Corporate Tax

The sophistry of corporate taxes by President Biden | opinion

According to The New York Times, the infrastructure draft signed by President Joe Biden, The American Jobs Plan, will cost $ 2.3 trillion over the next eight years. In addition to the Infrastructure Act, Biden has expressed support for increasing federal spending to levels not seen since World War II, even though the wafer-thin Democratic majorities in the House and Senate are unlikely to have the political capital to pass all presidential elections Privileges.

Every time a politician articulates a vision at a high price, budget hawks from across the nation can be heard: “How are we going to pay for this?” It’s a fair question to ask, especially since the United States’ national debt is already 100% GDP exceeds and did so before the pandemic.

Biden’s response to such questions is usually similar to claiming that he will “get the rich to pay their fair share” without raising taxes on the middle class. It’s a simple but effective political tactic that has been around for decades: my proposal won’t bother you, you will. There is one glaring problem with Biden’s promise, however. While he does not plan to levy taxes directly on the middle class, there are several ways that the middle class can shoulder the brunt of the president’s spending habits without direct taxes.

As part of the “rich pay their fair share,” Biden’s American Jobs Plan sees the corporate tax rate hike from 21% to 28%. With the bad corporations paying more taxes, the average American can benefit from improved infrastructure without paying the costs, right? Not correct.

Firms are reacting to market forces and are unwilling to simply watch their profit margins drop as they pass an additional 7% of their earnings on to the federal government. Like any other person or organization forced to adjust their lifestyle due to a drop in income, companies will try to make up for the loss in other ways. This can be done through wage cuts or layoffs, but it is much more likely that companies will raise prices to keep their profit margins below the higher tax rate. If Company X makes a profit of $ 1 million selling widgets for $ 3 at a tax rate of 21%, it must increase the price of its widgets by 7% if it has a profit of $ 1 million. Dollars at the new 28% tax rate.

Who bears the cost of price increases? The very same consumer that President Biden has promised will not have his taxes increased. While the IRS may not charge the suburban single mother who brought Joe Biden to the Oval Office 7% more income tax, in reality she will be paying more for the same product to offset the cost of Biden’s plan.

Perhaps the infrastructure is important enough to outweigh the president’s quibbles. Regardless of whether this is the case or not, it is difficult to imagine a worse time to force legislation that will lead to price increases than it is now. Inflation has risen steadily during the pandemic recovery, with CPI rising 5.1% from September 2020 to August 2021.

Put simply, without the corporate tax hike, prices will go up, and now the White House wants to incentivize further price hikes by adjusting tax legislation. The candidate, who campaigned not to bring the economy to a standstill, is eight months into office and appears determined to make the money in Americans’ pockets worth less than it deserves.

If he’s going to reverse this trend, our chief ice cream lover should rethink his corporate tax plan.

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