(The Center Square) – A new analysis of President Joe Biden’s tax plan raises concerns about its impact on the economy both now and in the future.
The American Enterprise Institute publishes a report Wednesday analyzed Biden’s proposed corporate tax hike and said it will reduce the incentive to invest in the US for years to come.
“Corporate tax policies vary significantly between developed countries,” said Kyle Pomerleau, tax advisor at AEI. “In addition to the differences in the statutory corporate tax rates, there are significant differences in the corporate tax base. Some countries provide tax breaks for certain types of wealth and income and have only a minor impact on corporate income and investments. Other countries offer lower specific benefits for certain types of income and work and place a greater burden on business investments. “
The report argues that including corporate tax hikes in the Democrats’ $ 3.5 trillion reconciliation bill could make the US less competitive on the world stage and hurt economic growth.
“Current proposals to reform US corporate taxation would raise statutory and effective tax rates well above the OECD average,” the report said. “Biden’s proposal to raise the federal corporate tax rate to 28 percent would raise the combined statutory corporate tax rate to 32.3 percent, which would be the second highest in the OECD. The METR and AETR for new investments would also become the second highest in the OECD. “
According to the report, the similar proposal by the Democrats in the House of Representatives would also put the US at the top of the list of corporate tax rates in the OECD, the 38-member organization for economic cooperation and development.
“The House of Representatives proposal, approved by the House of Representatives Committee on Ways and Means on September 15, 2021, would raise the corporate tax rate to 26.5 percent. Under this proposal, the US combined statutory corporate tax rate would be 30.9 percent, the third highest in the OECD, ”the report said. “The METR for business investment would increase to 22.4 percent, which would be the third highest in the OECD, and the AETR would increase to 28 percent, which would be the second highest in the OECD.”
These high tax rates can make corporate investors hesitate about where to put their funds.
“Proposals to raise the statutory corporate tax rate and increase the tax burden on business investments will increase the incentive to move profits and high-yielding assets to low-tax countries and reduce the incentive to invest in the United States,” said Pomerleau.