A plan by the Biden administration to raise the corporate tax rate from 21% to 28% would raise the state’s combined tax rate to 32.34% – the highest level in the Organization for Economic Cooperation and Development (OECD), according to the analysis of the tax foundation.
The higher corporate tax would undermine long-term economic output by 0.8%, cut 159,000 jobs and cut wages by 0.7%, while increasing capital costs and hurting US competitiveness, according to the tax foundation.
“Poorly considered changes in tax policy, including trade tax increases, would hamper economic recovery and limit long-term prospects,” said the tax foundation.
President Biden will “look into corporate taxation, fill in loopholes and try to raise the corporate tax rate, likely not as high as it was before 2017, but likely up to 28%,” Treasury Secretary Janet Yellen said in a February interview. 22nd
In addition to raising corporate income taxes, the Biden government has considered imposing a minimum tax of 15% on companies with book incomes greater than $ 100 million.
New income would be used for economic reconstruction and debt reduction. The U.S. budget outlook has deteriorated over the past year due to the downturn caused by the pandemic and $ 3.5 trillion in spending to bail out pandemics.
The federal budget deficit will be 10.3% of gross domestic product (GDP) this year – the second largest since 1945 and, according to a forecast by the budget office of Congress, only exceeded by 14.9% in 2020.
The federal government’s annual deficits will soar to 5.7% of GDP by 2031, and the US debt will rise to a record 107% of GDP this year, according to CBO projections. Currently, Democratic lawmakers are looking to pass a $ 1.9 trillion coronavirus aid package proposed by Biden.
Increasing federal revenue by increasing corporate tax would cost the entire economy, the tax foundation said.
“President Biden’s proposed tax hike would reduce American economic output at a time when we need to maximize economic growth in order to match our country’s pre-pandemic growth trend and return to full employment,” the Tax Foundation said. “Avoiding harmful tax increases and pursuing reform opportunities in corporate taxation should be the focus.”
Currently, US companies have a statutory tax rate of 21% and an average statutory tax rate of about 6%, which equates to a combined tax rate of 25.8%, according to the Tax Foundation.
“The business literature shows that corporate taxes are one of the most damaging types of tax to economic growth,” it said. “Corporate income tax increases the pre-tax return companies need to take advantage of investment opportunities and reduces the pool of investments that companies think makes sense,” along with economic performance, wages and living standards.
A rise in corporate tax from 21% to 25% would cut production by 0.4% and cut about 84,000 jobs, the Tax Foundation said, adding that a tax on corporate income tax “would likely add additional complexity and distortion to tax legislation, stimulating investment.” damage and generate relatively little tax revenue. “