could cost this family almost $2,000 a year.
Put simply, workers and their families will be hurt by Biden’s corporate tax increases. If they don’t lose their jobs, they will be working for lower wages. Their retirement savings will be lower, their utility bills will be higher, and they will be paying higher prices every time they go shopping. In short, their cost of living will go up and their standard of living will go down.
These corporate tax increases are a bad deal for working families. Congress should vote them down.