P.Resident Joe Biden has proposed trillion-dollar tax hikes for businesses, including a corporate tax rate hike from 21% to 28%. The president claims his new taxes will not affect anyone who earns less than $ 400,000.
Most economists, however, disagree. They believe that working people will be harmed by these tax hikes. This damage will come in the form of slower economic growth, fewer jobs, higher prices and lower wages. Numerous studies have shown that an increase in corporate taxes lowers workers’ wages. Economists are discussing how much these taxes will lower wages, but economists and tax experts agree that corporate tax increases will lower workers’ wages.
About two-thirds of Biden’s tax increases go to corporations, as opposed to wealthy individuals. This means that more of the tax increases will fall on the average working people.
The Congressional Budget Office and the Joint Committee on Taxation estimate that employees bear 25% of the burden of a corporate tax increase. The Tax Policy Center estimates that only about 20% of corporate tax increases will be borne by employees. However, it is still reported that “most households would pay more in 2022” due to Biden’s corporate tax hikes. According to the center’s analysis of the Biden Plan, “around three-quarters of middle-income households would face a tax increase” because of the higher corporate taxes.
Other economic research suggests that workers will bear 50 to 70% of the tax burden, which will cost them much more per year with lower wages. The Tax Foundation has determined that “a significant portion of the economic cost of corporate tax is borne by workers” and that an increase in corporate tax will reduce economic growth, employment and wages. The Foundation adds, “Full-income workers would bear a large portion of the tax hike,” but the “bottom 20%” would see the biggest drop in income.
A study by the Federal Reserve Board found that corporate tax increases “are consistently harmful to workers” and that “increases in corporate tax rates would lead to significant cuts in employment and income.”
According to the Federal Reserve’s study, “a 1% increase in the corporate tax rate would reduce wages by 0.3% to 0.6%.” The increase in the corporate tax rate in Biden could cost a household making $ 80,000 a year as much as $ 3,360 a year in lower wages. A rate of 25% could cost this family nearly $ 2,000 a year.
Put simply, workers and their families are hurt by Biden’s corporate tax hikes. If they don’t lose their jobs, they will work for lower wages. Their retirement savings will be lower, their utility bills will be higher, and they will be paying higher prices every time they go shopping. In short, their cost of living will go up and their standard of living will go down.
These corporate tax hikes are bad business for working families. Congress should vote them.
Bruce Thompson was Senate Advisor, Assistant Secretary of the Treasury for Legislative Affairs during the Reagan administration, and Director of Government Relations for Merrill Lynch for 22 years.