Biden says he is “asking” corporations to pay “a little bit more.” But his plan would force businesses to pay significantly higher taxes than they faced even before the Tax Cuts and Jobs Act passed in 2017. The proposed budget hikes taxes on corporations by $2 trillion over the next decade. It would hike federal corporate income taxes to 28%, introduce a 15% minimum tax on book income, and impose a global minimum tax on U.S. businesses of up to 26.25%.
Meanwhile, House Democrats have proposed a 26.5% corporate tax rate. After including state corporate taxes, this would come out at roughly 31%.
Neither proposal is “reasonable.” According to the Joint Committee on Taxation , the business and international tax sections of the 2017 tax cut reduced taxes by $329 billion over a 10-year period. While that tax cut reduced the corporate tax rate from 35% to 21%, it also eliminated deductions and credits worth hundreds of billions of dollars.
In addition, the act implemented several new international tax provisions. These included a one-time tax on repatriated earnings, the deduction for foreign-derived intangible income, and the global intangible low-tax income regime. Many of these provisions raised revenue and were part of a carrot-and-stick approach to encourage businesses to locate their operations and intellectual property in the United States.
Even a “centrist” Democratic Party position, raising the federal corporate tax rate to 25%, would increase taxes by over $400 billion over the next decade. The vast majority, almost $1.2 trillion, of the Republican tax cut in 2017 went to small businesses and individuals. This included the reduction in income tax brackets, the doubling of the child tax credit (from $1,000 per child to $2,000), the doubling of the standard deduction (from $12,000 to $24,000 for a family), and the creation of the 20% small business deduction for businesses filing under the individual tax code. It also included an expansion of the estate tax.
The Republican tax cut of 2017 increased economic prosperity. Prior to COVID-19, the economy was at one of its strongest levels in history. In 2019, the unemployment rate dropped to 3.5%, a 50-year low. In the same year, median household income increased by $4,440 or 6.8%, the largest one-year wage growth in history. This wage growth (6.8%) in just one year (2019) dwarfed the increase in wages during the entire eight years of Barack Obama’s presidency (5%).
And there is more. There were more job openings than job seekers between March 2018 and February 2020.
Economic gains flowed to all demographic groups and income levels. Black and Hispanic Americans saw their median income hit record levels , while the poverty rate declined to 10.5%, the lowest rate in decades. The bottom 25% of wage earners saw their wages grow faster than the top 25% of wage earners, according to the Atlanta Fed.
Biden’s plan to raise taxes would reverse these gains. According to the left-of-center Tax Policy Center, Biden’s tax plan will raise taxes on 75% of middle-class families next year and 95% of families over the long term. Biden’s policies are already slowing the economy. In August, the U.S. added just 235,000 jobs, a far cry from estimates that 720,000 jobs would be created. The economy has over 600,000 fewer jobs than the Biden administration boasted would be created in February, and we are 5.2 million jobs short from pre-pandemic employment levels.
Biden’s plan to increase taxes on businesses by trillions of dollars is not about “asking” them to pay a little bit more. It is a massive tax hike borne by working families.
Grover Norquist is president of Americans for Tax Reform.