BY SENATOR BLANCHE LINCOLN
This column first appeared in RealClearMarkets
As members of my party prepare the legislative calendar for the coming year in Congress, I encourage policymakers to remember the principle long embraced by leaders across the aisle: a recession is the wrong time to raise taxes. Noted economists like Mark Zandi – to whom leaders like President Joe Biden and Speaker Pelosi turn for sound, impartial analysis – agree. Per Zandi’s recent recommendation, Congress “shouldn’t allow any tax increases to take effect for several more years…anything that could potentially be an impediment to getting this economy fully up and running.”
Indeed, as a former member of the Senate Finance Committee between the consequential years of 2008 to 2010, I believe a tax hike on job creating businesses of all sizes would be a uniquely harmful proposition at a uniquely harmful point in time. Returning our corporate rate to the highest in the world during the worst financial crisis in our lifetimes threatens so many aspects of our fragile economy – impacting not only the major U.S. companies and workers they employ, but also the smaller suppliers and vendors who support these industries and form the backbone of suburban and rural America. Returning to an uncompetitive rate would put U.S. companies and the workers they employ at a competitive disadvantage, send American jobs back overseas, and restart an inversion trend which finally began to reverse after the 2017 enactment of a 21 percent federal corporate income tax rate.
When combined with the average 4.9 percent state and local corporate tax rate, America’s job creators — the very companies that will drive our recovery out of this recession — already pay a higher combined rate than the global OECD average of 23.85 percent and China’s rate of 25 percent. Further, as economic competitors like France take steps to reduce their tax rates, the nonpartisan Tax Foundation recently cautioned that going in the opposite direction – hiking our federal corporate rate all the way up to 28 percent – would “give the U.S. a combined rate of over 32 percent…ranking the U.S. again among the top corporate tax rates in the industrialized world.”
While such a proposal would be welcome news to the countries with which we compete in the globalized marketplace, its implications would be worrisome for American workers – particularly for those at the lowest income levels. Empirical economic studies estimate that labor bears “between 50 percent and 100 percent of the burden of the corporate income tax, with 70 percent or higher the most likely outcome.” And as Harvard Business School professor Mihir A. Desai put it prior to the achievement of a globally competitive rate: “high corporate taxes divert capital away from the U.S. corporate sector and toward noncorporate uses and other countries. They therefore limit investments that would raise the productivity of American workers and would increase real wages… its burden falls most heavily on workers.”
Scores of meaningful economic wins that followed the reduced U.S. federal corporate rate demonstrate precisely why it had long been a bipartisan priority. They demonstrate precisely why leaders that span the ideological spectrum, including Democratic icons like President Obama and Speak
Our country’s pre-pandemic economy certainly wasn’t perfect, and significant work still remains to promote greater equality, diversity and inclusion. Yet, as the world begins to regain its footing and recover from this COVID-induced downturn, policymakers in Washington should keep in mind the blueprint that built a remarkably robust economy – the cornerstone of which was a globally competitive corporate tax rate. A competitive corporate rate and balanced tax policies which allow our companies to compete and grow — combined with necessary investments in infrastructure, healthcare, working families and rural communities — will help my friend and former Senate colleague, President Biden, Build Back Better for all Americans.
Let’s join together to eliminate wasteful loopholes rather than jobs. In addition, let’s work to strengthen the enforcement of existing tax laws rather than weaken a tax code that empowers U.S. businesses of all sizes to grow. And let’s maintain our globally competitive rate to help reignite our economy, create new opportunities for our country’s workers, and keep investment right here in America at a time when all three of these pillars of prosperity are needed the most.
Blanche Lincoln, a former U.S. Senator from Arkansas, is the founder of the Lincoln Policy Group and works as an advisor for the RATE Coalition.