President Joe Biden has proposed raising the corporate tax rate from 21 percent to 28 percent as part of his plan to raise taxes by as much as $4 trillion over the next decade.

Any effort to raise taxes on businesses should be rejected. It will prolong the economic downturn and harm workers and businesses. It will make America a less competitive place to do business and could see a return of corporate inversions and an increase in foreign acquisitions. It will also harm Americans that have their savings in a 401(k) or IRA or have begun investing in the stock market.

Here are five reasons to reject efforts to raise the corporate tax hikes:

1. Raising the corporate rate will prolong the economic downturn

Now is the worst time to raise taxes on businesses because the economy is weak and millions of Americans are out of work. Raising the corporate rate will make it harder for businesses to hire new Americans, prolonging the economic downturn.

Because of government mandated lockdowns and restrictions, 140,000 jobs were lost in December according to the Bureau of Labor Statistics. While 11 million jobs have been recovered since the peak of the pandemic, this represents just half of the total jobs lost.

Make no mistake – there is significant work to be done in order for the economy to fully recover. In the meantime, businesses and workers remain vulnerable. Rather than pushing tax increases, we should be pushing policies that encourage investment and job creation.

Even former President Barack Obama has warned against tax increases during an economic downturn. As Obama noted:

“The last thing you want to do is raise taxes in the middle of a recession because that would just suck up, take more demand out of the economy and put businesses in a further hole.”

2. Raising the corporate rate will harm workers and families

Biden’s plan to raise the corporate rate will harm workers and families, with the costs of the tax passed down to them.

Numerous studies have found that between 50 percent and 70 percent of the corporate tax is borne by workers with the remaining being borne by shareholders. This means that increasing the corporate tax rate harms workers and reducing the tax benefits workers.

Not only is the correlation between worker wages and business taxes seen in economic studies, it has been seen in the strong economic conditions following the Tax Cuts and Jobs Act (TCJA), which reduced the corporate tax rate from 35 percent to 21 percent.

After the TCJA was signed into law, American workers saw unprecedented prosperity.

The unemployment rate hit 3.5 percent in 2019, a 50-year low.

Median household income increased by $4,440 or 6.8 percent – the largest one-year wage growth in history. Average hourly earnings grew by 3 percent or more for 20 consecutive months between 2018 and the start of 2020, according to BLS.

The bottom 25 percent of wage earners saw 4 percent or greater annual monthly wage growth for 26 consecutive months under President Trump, according to the Atlanta Fed. This wage growth was greater than the top 25 percent of wage earners in every month. 

Under this economy, there were more job openings than job seekers for 24 consecutive months. In March 2018, the ratio of unemployed persons to job openings dropped to 0.9. This ratio remained below 1.0 until the pandemic when it began to rise in March 2020.

Unfortunately, the COVID-19 pandemic put an end to this strong economy. However, the benefits in the years and months after the TCJA was passed are clear.

3. Raising the corporate rate will make the U.S. less competitive.

Biden’s plan to raise the corporate rate to 28 percent, which would be about 32 percent after state taxes, would give the U.S. one of the highest rates in the developed world.

The U.S. rate would be higher than key competitors such as the United Kingdom (19 percent), China (25 percent), Canada (26.5 percent), Ireland (12.5 percent), Germany (29.9 percent) and Japan (29.74 percent), according to data compiled by the Organisation for Economic Co-operation and Development (OECD).

Many countries also have lower rates for certain industries to encourage innovation and investment. For instance, China has a 15% rate for industries including high tech enterprises, while the United Kingdom has a 10 percent “patent box” rate for businesses that depend on patented inventions and innovations.

The U.S. is already lagging behind when it comes to promoting innovation. According to a Manufacturing Leadership Council study, the U.S. ranks 26th in research and development tax incentives when ranking the 36 developed countries in the OECD.

4. Raising the Corporate rate could lead to a return of foreign inversions and acquisitions

If Biden raises the corporate rate, it could cause a return of corporate inversions and see a surge in foreign acquisitions of U.S. businesses.

Concern over inversions grew during Obama’s second term because a number of large American businesses with combined assets of $319 billion announced plans to invert in 2014, according to the Congressional Budget Office.

Inversions occur when a U.S. business merges with, or acquires, a foreign business with the intent of incorporating the new, combined entity overseas. This happened because the U.S. tax code was uncompetitive and businesses were moving to countries with more competitive tax codes.

The inversion problem was solved when the TCJA was signed into law. In fact, after the TCJA, companies began to come back to America. The inversion problem was just one indicator of American uncompetitiveness. Prior to the TCJA, American businesses were vulnerable to foreign acquisitions.

According to a study released by EY, American companies also suffered a net loss of almost $510 billion in assets between 2004 and 2017. This was because the high U.S. rate and worldwide tax system meant non-U.S. companies could outbid U.S. companies.

If the corporate rate was lower between 2004 and 2017, the study estimates that U.S. companies would have acquired a net of $1.2 trillion worth of assets, meaning that more than $1.7 trillion in assets were lost because of the uncompetitive U.S. rate.

5. Raising the corporate rate will harm Americans with a 401(k) or invested in the stock market

Biden’s plan to raise the corporate rate will also harm the life savings of millions of Americans that are invested in the stock market or that are saving for retirement through a 401(k) or IRA. Raising the corporate tax rate will reduce the value of stocks, reducing the value of these life savings.

This has the potential to impact Americans across the country. According to recent data, 80 to 100 million Americans have a 401(k),  while 46.4 million households have an individual retirement account.

A majority of the assets in these accounts are invested in stocks. 401(k)s hold $6.2 trillion in assets and almost 70 percent of these assets (or $4.3T) are in stocks. 

Similarly, 53 percent of the more than $11 trillion in IRA savings are held directly in stocks while another 18 percent of savings are invested in funds that comprise stocks.

This is not the only source of life savings that could be reduced by Biden’s tax increase. 19 million Americans rely on public pension funds for their retirement and roughly half of the $4 trillion in savings is invested in stocks. 

This could also impact younger Americans that have begun investing in the stock market to increase their savings. Half of Gen-Zers and Millennials have begun trading in stocks as a way to increase their life savings, according to recent reports. Across the entire country, as many as 53 percent of American households’ own stock, according to the Federal Reserve. In addition, over 70 percent of households in the “upper-middle income group” owned stocks and the median value of these portfolios was over $40,000.