[Update: Senator Rubio has introduced a new amendment that would increase the corporate rate to 20.94 percent to finance spending subsidies in the form of refundable child tax credit payments. This opens the door for EVERY Senator to further increase business taxes to finance specific preferential tax provisions and spending subsidies. ATR urges a NO vote on this amendment.]
Senators Marco Rubio (R-Fla.) and Mike Lee (R-Utah) have proposed an amendment (1605, 1606) to the Tax Cuts and Jobs Act that increases taxes on businesses to finance spending through the tax code. ATR urges a NO vote on this amendment.
In net, this amendment would result in lower economic growth, fewer new jobs, and decreased wages.
The amendment proposes increasing the corporate tax rate from 20 percent to 22 percent to finance an increase in the refundability (spending) of the child-tax credit, to index the credit to inflation, and to slightly increase the income threshold at which the credit phases-out.
These policy changes would come at the cost of lower economic growth, fewer new jobs, and decreased wages.
In addition, support for this amendment opens the door to all Senators proposing tax increases on businesses to finance distortionary tax provisions and spending subsidies for narrow interests.
Businesses don’t pay taxes – people do, so any higher tax rate on businesses is passed onto employees, consumers, and investors.
Recent studies that take into account the global economy find that workers bear a significant portion of the corporate tax — 50 percent, 70 percent, or even higher.
This translates into real money for families across the country. A study released by the Council of Economic Advisors found that a 20 percent corporate rate could result in household wages increasing by between $4,000 and $9,000.
Similarly, a study by the Tax Foundation found that reform would boost capital investment by 8.5 percent, and create more than 592,000 jobs, while increasing after-tax incomes of families by an average of $1,800.
Lawmakers should not water down the growth potential of the Tax Cuts and Jobs Act by increasing taxes on businesses to finance distortionary spending subsidies in the tax code. ATR urges a NO vote on the Rubio-Lee Amendment.