President Biden argued that tax hikes would “make the economy work better” and “generate more energy” as he answered press questions about the March job report.
President Biden defended adding the largest corporate tax rate in decades to his spending package of $ 2.25 trillion, despite criticism from CEOs and industry groups who say it could hurt US economic growth.
“Tax hikes are not going to slow the economy at all,” Biden said during Friday’s remarks. “We urge American companies to pay their fair share. This is not going to slow the economy at all.”
Earlier this week, Biden launched what is known as the American Jobs Plan, an eight-year initiative 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% .
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However, the White House is already facing headwinds from the proposed tax hikes: Both the U.S. Chamber of Commerce and the Business Roundtable, which includes CEOs of some of the country’s largest corporations, warned that companies would be forced to pay more federal taxes Economic recovery from the coronavirus pandemic.
“Business Roundtable strongly rejects corporate tax increases as payment for infrastructure investments,” CEO Joshua Bolten said in a statement. “Policymakers should avoid creating new barriers to job creation and economic growth, especially during the boom.”
Recent research from the Tax Foundation shows that Biden’s plan to increase corporate taxes would cut GDP, the broadest measure of goods and services produced in the country, by 0.8% and cut 159,000 jobs. It would also cut workers’ wages by 0.7%, the bipartisan organization said.
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Critics also say that increasing the corporate tax rate ultimately hurts workers: a study published by the American Enterprise Institute, a conservative think tank, found that a 1% increase in the corporate tax rate 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.
“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.”
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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.
Biden’s comments followed a report on blow-out jobs that found employers created 916,000 new jobs in March and the unemployment rate fell to 6%. There are still 8.4 million fewer jobs than a year before the crisis began.
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The president praised better-than-expected economic progress and the accelerating pace of vaccine distribution in the US, but warned that the progress could be reversed if Americans stop certain measures – such as wearing a mask and social distancing – in order to contain the spread of COVID-19.
“We still have a long way to go to get our economy going after the worst economic and employment crisis in nearly a century,” he said.