With the 2022 midterm elections approaching, the Biden administration has announced that they will use the next month to pitch voters on how they will solve out-of-control inflation and the weak economy.
President Biden has proposed fighting inflation with trillions in tax increases and new spending programs. Senate Majority Leader Chuck Schumer (D-NY) has also said that he is working with key Democrat Joe Manchin (D-W.Va.) to address inflation by repealing the Trump tax cuts and raising tax rates.
Instead of helping inflation, these policies will make the problem worse. Tax increases on businesses being pushed by the Left will be passed onto families in the form of higher costs. Discriminatory taxes on energy being pushed by Democrats will similarly raise costs for small businesses and families.
Dem Tax Increases on Businesses Will Be Passed on to Working Families
Democrats are pushing massive tax increases on American businesses including raising the corporate tax rate to 28 percent, a rate higher than Communist China and the average rate in Europe. This would repeal a key part of the Trump tax cut which reduced the corporate tax rate from 35% — the highest in the developed world — to 21%, a rate in line with foreign competitors. The Left is also pushing a number of other tax increases on corporations including a 15 percent minimum tax on “book income,” a 15 percent global minimum tax, and a tax on stock repurchases.
These tax increases will not be paid by large corporations but will be passed along to working families in the form of higher prices. For instance, 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 also stick American families and small businesses with higher utility bills. At least 300 investor-owned electric, gas, and water companies passed along the savings and reduced their rates when the corporate rate was cut in 2017. Raising taxes on corporations will result in these same utilities increasing their rates.
Tax increases will also harm workers in the form of lower wages and fewer jobs. As noted in a 2017 report by Stephen Entin of the Tax Foundation, 70 percent of corporate taxes are borne by labor. Other economists argue that anywhere from 20% to 50%, to even 100% of the tax hits workers.
Tax Increases on Energy That Will Raise the Cost of Gasoline
The price of energy has increased by 30 percent over the past 12 months while gasoline has increased by 44 percent. In that same time, Democrats have called for 17 tax increases on energy that will only make this problem worse.
President Biden’s recent budget proposal called for 11 tax increases on the oil and gas industry totaling $45 billion over the next decade.
These tax increases would only lead to higher prices, less investment and fewer jobs. For example, Democrats have called for repealing the deduction for intangible drilling costs (IDCs), which allows independent producers to immediately deduct business expenses related to drilling such as labor, site preparation, repairs and survey work.
As noted in a 2014 study by Wood Mackenzie Consulting, this tax increase would result in a $407 billion reduction in investment, or roughly 25 percent of the capital used by producers to continue investing in new projects. This would cost 265,000 jobs in the long-term and mean even less oil and higher prices for American consumers.
Democrats are also pushing a windfall profits tax to punish oil and gas producers for high prices. One proposal would impose a 50 percent tax on the difference between the current price of a barrel of oil and the average price per barrel between 2015 and 2019 and could raise taxes by as much as $450 billion over the next decade. This would be used to finance a new welfare payment, that in combination with other Democratic policies, will pay people not to work and drive inflation.
New Wasteful Spending Will Exacerbate Inflation
The Left wants to use tax increases to finance vast, wasteful government spending programs including proposals that pay people not to work and subsidies for progressive special interests.
Democrats exploited the pandemic to enact many of these policies and now want to double down and extend them into the future. The plethora of welfare programs enacted in this time saw a family of four with two unemployed persons receive $109,048 from the federal government between April 2020 and September 2021, according to a report by House Ways and Means Republicans.
One example of these policies was the Democrat proposal that paid people not to work through an additional unemployment supplement. The most recent policy provided $300 a week to unemployed workers in addition to state unemployment benefits. Under this supplement level, over one-third of the workforce, or 37 percent of workers made more on unemployment than at work.
Democrats also transformed the child tax credit into a monthly $300 payment that was paid regardless of whether an individual worked. The Biden administration also repeatedly extended the moratorium on federal student loan repayments, costing $100 billion as of January 2021, and $4 to $5 billion each month since.
In addition to extending these proposals, their trillion-dollar spending bill was packed full of giveaways to trial lawyers, union bosses, wealthy blue-state taxpayers and even reporters.
These policies will do little to help American workers and businesses and will only make inflation worse.