Americans for Tax Reform today released a new TV ad blasting the Democrats' tax-and-spend plan to impose higher business taxes than communist China. The ad also calls out the Democrat plan to give special tax subsidies to reporters.
If President Biden and congressional Democrats succeed in passing their socialist wishlist, Americans will see the largest tax increase in more than 50 years. America will be less competitive than China and Europe and small businesses and working families will see higher taxes.
The ad script is as follows:
First Afghanistan. Now China.
Biden has a knack for bad decisions.
Biden’s socialist spending bill means higher business taxes than Communist China.
It’s the biggest tax increase in 50 years.
It’s even loaded with special interest spending like tax subsidies for journalists.
Will Congress stop him?
We can’t afford higher taxes than Communist China, especially now.
Democrats want to raise the corporate rate higher than China and other major economic competitors.
The House $3.5 trillion socialist spending plan raises the federal corporate tax rate to 26.5 percent, resulting in a combined federal and state rate of 31 percent. President Biden has previously proposed raising the corporate tax to 28 percent, which would be over 32 percent after state taxes.
By comparison, China’s corporate rate is 25 percent while the developed world average (OECD) is 23.5 percent. The European average corporate tax rate is 19%.
Not only would this make the U.S. globally uncompetitive, but it will also harm working families, increase the cost of goods and services and reduce the life savings of Americans.
Workers Will Bear the Burden of an Increased Corporate Tax Rate. Raising the corporate tax will cause businesses to invest less in the United States and more overseas (or not at all), resulting in fewer job opportunities and lower wages for American workers:
- The non-partisan Joint Committee on Taxation recently affirmed in congressional testimony that the corporate tax rate hike will fall on "labor, laborers." Testifying before the House Ways & Means Committee, JCT Chief of Staff Thomas A. Barthold said: "Literature suggests that 25% of the burden of the corporate tax may be borne by labor in terms of diminished wage growth."
- A Treasury Department study estimated that “a country with a 1 percentage point lower tax rate than its competitors attracts 3 percent more capital.” This is because raising the corporate rate makes the United States a less attractive place to invest profits.
- According to 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.
- A 2012 Harvard Business Review piece by Mihir A. Desai notes that raising the corporate tax lands “straight on the back” of the American worker and will see a decline in real wages.
- A 2012 paper at the University of Warwick and University of Oxford found that a $1 increase in the corporate tax reduces wages by 92 cents in the long term. This study was conducted by Wiji Arulampalam, Michael P. Devereux, and Giorgia Maffini and studied over 55,000 businesses located in nine European countries over the period 1996-2003.
- Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor.
A Corporate Income Tax Hike Would Increase the Cost of Goods and Services. Raising the corporate income tax would cause prices to increase for American consumers in a couple ways. A 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers. Additionally, customers directly bear the cost of corporate income taxes imposed on utility companies. In this way, customers would have to pay more for their utility use.
Already, inflation levels are rising. Consumer prices increased by 5.4 percent on an annualized basis in July, according to the Bureau of Labor Statistics (BLS). In January 2021, before Joe Biden took over the presidency, annual inflation was at a stable 1.4 percent. If Americans are struggling to afford goods and services now, they certainly will be after the corporate income tax is implemented.
A 26.5% Corporate Tax Rate Would Threaten American Life Savings. 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.
President Biden and Democrats continually claim their tax hikes will hold middle class families and small businesses harmless. However, the facts do not support this case. If Democrats have their way and raise taxes, millions of main street businesses, low- and middle-income workers, and retirees will be hit. Lawmakers must reject the 26.5% federal corporate income tax rate hike.