President Joe Biden and congressional Democrats demand trillions of dollars of tax increases be imposed on American businesses and working families. Biden routinely claims that this tax hike is about making corporations “pay their fair share.”
However, taxes that Biden claims hit only corporations will directly harm families, small businesses, and savers. It would increase the cost of goods and services, raise utility bills, and lock in a global agreement to surrender U.S. tax sovereignty to foreign countries.
Here are six reasons to be concerned about these tax increases:
1. Biden will give us a higher corporate tax rate than China and the rest of the world
The president has proposed raising the federal corporate tax from 21% to 28%, a 33% increase. Including state taxes, which average 4%, the U.S. would have a 32% corporate tax, significantly higher than China’s 25 % tax. This would also make the U.S. rate higher than our competitors including Canada (26.5%), the United Kingdom (19%), Ireland (12.5 %), Germany (29.9 %) and Japan (29.7%).
2. Higher costs and lower wages
Businesses will pass along the costs of the corporate tax along to consumers by raising the price of goods and services. Inflation has already increased the cost of travel, housing, and food in the first half of 2021, and this tax hike will make things worse. Workers will also see fewer job opportunities and lower wages.video
Americans for Tax Reform President Grover Norquist provides insight into taxes and expanding the IRS under the Biden administration.
According to a recent National Bureau of Economic Research paper, 31% of the corporate tax rate is borne by consumers through higher prices, while 38 % of the corporate tax is borne by workers through lower wages or less jobs.
Similarly, a 2017 study by Stephen Entin of the Tax Foundation argues that labor (or workers) bear around 70% of the burden of corporate taxes.
After the corporate tax rate was reduced from 35% to 21%, median household income increased by $4,440 or 6.8% in 2019 – the largest one-year wage growth in history. Biden’s tax hike will reverse those gains.
3. Reduced value of your nest egg
Raising the corporate tax will harm the 80 to 100 million Americans that have a 401(k) and the 46.4 million households that have an individual retirement account. Even the left-of center Tax Policy Center acknowledges this fact.
In a recent essay, Len Burman of the left-leaning Tax Policy Center asks and answers the question of whether middle class families would be harmed by the Biden corporate tax hike:
“Does a corporate tax increase or a financial transaction tax raise taxes on shareholders, including the millions of middle-class people who own 401(k) plans? (Answer: yes.)”
4. Utility bill increases
If Democrats increase the corporate income tax rate, they will have to explain why they just increased your utility bill. Utility customers bear the cost of taxes imposed on utility companies. Utility companies collect the corporate income tax. You pay the tax. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up. When Republicans enacted a corporate tax rate cut, utilities across the country lowered their rates.
5. Tax hikes on small businesses
Biden’s corporate tax increase won’t just hit large businesses. One million C-corporations are classified as small employers, defined by the Small Business Administration as any independent business with fewer than 500 employees. They will see a tax increase under the Biden plan.
In addition, 900,000 businesses organized as passthrough entities will see a tax increase, a fact the Biden administration admitted in a statement to Reuters several months ago.
6. A “global minimum tax” to yoke USA to China, Russia, Saudi Arabia
In addition to raising the corporate tax, Biden wants a 21% global corporate minimum tax on American businesses. At the same time, the administration is pushing for a global agreement amongst foreign countries to set a foreign minimum tax rate of 15 %.
This is a terrible idea that, if successful, will surrender U.S. sovereignty to foreign leaders in Russia, China, Saudi Arabia, and the European Union in order to bind the world into higher taxes and bigger government.
It should be telling that the Biden wants foreign countries to pay a 15% minimum tax, while domestically he has proposed a 28% tax. Clearly, the administration is not prioritizing American businesses and workers.
Why does Biden trust foreign countries – many of which have a history of undemocratic governance and human rights violations — to play by the rules in a way that ensures American businesses and workers are treated fairly?
The push to impose a global minimum tax shows that the Biden administration is not prioritizing American workers, families and businesses but instead wants to expand the size and scope that the federal government has over the U.S. economy and the power that politicians in other countries have over Americans.
Grover Norquist is president of Americans for Tax Reform.