House Democrats are proposing almost $3 trillion ($3,000,000,000,000) in tax increases including tax increases on small businesses and working families. This would be the largest tax increase since 1968 compared to the size of the economy and the largest tax increase ever in nominal dollars.
Some of these tax increases include:
Raising taxes on working families by increasing the federal corporate income tax rate from 21 percent to 26.5 percent. This tax increase will be passed along to working families in the form of higher prices, fewer jobs, and lower wages. This will give the U.S. a combined state-federal rate of 30.9 percent, higher than our foreign competitors including China, which has a 25 percent corporate tax rate, and Europe which has an average rate of 21.7 percent.
According to the Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment. Similarly, a 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers.
A corporate tax increase will threaten the life savings of families by reducing the value of publicly traded stocks in brokerage accounts or in 401(k)s. Individual investors opened 10 million new brokerage accounts in 2020 and at least 53% of households own stock. In addition, 80 million to 100 million people have a 401(k), and 46.4 million households have an individual retirement account
Raising the corporate income tax rate will hit Americans with higher utility bills as the country tries to recover from the pandemic. Customers directly bear the cost of corporate income taxes imposed on utility companies. Investor-owned electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. Therefore, if Democrats raise the corporate tax rate, they will have voted to raise utility bills. [Americans for Tax Reform has compiled 300 examples of utilities passing tax savings along to customers.]
Raising taxes on small businesses by raising the top income tax rate to 39.6 percent, limiting the 20 percent small business deduction, expanding the Obamacare net investment income tax, limiting the ability of passthroughs to deduct excess business losses, and raising the corporate tax rate.
This would likely increase taxes on several million small businesses across the country – earlier this year, the Biden administration admitted raising the top income tax rate would raise taxes on one million small businesses. This does not include the other tax increases – a study by the Chamber of Commerce found that there are 1.4 million small businesses organized as C-corporations, while almost 900,000 small businesses could be hit with the limitation of the passthrough deduction based on 2018 IRS SOI data.
Increasing the capital gains tax rate to 28.8 percent and increasing the holding period for carried interest capital gains to five years. Communist China’s capital gains tax is 20 percent.
A 16.5 percent global minimum tax. The Biden administration has been pushing a global agreement locking in high taxes and a 15 percent global minimum tax in order to “end the race to the bottom” and “make all citizens fairly share the burden of financing government.”
Increasing the death tax by cutting the exemption level in half and modifying valuation rules. This will raise taxes on family-owned businesses and farms across the country.
Retroactively raising taxes on taxpayers claiming the conservation easement deduction. It would apply this retroactively back to Notice 2017-10 released on December 23, 2016, so would impact taxpayers in tax years 2016, 2017, 2018, 2019, 2020, 2021 and for future years. If lawmakers want to make changes to the conservation easement deduction, they should do so as part of a net tax cut and prospectively, not retroactively.
A new 95 percent excise tax on medicines and socialist healthcare policies. This legislation creates a 95 percent excise tax on manufacturers and imposes an international reference pricing scheme that directly imports foreign price controls into the U.S.
This proposal will reduce access to new, lifesaving and life-preserving medicines. According to research by the Galen Institute, the U.S. had access to 90 percent of new cures launched between 2011 and 2018, a rate far greater than comparable foreign countries. For instance, The United Kingdom had access to 60 percent of medicines, Japan had 50 percent, and Canada had just 44 percent.
It will also threaten high-paying manufacturing jobs across the country at a time when we are just emerging from the economic wreckage from the pandemic. Pharmaceutical manufacturers invest $100 billion in the U.S. economy every year, directly supporting 800,000 jobs including jobs in every state.
$80 billion in new IRS funding to hire 87,000 new agents. This would allow the IRS to audit and harass small businesses and American families for an additional $787 billion. It would hire enough new IRS agents to fill Nationals Park twice.
It would help implement the Biden plan to create a new comprehensive financial account information reporting regime which would force the disclosure of any business or personal account that exceeds $600. Not only would this include the bank, loan, and investment accounts of virtually every individual and business, but it would also include third-party providers like Venmo, CashApp, and PayPal.
New IRS funding will also be a boon to the union that represents IRS employees. This union, the National Treasury Employees Union (NTEU), shovels 97 percent of their money into Democrat campaign coffers. IRS employees also regularly perform union work on the taxpayer’s dime. In 2019, 1,421 IRS and other Treasury Department employees spent 353,820 hours of taxpayer-funded union time (TFUT), costing the federal government $17.27 million.