Bloomberg | Michael R. Strain | March 17, 2021
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Raising the corporate levy would hurt ordinary workers, not just people earning $400,000-plus.
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If the corporate rate goes up, it will reduce the incomes of the middle class.
The corporate tax rate was lowered from 35% to 21% as part of the 2017 tax law. Biden is said to be considering an increase to 28%. Tempting though it is to wish that faceless entities like corporations would shoulder the burden, sparing individuals the pain, in reality corporate taxes are always financed by people. The only question is which ones.
Economists used to think that the burden of corporate taxation fell almost entirely on the owners of capital in the form of lower share prices or, say, smaller dividend checks.
That view became outdated as it became easier for capital to cross national borders. Workers, by contrast, are much less internationally mobile. This leaves them more vulnerable when business owners are forced to pony up higher taxes on their business income…The burden of the corporate tax increase would fall on workers in the form of lower wages.
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Workers — very much including those with incomes below $400,000 — will see their wages fall if Biden hikes the corporate rate. That’s only one reason not to do it. Future prosperity will be strengthened if the U.S. continues to be thought of as the place for corporations to set up shop and do business. A tax rate at least as low as the ones in Europe and most other advanced economies is one way to help ensure U.S. global competitiveness.
If you tax something, you get less of it. Does the U.S. want less corporate income? I don’t think so.
Biden’s proposal to pay for new spending instead of financing it by piling on more debt is refreshing and laudable. But Mr. President, please look elsewhere to raise revenue.
