Rep. Jim Jordan, R-Ohio, explains how his party would handle spending differently.
President Biden on Wednesday tabled a proposal for the highest corporate tax rate in decades to pay off his nearly $ 2.25 trillion spending package – an increase that could indirectly harm middle-class Americans.
The White House bills the eight-year initiative, called the American Jobs Plan, as a one-off infrastructure solution that will make massive investments in the country’s roads and bridges, as well as transportation systems, schools and hospitals. The move will be funded by raising the corporate tax rate from 21% to 28% – reversing part of former President Donald Trump’s 2017 tax cuts – and increasing the global minimum tax on US companies from 13% to 21% .
WHAT’S IN BIDENS $ 2.2T INFRASTRUCTURE AND TAX PROPOSAL?
However, critics say that raising taxes on companies will ultimately hurt workers in the form of lower wages, potentially violating the president’s election promise not to increase tax rates on those earning less than $ 400,000.
“Corporate income tax is simply not paid by companies, it is paid by workers for lower wages,” said right-wing Americans vice president of communications for tax reform, John Kartch, to FOX Business. “There is something to watch out for, even a left-of-center economist will tell you that some measure is borne by lower wages.”
President Biden will speak in Pittsburgh on Wednesday, March 31, 2021 on infrastructure spending at Carpenters Pittsburgh Training Center. (AP Photo / Evan Vucci)
A study published by the American Enterprise Institute, a conservative think tank, found that a 1% increase in corporate tax rates correlated with a 0.5% decrease in real wages. And in 2007, the Impartial Budget Bureau of Congress found that workers pay more than 70% of the cost of corporate taxes.
BIDEN’S PLANNED TAX HIKES COULD BE “DESTRUCTIVE” FOR DEMOCRATS IN 2022
“When Biden says he will only collect taxes on those earning more than $ 400,000, he is saying that his tax law only applies to those high-income taxpayers,” wrote Taylor LaJoie, policy analyst with the Tax Foundation, recently . “However, economists track the economic impact of these taxes on who wrote the check.”
Not to mention the broader economic impact of a corporate tax increase: Recent research from the Tax Foundation shows that Biden’s plan to increase corporate tax would cut GDP, the broadest measure of goods and services produced in the country, by 0.8% and eliminate 159,000 Jobs. It would also cut workers’ wages by 0.7%, the bipartisan organization said.
“The business literature shows that corporate taxes are one of the most damaging types of tax to economic growth, as capital investments are sensitive to corporate taxes,” the analysis said. “Corporate income tax increases the pre-tax return firms required to pursue investment opportunities and decreases the pool of investments that businesses find useful. This lowers long-term economic performance, lowers wages and the standard of living.”
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The corporate tax hike would generate around $ 740 billion in new revenue over the next decade, according to a recent analysis by the Tax Policy Center.
However, the proposal faces an uphill battle in Congress: Republicans have already begun to attack the plan as a “Trojan horse” for bigger tax hikes, while progressive Democrats have argued that the proposal does not go far enough to address climate change or other issues .
If Democrats choose to pass the measure through reconciliation on a party line, they cannot lose any Senate and only three in the House of Representatives, provided all GOP lawmakers oppose the bill.