Earlier this year, my friend and former Senate colleague President Joe Biden published the first draft of his American employment plan to revitalize our country’s infrastructure. Rebuilding American infrastructure, if done right, would not only improve our roads, bridges, highways, airports, and water systems, but also accelerate our country’s recovery from the economic fallout from the COVID-19 pandemic.
These are critical investments at a critical time. But like many others, I have grave concerns that President Biden’s plan to increase corporate tax rates would hinder rather than facilitate this economic comeback.
In the White House’s own words, the plan is “an investment in America that will create millions of good jobs, rebuild our country’s infrastructure and enable the United States to outperform China.” But any increase in corporate rate would position the US even further behind global competitors like China. As a result, there would be threats of halting domestic investment, moving American jobs overseas, resuming corporate inversions, and lowering workers’ wages.
Non-partisan organizations from the Joint Committee on Taxation to the Congressional Budget Office have stated that corporate tax costs are borne by workers and consumers. One CBO economist even estimates that “domestic workers bear just over 70 percent of the long-term corporate tax burden”.
Corporations here in the United States already pay a combined corporate rate greater than 25 percent when state and local rates are included. This is a number higher than most of America’s global competitors. The average rate among the countries that make up the Organization for Economic Co-operation and Development – corporate taxes considered the “most detrimental type of tax on economic growth” – is 23.4 percent (excluding the United States). The flat rate of 25 percent offered in China already undercuts our current one. As a result, over the past two decades China has added 114 Fortune Global 500 headquarters while the United States has lost 58. Today China has 124 while the US has 121.
In stark contrast to the corporate tax proposal in President Biden’s infrastructure plan, “nine of the largest and most advanced economies in the world … have lowered their highest corporate tax rate” over the past four years, the Wall Street Journal’s editorial board recently pointed out.
It’s worth noting that a number of significant economic successes were achieved when we finally cut our tariff in 2017. This quickly underscored why a competitive corporate tariff has long been a bipartisan priority. Leading Democrats such as President Barack Obama rightly warn of the consequences of a corporate tax hike during an economic downturn and the consequences of an uncompetitive corporate tax rate in general.
As I mentioned in my recent written testimony to the Senate Finance Committee, having a competitive business rate helped foster a climate where America’s unemployment rate remained consistently below 4 percent, our economy more than 100,000 private sector jobs per month and nominal wage growth either created nearly two years in a row prior to the COVID-19 pandemic or over 3 percent growth.
Kevin Hassett, chairman of President Donald Trump’s economic advisory council during the implementation of the corporate rate cut, recently stated that “Actual gross domestic product by the end of 2019 was about $ 300 billion higher than the Congressional Budget Office’s forecast in July 2017. Corporate investment increased by approximately $ 100 billion and employed 2.8 million more workers. US companies repatriated $ 1.4 trillion in cash that had previously been stuck abroad. And in the first two years after the tax cuts were passed, real average household income rose by $ 4,900. Employment increased, particularly among the long-term unemployed, the poor and minorities. The wealth of the bottom 50 percent of households grew three times as fast as that of the top percent. ”A corporate tax rate equivalent to that of our global competitors is in place to help our country achieve such remarkable post-pandemic growth.
Together with numerous citizens and policymakers from across the political spectrum, I share President Biden’s vision of rebuilding American infrastructure and surpassing China. But the United States cannot accomplish those two goals at an even higher corporate tax rate than what Beijing is currently offering. As Congress raises the question of how to fund the worthy goal of repairing our infrastructure, I urge my former colleagues to avoid increasing corporate tax rates. Any increase would weaken the progress of our country’s economic recovery and act as an obstacle to the critical goal of better construction.
Blanche Lincoln is a Democrat who represented Arkansas in the Senate from 1999 to 2011 and in the House of Representatives from 1993 to 1997. She is the founder and director of the Lincoln Policy Group and an advisor to the RATE Coalition, which works for a globally competitive company. US tax rate