As Congress debates ways to strengthen the American economy amid the rapid rise of the Delta variant, I encourage policymakers to responsibly fund new investments. Curbing job-creating companies of all sizes and the workers they employ with a rise in corporate tax rates would undermine rather than unleash President Biden’s bold vision of bettering for American families.
A multitude of studies make it clear that an increase in corporate taxes has alarming consequences for American workers who pay up to 70 percent of the taxes. Former Federal Reserve and IMF economist William Lee has even increased that number to 85 percent.
Consider the Federal Reserve’s “Corporate Tax Impact On Employment and Income” review, which shows how “a 1 percent increase in the corporate tax rate would cut wages by 0.3-0.6 percent.” The proposed 28 percent corporate tax rate could therefore cost an American household making $ 80,000 annually as much as $ 3,360 a year due to lower wages, while a 25 percent rate could cost the same family nearly $ 2,000 annually.
The Fed’s results compound the ramifications of numerous other worrying projections related to the current corporate rate hike proposal. For example, a higher corporate tax rate would result in up to 1 million American jobs being cut and 1.4 million small businesses across the country being taxed higher, including 7,335 companies with fewer than 500 employees in my home state of Arkansas. American families will also feel pressures from higher corporate taxes in the form of higher retail prices and a recent Joint Tax Committee analysis of higher cost of living in general.
These consequences are not only unacceptable. They are also at odds in a global context where “nine of the largest and most advanced economies” [have] in the last four years alone have reduced their corporate income tax ”. In addition, American companies of all sizes are already paying a combined corporate tax rate of more than 25 percent, a figure that the current proposal will exceed 32 percent, with the added burden of state and local taxes. In contrast, the average corporate tax rate in Europe was 19.99 percent last year, while the OECD countries pay an average rate of 23.4 percent (excluding the US). Any increase in the interest rate would put us even further behind economic rivals around the world, including China, which offers tariffs as low as 10 and 15 percent in certain industries that the country seeks to strengthen its dominance in the supply chain.
The significant economic benefits gained from lowering corporate tax rates in 2017 quickly demonstrated why a globally competitive tariff has long been a priority for policymakers on both parties. The new tax bill has helped foster a climate where America’s unemployment rate routinely stayed below 4 percent, our economy created more than 100,000 private sector jobs every month, and nominal wage growth was at or above 3 percent for nearly two consecutive years , and actual GDP was around $ 300 billion higher than the Congressional Budget Office’s forecast for 2017 by the end of 2019. As for workers, median household income rose in the first two years after corporate tax rates were cut by $ 4,900. Dollars, while “wealth for the bottom” 50 percent of households are three times as fast as the top percent. ”
Funding mechanisms to pay for critical domestic investments should be based on the knowledge that increasing our corporate rate would have a significant impact on American workers and their families. There are smarter, more efficient, and less damaging approaches for policymakers, like the recent IRS assessment that $ 1 trillion in taxes is not collected annually.
I encourage my former colleagues in Congress to work together to reclaim unpaid taxes already owed, rather than jeopardizing American jobs, workers’ incomes, and lower bills caused by a globally competitive corporate tax rate.
Blanche Lincoln, a former United States Senator from Arkansas, is the founder of the Lincoln Policy Group and works as an advisor to the RATE Coalition.