Pennsylvanians will be saddled with a 34% combined federal-state corporate rate under the Kamala Harris call to raise the federal corporate tax rate to 28%.

Pennsylvania’s all-in 34% rate under the Harris plan is much higher than communist China’s 25%, the world average rate of 23.5%, the EU average of 21% and the Asia average of 19.8%. (See the Tax Foundation’s comprehensive listing here.)

The burden of the corporate tax hits workers in the form of lower wages, working households in the form of higher prices, and retirees in the form of reduced nest egg values.

The current Pennsylvania state corporate tax rate is 8.49% and is scheduled to drop a half-point each year until 2031. Combining the Harris 28% federal rate with the current 8.49% state rate — and adjusting for federal deductibility of state corporate taxes paid — amounts to the combined rate of 34%.

Pennsylvania would end up with a competitive disadvantage as shown below:

PA: 34%
Canada: 26.2%
China: 25%
UK: 25%
World avg: 23.5%
EU avg: 21%
Sweden: 20.6%
Russia: 20%
Asia avg: 19.8%

Harris has repeatedly vowed to repeal the Tax Cuts and Jobs Act signed into law by President Donald Trump in 2017. Examples of how Trump’s corporate tax rate reduction to 21% helped Americans can be found here. Additional Pennsylvania examples of TCJA benefits can be found here.

“Not only will the Harris corporate tax rate hike kill jobs, hurt wages, and raise prices even further, it will harm America’s international competitiveness,” said Grover Norquist, president of Americans for Tax Reform.

Harris seeks to impose a lengthy list of tax increases detailed here.

Pennsylvania businesses compete with their counterparts in other states and nations. Even Democrat Gov. Josh Shapiro recognizes the corporate rate’s competitive importance. Just last year in a speech to the Philly Chamber of Commerce, Shapiro touted his plan to accelerate state corporate tax cuts enacted by his predecessor Tom Wolf (D).

He reiterated the point this summer. “We needed to have a more advantageous tax environment for our businesses, and it [cutting the corporate tax rate] was one component of an overall strategy in order to grow jobs and create more economic opportunity in Pennsylvania,” Shapiro said at a July 30 event in Philadelphia with Treasury Secretary Janet Yellen. 

“I am competitive as hell,” Shapiro said at the event with Yellen, adding that is why he has “been so aggressively working to cut business taxes.”

The Kamala Harris corporate tax rate increase proposal harms Pennsylvania’s ability to compete.

American workers will bear the brunt of the Harris corporate tax increase.

According to Stephen Entin of the Tax Foundation, workers bear an estimated 70 percent of the corporate income tax. He wrote in 2017:

“Over the last few decades, economists have used empirical studies to estimate the degree to which the corporate tax falls on labor and capital, in part by noting an inverse correlation between corporate taxes and wages and employment. These studies appear to show that labor bears between 50 percent and 100 percent of the burden of the corporate income tax, with 70 percent or higher the most likely outcome.”

The non-partisan Joint Committee on Taxation affirmed in congressional testimony that corporate tax rate hikes hit “labor, laborers.”

Testifying before the House Ways & Means Committee, JCT’s 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 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.

The Harris corporate tax increase will also raise the cost of utility bills. Electric, gas, and water companies subject to the corporate income tax have their billing rates set by the 50 state utility commissions. The commissions are required to build the cost of taxes into the utility rates. Documentation of this concept can be found is this compilation, which includes 17 Pennsylvania examples.

While Harris likes to pretend her tax increases only concern the likes of Scrooge McDuck and Rich Uncle Pennybags, everyone gets hit.

Stay tuned for updates at ATR’s special website, Kamalanomics.org