The $ 3.5 trillion budget proposal that goes through Congress would go a long way towards strengthening America’s safety net.
For example, childcare for families with low and middle incomes would be more affordable and at the same time a way to universal early intervention would be created. It would also support the incomes of low and middle income workers by continuing the improved earned income tax credits originally created as part of various pandemic relief packages.
The budget proposal would also make healthcare more affordable, including lowering prescription drug prices, expanding insurance premium subsidies created under the Affordable Care Act, and launching a new program to cover about 2 million uninsured Americans. Oh, and it would help companies directly by providing federal funding to cover the cost of family vacations. But that’s not the only way companies can benefit from this “liberal” proposal.
Indeed, most of the welfare programs funded from the proposed funds help businesses in a variety of ways, from enabling more parents – especially women – to enter the labor market, to subsidizing the incomes of low to middle income workers and thereby putting pressure on them employers to offer wage increases. It would also give people more money to spend on consumer purchases, which drives up corporate profits.
For this reason, business groups have in the past supported the social programs that the proposed budget would fund. Despite numerous initiatives that businesses support and would benefit from, corporate lobbyists oppose the proposed budget.
Why? The answer is simple: To cover some of the $ 3.5 trillion spending, Congress is considering raising the corporate tax rate from its current 21 percent to 26.5 or 28 percent. This tax hike is why American companies are against a budget that otherwise helps businesses.
Jay Timmons, CEO of the National Association of Manufacturers, complained that this tax hike would “get America back to where we were” before the 2017 cuts proposed by then-President Donald Trump were passed. This is neither right nor, as it turns out, a bad place for business.
It’s not accurate because the corporate tax rate was 35 percent prior to the passage of Trump’s tax cuts, which is still well above the level proposed to pay for new federal spending. And in those days leading up to the tax cut, businesses were doing pretty well from a profitability standpoint. How well? According to data from the US Bureau of Economic Activity, aggregate corporate profits after tax were $ 1.87 trillion in 2017.
In context, that profitability number is 873 percent higher than in 1981, when President Ronald Reagan first introduced supply-side tax cuts for corporations (and wealthy individuals). Remember that supply-side theory of tax increases always hurts the economy, while tax cuts for corporations and wealthy individuals are always meant to increase them so quickly that great benefits trickle down to ordinary people. But things didn’t go as the vendors promised.
From the time the supply-side tax cuts were first introduced in 1981 to the passage of Trump’s tax cuts in 2017, corporate earnings growth outpaced both national GDP growth of around 165 percent and wage growth for the bottom 90 percent of the population Income earners, that was around 40 percent.
On the supply side, Neil Bradley of the US Chamber of Commerce flipped the theory that any tax hike would hamper economic growth when he warned that the proposed tax hike would be “economically devastating to the country.” ”
No it won’t. The truth is, the data has never supported a core supply-side tenet: that tax cuts always boost the economy, or that tax increases always hurt it.
On the contrary, every credible independent supply-side study to date by the London School of Economics, the International Monetary Fund or the Congressional Research Service has found that reducing or increasing tax rates for corporations – or wealthy individuals, z – simply does not correlate with economic growth.
However, investing in human capital leads to increased economic activity that benefits everyone – including businesses.
Ralph Martire is executive director of the Center for Tax and Budget Accountability, a non-partisan tax policy think tank, and Arthur Rubloff Professor of Public Policy at Roosevelt University in Chicago. He can be reached at firstname.lastname@example.org.