Wyoming Residents Will Get Stuck with Even Higher Utility Bills Due to Biden Corporate Tax Rate Hike
If Biden and the Democrats enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and congressional Democrats hike the corporate income tax rate, Wyoming households and businesses will get stuck with higher utility bills as the country tries to recover from the pandemic.
Democrats plan to impose a corporate income tax rate increase to 26.5%, even higher than communist China's 25% and higher than the developed world average of 23.5%. This does not even include state corporate income taxes, which average 4 - 5% nationwide.
Customers bear the cost of corporate income taxes imposed on utility companies. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up.
Electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. When the 2017 Tax Cuts and Jobs Act cut the corporate income tax rate from 35% to 21%, utility companies worked with state officials to pass along the tax savings to customers, including at least four Wyoming utilities.
The savings typically come in the form of a rate reduction, a bill credit, or a reduction to an existing or planned rate increase.
According to a report published in the trade publication Utility Dive, customers nationwide were to receive a $90 billion utility benefit from the Tax Cuts and Jobs Act:
Estimates derived from 2017 annual SEC 10-K filings indicate that the 14-percentage-point reduction in the corporate tax rate enacted under the 2017 Tax Cuts and Jobs Act (TCJA) resulted in investor-owned utilities establishing significant regulatory liability balances, totaling approximately $90 billion to be refunded back to customers.
Americans for Tax Reform has compiled a 90-second nationwide utility savings video from local news reports which may be viewed here.
If Democrats now impose a corporate income tax rate increase, they will have to reckon with local news coverage noting utility bills are going up. A vote for a corporate income tax hike is a vote for higher utility bills as households try to recover from the pandemic.
Tax Cuts and Jobs Act Impact: Working with the Wyoming Public Service Commission, Black Hills Energy, Black Hills Wyoming Gas, LLC, Montana-Dakota Utilities Co. and Rocky Mountain Power passed along tax savings to their customers.
Black Hills Energy: As noted in this September 23, 2019 ShortGO article:
Black Hills Energy’s Cheyenne electric utility customers are seeing benefits of the federal corporate tax rate reduction from 35 percent to 21 percent on September bills. The Wyoming Public Service Commission (WPSC) approved a proposal to return the tax savings stemming from the Tax Cuts and Jobs Acts for 2018 and 2019 in the form of a one-time bill credit to customers on their September bills.
The residential customer credit is $83.62, the commercial customer credit is $147.37, the Secondary General customer credit is $3,586.24, and the Primary General Service customer credit is $32,810.64. Customers will see slightly different amounts on their bill based on the refund impacts on taxes and fees included on the bill.
Black Hills Wyoming Gas, LLC: As noted in this March 10, 2020 Black Hills Wyoming Gas document:
The TCJA Amortization Credit refunds the net Non-Protected excess deferred income tax items owed to customers resulting from the Tax Cuts and Jobs Act. These tax items include the Non-Protected Property Rate Base amounts owed to customers, the Non-Protected Non-Property Rate Base amounts owed by customers, and the Non-Refunded ARAM from 2018 and 2019 owed to customers. The total amount to be returned to customers through the TCJA Amortization Credit is $1,672,740 as approved by the Commission in Docket No. 30026-2-GR-19.
Montana-Dakota Utilities Co.: As noted in this Montana-Dakota Utilities Co. document:
Wyoming customers of Montana-Dakota Utilities Co. (Montana-Dakota) who were billed for electric service during the months of January 2018 through April 2019 will see a one-time bill credit on their electric service bill issued between July 25, 2019 and August 26, 2019. This refund is associated with the Tax Cuts and Jobs Act of 2017 passed into law in late December 2017.
On June 13, 2018, Montana-Dakota filed an application with the Wyoming Public Service Commission (Commission) to update the Company’s electric rates in response to the passage of the Tax Cuts and Jobs Act of 2017 and the Commission’s Order Requiring Montana-Dakota to File its Tax Assessment Plan and Create a Deferred Regulatory Liability Account issued on December 29, 2017. On April 8, 2019, the Commission authorized an overall decrease in the Company’s electric service rates to be effective May 1, 2019 and a Tax Cuts and Jobs Act Refund for customers who were billed for electric service January 2018 through April 2019 to be applied to customers’ accounts no later than August 1, 2019. The bill credit includes interest at the Commission approved interest rate. New Tax Cuts and Jobs Act Refund for Wyoming Customers for January 2018 through April 2019 Electric Service Electric service rates were implemented May 1, 2019.
The electric rate refund plan approved by the Commission provides for the refunding of $1,614,096 to Wyoming electric service customers through a one-time bill credit on their electric bill to be applied by August 1, 2019. Each customer’s refund is based on their January 2018 through April 2019 consumption.
The bill credit is shown as a separate line item in the Account Summary section of your bill and will be identified as “Tax Cuts and Jobs Act Refund”.
Rocky Mountain Power: As noted in this April 17, 2019 Wyoming Public Service Commission document:
On May 16, 2018, the Company submitted an application proposing a new Tariff Schedule 197, 2017 Federal Tax Act Adjustment, to return the benefits of the 2017 Tax Cuts and Jobs Act to customers in Docket No. 20000-536-ER-18. The Company included, as part of its 3 application, a stipulated settlement agreement (“Stipulation”) between Rocky Mountain Power and the Wyoming Industrial Energy Consumers (“WIEC”) and a request to (1) reduce customer rates by $22.5 million; and (2) offset the 2018 Energy Cost Adjustment Mechanism (“ECAM”) deferral balance, for which the Company sought recovery in Docket No. 20000-535-EA-18 (“2018 ECAM”), by $3.6 million—both with benefits or savings resulting from the 2017 Tax Cuts and Jobs Act.
---
On March 15, 2019, the Commission issued its Final Order in the docket and approved the part of the Stipulation in which parties agreed to refund $22.5 million of the tax benefits to customers until the next general rate case using average-of-period rate base calculations and rejected the part of the Stipulation in which parties agreed to use some of the benefits to automatically offset future costs related to the ECAM and Energy Vision 2020 projects. The Commission indicated instead that it would consider them in future, separate applications.
Conversely, if Biden and Democrats raise the corporate tax rate, they will add to the burden faced by working families. And any small businesses operate on tight margins and can't afford higher heating, cooling, gas, and refrigeration costs.
President Biden should withdraw his tax increases.
More from Americans for Tax Reform
Job Growth Under Biden Administration Remains Stagnant
In yet another disappointing jobs report, the Bureau of Labor Statistics (BLS) found that the U.S. economy added just 194,000 jobs in September. This is a far cry from estimates which predicted the economy would add 500,000 jobs. The unemployment rate now stands at 4.8 percent.
7.7 million Americans are still out of work and millions of Americans are still underemployed. About 4.5 million workers are employed part-time for economic reasons, meaning they would prefer to work full-time, but cannot gain the hours needed to do so.
Given the economy remains weak, now is a terrible time to impose trillions of dollars in taxes as the Democrats have proposed. Their most recently released bill includes numerous concerning tax increases:
- The bill would raise the corporate rate to 26.5 percent, higher than communist China's 25 percent rate. Under this plan, the average combined state and federal corporate tax would be 31 percent. A corporate tax hike would be borne by workers and consumers. As noted by Stephen Entin of the Tax Foundation, workers bear nearly 70 percent of the cost of a corporate tax through lower wages and fewer jobs. Further, a 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers. This tax hike would hit many small businesses as well. Over one million C-corporations are classified as small businesses, defined by the Small Business Administration as any independent business with fewer than 500 employees.
- The bill would raise the capital gains rate to 25 percent. This tax hike will threaten business creation, business expansion, entrepreneurship, retirement savings, and jobs and wages.
- This bill could impose $96 billion in tax hikes on tobacco and vaping. This will disproportionately harm the poorest Americans, as 72 of smokers are low-income earners. In some states, poorer smokers already spend one quarter of their income on tobacco.
- This bill would also increase the top income tax rate to 39.6 percent. This tax increase will hit small business that are organized as sole proprietorships, LLCs, partnerships, and S-corporations. These “pass-through” entities pay taxes through the individual side of the tax code. Of the 26 million businesses in 2014, 95 percent were pass-throughs. Pass-through businesses also account for 55.2 percent, or 65.7 million of all private sector workers. More than half of all pass-through income would be taxed at this new, higher rate.
Today's disappointing jobs report shows that we still have a long way to go to fully recover from the economic damage the pandemic caused. Virtually every jobs report released under the Biden administration has been well below expected growth. Certainly, Democrats should be more concerned about safeguarding a fragile economy than ramming through their policy wishlist.
Photo Credit: "Unemployment Office" by Bytemarks in licensed under CC BY 2.0.
More from Americans for Tax Reform
ATR Op-Ed in The Washington Times: Taxing stock buybacks harms everyone
In an op-ed published in the Washington Times today, ATR Federal Affairs Manager Bryan Bashur underscored the benefits of stock buybacks. He also explained that the idea that buybacks only benefit corporate executives at the expense of workers and R&D is flawed.
In fact, buybacks are beneficial for employees’ retirement plans. Bashur points out that:
Individuals who do not actively work in the financial sector still have extensive exposure to the stock market. Retirement accounts hold the largest portion of corporate stock in the United States. In 2015, retirement accounts held 37 percent of the outstanding $22.8 trillion in U.S. corporate stock. In 2017, corporate-sponsored funds made up $4.45 trillion in market value; union-sponsored funds accounted for $409 billion; and public-sponsored funds, which benefits teachers and police officers, added up to $4.25 trillion.
Senate Banking Committee Chairman Sherrod Brown (D-Ohio) and Senate Finance Committee Chairman Ron Wyden (D-Ore.) introduced a bill to impose an excise tax on the share repurchases of publicly-traded companies. If enacted, this tax would be a disincentive for companies to perform buybacks and thus restrict equity distributions to shareholders. Bashur explains that:
The proposed 2 percent tax would reduce incentives to provide cash distributions to shareholders and force companies to retain earnings that will be used for less economically beneficial purposes. A tax on stock buybacks harms all shareholders and employees with an individual retirement account or 401k.
Buybacks and dividends provide the same economic benefit to shareholders—both actions provide a distribution of cash to shareholders. This is a boon for employees’ IRAs, 401ks, and pension funds, who reap the benefits of higher share prices from buybacks.
Finally, buybacks provide shareholders the opportunity to reinvest their new cash distribution into smaller companies and private equity. This will help ensure jobs are available across the country. Bashur states that:
Stock buybacks also benefit non-S&P 500 public companies and nonpublic companies. According to Fried and Wang, from 2007-2016, the equity shareholders receive from buybacks accounted for $407 billion in net shareholder inflows to non-S&P 500 public companies. Additional cash distributions result in a redistribution of equity into companies backed by private equity firms, which “employ almost 70% of U.S. workers and, and generate nearly half of business profits.”
Bashur urges members of Congress to oppose the Stock Buyback Accountability Act. For Democrats, this bill is not just about punishing the top one percent, but it’s about implementing a cultural shift in the United States so that no one can earn more or perform better than one’s peers.
Click here to read the full op-ed.
Photo Credit: "Stock market quotes in newspaper" by Andreas Poike is licensed under CC BY 2.0
Wisconsin Companies Will Face Higher Taxes Than China and Europe if Dem Bill Passes
Wisconsin companies will get stuck with higher taxes than China and Europe if the Democrats' reconciliation bill is enacted.
The Democrats' reconciliation bill will saddle Wisconsin with a combined federal-state corporate tax rate of 32.3% vs. communist China's 25%.
The bill will also put Wisconsin companies at a competitive disadvantage vs. Europe: The European average corporate tax rate is 19%.
Wisconsin is home to 8 Fortune 500 companies, which provide jobs for thousands of households.
"As the country tries to recover from a once-in-a-century pandemic, Wisconsin's congressional Democrats must explain why they want to stick residents with higher taxes than China and Europe," said Grover Norquist, president of Americans for Tax Reform.
The Democrats' $3.5 trillion bill will impose the largest tax increase since 1968. It will raise individual income taxes, small business taxes, corporate taxes, and capital gains taxes.
If passed, the combined federal-state capital gains tax rate for Wisconsin residents would be 37.16% vs. China's 20%.
The burden of the corporate tax rate hike will be borne by workers in the form of lower wages, and by households in the form of higher prices. Higher corporate tax rates will also raise utility bills.
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."
Economists across the political spectrum agree that workers bear the brunt of corporate tax increases. And 25% is on the very low end.
According to Stephen Entin of the Tax Foundation, labor (or 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."
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:
"We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that $1 of additional tax reduces wages by 92 cents in the long run. The incidence of a $1 fall in value added is smaller, consistent with our wage bargaining model."
A 2015 study by Kevin Hassett and Aparna Mathur found that a 1 percent increase in corporate tax rates leads to a 0.5 percent decrease in wage rates. The study analyses 66 countries over 25 years and concludes that workers could see a greater reduction in wages than the federal government raises in new revenue from a corporate income tax increase:
"We find, controlling for other macroeconomic variables, that wages are significantly responsive to corporate taxation. Higher corporate tax rates depress wages. Using spatial modelling techniques, we also find that tax characteristics of neighbouring countries, whether geographic or economic, have a significant effect on domestic wages."
A 2006 study by William Randolph of the Congressional Budget Office found that 74% of the corporate tax is borne by domestic labor:
"Burdens are measured in a numerical example by substituting factor shares and output shares that are reasonable for the U.S. economy. Given those values, domestic labor bears slightly more than 70 percent of the burden of the corporate income tax."
A 2007 study by Alison Felix estimated that a 1 percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. She concluded that the wage reductions are over four times the amount of collected corporate tax revenue:
"The empirical results presented here suggest that the incidence of corporate taxation is more than fully borne by labor. I estimate that a one percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. The magnitude of the results predicts that the decrease in wages is more than four times the amount of the corporate tax revenue collected."
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:
"Because capital is mobile, high tax rates divert investment away from the U.S. corporate sector and toward housing, noncorporate business sectors, and foreign countries. American workers need that capital to become more productive. When it’s invested elsewhere, real wages decline, and if product prices are set globally, there is no place for the corporate tax to land but straight on the back of the least-mobile factor in this setting: the American worker."
Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor:
"In calculating distributional effects, the Urban-Brookings Tax Policy Center (TPC) assumes investment returns (dividends, interest, capital gains, etc.) bear 80 percent of the burden, with wages and other labor income carrying the remaining 20 percent."
"Democrats would be wise to oppose any tax increase," said Norquist.
ATR Leads Coalition Letter Opposing IRS Financial Reporting Requirement
Today, Americans for Tax Reform led a coalition letter in opposition to the proposed new reporting regime to have the IRS collect the account inflows and outflows for bank, loan, and investment accounts as well as Venmo, CashApp, and PayPal accounts. President Biden’s plan will result in the targeting and harassment of middle class families along with small and medium sized businesses. The letter was signed by almost 40 organizations.
You can read the letter below or here:
The undersigned organizations write in opposition to the proposed new reporting regime to have the IRS collect the account inflows and outflows for bank, loan, and investment accounts as well as Venmo, CashApp, and PayPal accounts. The Biden administration has proposed subjecting every account exceeding gross inflows and outflows of $600 to this proposal while Senate Democrats have suggested a threshold of $10,000. Either way millions of working-class families including many making less than $400,000 per year will be impacted by this proposal.
This proposal is part of President Biden’s plan to give the IRS $80 billion in new funding over the next decade and hire 87,000 new IRS agents. While Democrats claim they want to go after “the rich” and large corporations, this new reporting regime suggests they will target and harass middle class families and small and medium sized businesses.
Moreover, the reporting requirements impose a burden on banks, the cost of which will be passed on to their customers. It is likely that this cost will be borne most by those at the margin of the banking system, some of whom will be forced out of the system to join the ranks of the underbanked and unbanked.
There are also significant potential privacy violations with this new proposal. The plan could put the data security and personal information of taxpayers at risk at a time that the IRS has repeatedly proven it cannot safeguard taxpayer data.
Several months ago, ProPublica announced that it had the tax returns of thousands of taxpayers stretching back 15 years. This sensitive taxpayer data was either obtained through an unauthorized leak by an IRS employee or through a data breach – either way the IRS failed to safeguard taxpayer information.
Unfortunately, this is not an isolated incident. For decades, the IRS has proven incapable of protecting taxpayer data and acting in an impartial way. The IRS has had multiple, serious security breaches, has had employees leak sensitive taxpayer information to the public, and the agency has been caught discriminating against organizations and taxpayers for political gain.
This malfeasance even extends to existing financial reporting. A 2017 Treasury Inspector General for Tax Administration (TIGTA) report found that the IRS routinely skirted or ignored due process requirements when investigating taxpayers for violating the $10,000 currency transaction requirements that exist under the Bank Secrecy Act. The IRS Criminal Investigations Division (IRS-CI) utilized this reporting to investigate taxpayers that they suspected may be violating the law.
TIGTA found that most of these investigations were fishing expeditions – just 8 percent of taxpayers investigated were found to have broken the law. Instead, the inspector general uncovered numerous examples of IRS overreach including violations of the Eighth Amendment and failure to provide the taxpayer of their basic rights including considering reasonable explanations for exceeding the threshold, providing the purpose of the interview, proper agent identification, and that a seizure of their property took place.
The IRS has a long record of failing to do its job and targeting and harassing taxpayers. This proposed new financial reporting regime would provide another way for the agency to target taxpayers or lead to taxpayer data being leaked or stolen. Lawmakers should stand with taxpayers and reject this proposal.
Sincerely,
Grover Norquist
President, Americans for Tax Reform
Lisa B. Nelson
CEO, ALEC Action
Bob Carlstrom
President, AMAC Action
Brooke L. Rollins
President and CEO, America First Policy Institute
Dick Patten
President, American Business Defense Council
Phil Kerpen
President, American Commitment
Brent Wm. Gardner
Chief Government Affairs Officer, Americans for Prosperity
Ryan Ellis
President, Center for a Free Economy
Jeffrey Mazzella
President, Center for Individual Freedom
Andrew F. Quinlan
President, Center for Freedom and Prosperity
Tom Schatz
President, Citizens Against Government Waste
Iain Murray
Vice President for Strategy, Competitive Enterprise Institute
Matthew Kandrach
President, Consumer Action for a Strong Economy
David McIntosh
President, Club for Growth
Katie McAuliffe
Executive Director, Digital Liberty
Jeremy Cerone
CEO, EliteSafe Inc.
Adam Brandon
President, FreedomWorks
George Landrith
President, Frontiers of Freedom
Garrett Bess
Vice President, Heritage Action for America
Jon Caldara
President, Independence Institute
Carrie Lukas
President, Independent Women's Forum
Heather R. Higgins
CEO, Independent Women's Voice
Andrew Langer
President, Institute for Liberty
Tom Giovanetti
President, Institute for Policy Innovation
Seton Motley
President, Less Government
Charles Sauer
President, Market Institute
Pete Sepp
President, National Taxpayers Union
Keith Erf
New Hampshire State Representative (Hillsborough 2)
David Miller
Southwest Ohio Center Right Chair
Brandon Dutcher
Senior Vice President, Oklahoma Council of Public Affairs
Tom Hebert
Executive Director, Open Competition Center
Bryan Bashur
Executive Director, Shareholder Advocacy Forum
Saulius “Saul” Anuzis
President, 60 Plus Association
Jim Martin
Founder/Chairman, 60 Plus Association
Lorenzo Montanari
Executive Director, Property Rights Alliance
Karen Kerrigan
President & CEO, Small Business & Entrepreneurship Council
David Williams
President, Taxpayers Protection Alliance
Kevin Roberts
CEO, Texas Public Policy Foundation
Photo Credit: Cliff from Arlington, Virginia, USA, CC BY 2.0 <https://creativecommons.org/licenses/by/2.0>, via Wikimedia Commons
More from Americans for Tax Reform
Iowa Companies Will Face Higher Taxes Than China and Europe if Dem Bill Passes
Iowa companies will get stuck with higher taxes than China and Europe if the Democrats' reconciliation bill is enacted.
The Democrats' reconciliation bill will saddle Iowa with a combined federal-state corporate tax rate of 33.7% vs. China's 25%.
The bill will also put Iowa companies at a competitive disadvantage vs. Europe: The European average corporate tax rate is 19%.
"As the country tries to recover from a once-in-a-century pandemic, Democrat Cindy Axne must decide if she wants to stick residents with higher taxes than China and Europe," said Grover Norquist, president of Americans for Tax Reform.
The Democrats' $3.5 trillion bill will impose the largest tax increase since 1968. It will raise individual income taxes, small business taxes, corporate taxes, and capital gains taxes.
If passed, the combined federal-state capital gains tax rate for Iowa residents would be 37.62% vs. China's 20%.
The burden of the corporate tax rate hike will be borne by workers in the form of lower wages, and by households in the form of higher prices. Higher corporate tax rates will also raise utility bills.
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."
Economists across the political spectrum agree that workers bear the brunt of corporate tax increases. And 25% is on the very low end.
According to Stephen Entin of the Tax Foundation, labor (or 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."
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:
"We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that $1 of additional tax reduces wages by 92 cents in the long run. The incidence of a $1 fall in value added is smaller, consistent with our wage bargaining model."
A 2015 study by Kevin Hassett and Aparna Mathur found that a 1 percent increase in corporate tax rates leads to a 0.5 percent decrease in wage rates. The study analyses 66 countries over 25 years and concludes that workers could see a greater reduction in wages than the federal government raises in new revenue from a corporate income tax increase:
"We find, controlling for other macroeconomic variables, that wages are significantly responsive to corporate taxation. Higher corporate tax rates depress wages. Using spatial modelling techniques, we also find that tax characteristics of neighbouring countries, whether geographic or economic, have a significant effect on domestic wages."
A 2006 study by William Randolph of the Congressional Budget Office found that 74% of the corporate tax is borne by domestic labor:
"Burdens are measured in a numerical example by substituting factor shares and output shares that are reasonable for the U.S. economy. Given those values, domestic labor bears slightly more than 70 percent of the burden of the corporate income tax."
A 2007 study by Alison Felix estimated that a 1 percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. She concluded that the wage reductions are over four times the amount of collected corporate tax revenue:
"The empirical results presented here suggest that the incidence of corporate taxation is more than fully borne by labor. I estimate that a one percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. The magnitude of the results predicts that the decrease in wages is more than four times the amount of the corporate tax revenue collected."
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:
"Because capital is mobile, high tax rates divert investment away from the U.S. corporate sector and toward housing, noncorporate business sectors, and foreign countries. American workers need that capital to become more productive. When it’s invested elsewhere, real wages decline, and if product prices are set globally, there is no place for the corporate tax to land but straight on the back of the least-mobile factor in this setting: the American worker."
Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor:
"In calculating distributional effects, the Urban-Brookings Tax Policy Center (TPC) assumes investment returns (dividends, interest, capital gains, etc.) bear 80 percent of the burden, with wages and other labor income carrying the remaining 20 percent."
"Democrats would be wise to oppose any tax increase," said Norquist.
Virginia Companies Will Face Higher Taxes Than China and Europe if Dem Bill Passes
Virginia companies will get stuck with higher taxes than China and Europe if the Democrats' reconciliation bill is enacted.
The Democrats' reconciliation bill will saddle Virginia with a combined federal-state corporate tax rate of 30.9% vs. communist China's 25%.
The bill will also put Virginia companies at a competitive disadvantage vs. Europe: The European average corporate tax rate is 19%.
Virginia is home to 22 Fortune 500 companies which provide jobs for tens of thousands of households.
"As the country tries to recover from a once-in-a-century pandemic, Virginia's congressional Democrats must explain why they want to stick residents with higher taxes than China and Europe," said Grover Norquist, president of Americans for Tax Reform.
The Democrats' $3.5 trillion bill will impose the largest tax increase since 1968. It will raise individual income taxes, small business taxes, corporate taxes, and capital gains taxes.
If passed, the combined federal-state capital gains tax rate for Virginia residents would be 37.55% vs. China's 20%.
The burden of the corporate tax rate hike will be borne by workers in the form of lower wages, and by households in the form of higher prices. Higher corporate tax rates will also raise utility bills.
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."
Economists across the political spectrum agree that workers bear the brunt of corporate tax increases. And 25% is on the very low end.
According to Stephen Entin of the Tax Foundation, labor (or 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."
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:
"We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that $1 of additional tax reduces wages by 92 cents in the long run. The incidence of a $1 fall in value added is smaller, consistent with our wage bargaining model."
A 2015 study by Kevin Hassett and Aparna Mathur found that a 1 percent increase in corporate tax rates leads to a 0.5 percent decrease in wage rates. The study analyses 66 countries over 25 years and concludes that workers could see a greater reduction in wages than the federal government raises in new revenue from a corporate income tax increase:
"We find, controlling for other macroeconomic variables, that wages are significantly responsive to corporate taxation. Higher corporate tax rates depress wages. Using spatial modelling techniques, we also find that tax characteristics of neighbouring countries, whether geographic or economic, have a significant effect on domestic wages."
A 2006 study by William Randolph of the Congressional Budget Office found that 74% of the corporate tax is borne by domestic labor:
"Burdens are measured in a numerical example by substituting factor shares and output shares that are reasonable for the U.S. economy. Given those values, domestic labor bears slightly more than 70 percent of the burden of the corporate income tax."
A 2007 study by Alison Felix estimated that a 1 percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. She concluded that the wage reductions are over four times the amount of collected corporate tax revenue:
"The empirical results presented here suggest that the incidence of corporate taxation is more than fully borne by labor. I estimate that a one percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. The magnitude of the results predicts that the decrease in wages is more than four times the amount of the corporate tax revenue collected."
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:
"Because capital is mobile, high tax rates divert investment away from the U.S. corporate sector and toward housing, noncorporate business sectors, and foreign countries. American workers need that capital to become more productive. When it’s invested elsewhere, real wages decline, and if product prices are set globally, there is no place for the corporate tax to land but straight on the back of the least-mobile factor in this setting: the American worker."
Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor:
"In calculating distributional effects, the Urban-Brookings Tax Policy Center (TPC) assumes investment returns (dividends, interest, capital gains, etc.) bear 80 percent of the burden, with wages and other labor income carrying the remaining 20 percent."
"Democrats would be wise to oppose any tax increase," said Norquist.
Coalition Urges Senate Republicans to Reject Democrat Antitrust Trap
Americans for Tax Reform and a coalition of 30 conservative and free market groups and activists joined a letter in opposition to the Senate Democrat plans to pass a package of European-style antitrust regulations. Even though the left labels this effort as “antitrust reform,” these bills are hardly antitrust bills. Instead, they are regulatory bills that give Biden bureaucrats sweeping new power to reshape the economy in service of their progressive social agenda.
You can read the full letter below or here:
Dear Senator,
Recent media reports have indicated that Senate Democrats are crafting a package of European-style antitrust regulation.
Some left-wing politicians are attempting to convince conservatives that weaponizing antitrust law is the solution to legitimate anger over Big Tech censorship. In reality, such politicians are not acting in good faith, and these bills would increase the political and government abuse of conservatives.
Even though the left labels this effort as “antitrust reform,” these bills are hardly antitrust bills. They are regulatory bills that give Biden bureaucrats sweeping new power to reshape the economy in service of their progressive social agenda.
We urge you to reject any proposal that politicizes antitrust law or gives unelected bureaucrats even more power to control the economy.
The Senate legislation follows a package of six antitrust bills spearheaded by Rep. David Cicilline (D-R.I.) and reported out of the House Judiciary Committee in June.
The Cicilline package targets so-called “covered platforms” with over 50 million users and market capitalization/net sales of over $600 billion. As soon as a company has the audacity to grow larger than this government-determined size, it gets whacked with a slew of onerous new regulations.
One bill would allow the government to break up targeted companies that operate a business line that a bureaucrat deems to be a “conflict of interest.” Another would prevent targeted companies from selling or providing private-label products in their marketplaces, depriving shoppers of products they value at a lower cost than name-brand products.
An additional bill would ban targeted companies from making any new mergers and acquisitions, choking off a critical pathway to success for innovative startups. To keep track of all these new restrictions, another bill sets up secret government committees to monitor the activities of each targeted company.
Clearly, none of these bills address conservative censorship concerns. Instead, the package is a brazen power grab that gives Biden bureaucrats sweeping new authority to regulate the economy. While these bills are clearly geared towards the technology sector, the left wants to regulate every industry “from cat food to caskets.” This is just the beginning.
If these bills became law, companies fearful of abusive antitrust litigation would pull punches when competing with rival firms, robbing shoppers of the low prices and best choices that open competition delivers. Putting innovative American companies in a Mother-May-I relationship with the government would squash innovation and kill economic growth as we dig out from the pandemic.
Conservatives have long believed that antitrust law should be a scalpel used to rectify consumer harm, not a sledgehammer that bureaucrats and trial lawyers can use to advance their progressive social agenda. The left’s antitrust “reforms” would do just that.
As negotiations continue on a Senate antitrust package, we urge you to reject any legislation that politicizes antitrust law or gives the Biden administration even more power. Doing so would harm shoppers, stunt economic growth, and increase political abuse of conservatives.
Sincerely,
Grover Norquist
President, Americans for Tax Reform
Phil Kerpen
President, American Commitment
Brent Wm. Gardner
Chief Government Affairs Officer, Americans for Prosperity
Dick Patten
President, American Business Defense Council
Kevin Waterman
Chair, Annapolis Center Right Coalition Meeting
Robert H. Bork Jr.
President, Antitrust Education Project
Jim Martin
Founder and Chairman, 60 Plus Association
Saulius “Saul” Anuzis
President, 60 Plus Association
Andrew F. Quinlan
President, Center for Freedom and Prosperity
Jessica Melugin
Director of the Center for Technology and Innovation, Competitive Enterprise Institute
Chuck Muth
President, Citizens Outreach (Nevada)
Katie McAuliffe
Executive Director, Digital Liberty
Carrie Lukas
President, Independent Women's Forum
Heather R. Higgins
CEO, Independent Women's Voice
Steve Moore
Distinguished Visiting Fellow, Institute for Economic Freedom
Tom Giovanetti
President, Institute for Policy Innovation
Dr. J. Robert McClure
President & CEO, James Madison Institute
Rodolfo E. Milani
Founder & Chairman, Miami Freedom Forum
William O’Brien
Former Speaker, NH House of Representatives
Co-chair, New Hampshire Center Right Coalition
Doug Kellogg
Executive Director, Ohioans for Tax Reform
Tom Hebert
Executive Director, Open Competition Center
Lorenzo Montanari
Executive Director, Property Rights Alliance
Wayne Brough
Director of Technology & Innovation, R Street Institute
Mike Stenhouse
CEO, Rhode Island Center for Freedom and Prosperity
Bryan Bashur
Executive Director, Shareholder Advocacy Forum
Karen Kerrigan
President & CEO, Small Business & Entrepreneurship Council
Kerri Toloczko
Chair, SWFL Center Right Coalition
Patrick Hedger
Vice President of Policy, Taxpayers Protection Alliance
Rusty Cannon
President, Utah Taxpayers Association
Casey Given
Executive Director, Young Voices
Photo Credit: Martin Falbisoner, CC BY-SA 3.0 <https://creativecommons.org/licenses/by-sa/3.0>, via Wikimedia Commons
ATR Op-Ed in Townhall: Dem Investment Tax Will Hurt Everyday Investors
In an op-ed published in Townhall this week, ATR Federal Affairs Manager Bryan Bashur highlighted the detrimental effects a tax on exchange-traded funds (ETFs) would have on retail investors.
Senate Finance Committee Chairman Ron Wyden (D-Ore.) has proposed to tax ETFs by repealing a provision from statute that allows ETFs to distribute shares in-kind without immediately triggering the capital gains tax.
Notably, Wyden’s ETF tax will break President Biden’s pledge not to raise taxes on Americans earning less than $400,000. Millions of Americans invested in ETFs earn far less than $400,000. As Bashur points out:
According to the Securities Industry and Financial Markets Association (SIFMA), in 2019 there were $4.4 trillion in U.S. ETF assets. Approximately, “9.6 million households, or around 8% of total U.S. households, own ETFs.” In fact, the median income for households owning ETFs is $125,000.
Over the past few years, the growth of ETFs has outpaced mutual funds. A tax on ETFs would stymie this growth and limit any potential opportunities for ETFs to become a more integral investment option for employee retirement plans. Bashur explains that:
Adopting Wyden’s proposal and eliminating the current tax advantage for ETFs could slow investment into ETFs, making them unattractive for any consideration of 401k investment in ETFs. This would limit low-cost options for investors and stymie future innovations for retail investors’ retirement funds.
In recent years, investor interest in ETFs has grown faster than other investment products. From 2000 to 2017, ETFs grew at a compound annual growth rate of 25 percent as compared to mutual funds that grew by only 6 percent over the same period of time. This explosive growth in ETFs is largely due to increased demand for investments that are lower cost, transparent, and offer more liquidity than competitor products.
Moreover, there is ample potential for crypto investors to get involved in innovative ETF products. Bashur states that:
Federal intervention into the tax structure of ETFs could eliminate any potential for new ETFs. For example, Fidelity is in discussions with the Securities and Exchange Commission (SEC) to launch a bitcoin ETF, and Invesco is partnering with Galaxy Digital Holdings to launch new crypto ETFs. While the SEC has not yet approved cryptocurrency ETFs, countries such as Canada, Germany, and Switzerland are taking the lead. Abroad, assets in cryptocurrency ETFs “tripled from $3bn at the end of last year to $9bn as of June.”
Bashur implores members of Congress to oppose a tax on ETFs. In a world of increasingly democratized investment options, taxing ETFs would be a regressive political action that will only shut out retail investor participation in the financial markets.
Click here to read the full op-ed.
Photo Credit: "Rally at US Sen 0122 Senator Ron Wyden" by Edward Kimmel is licensed under CC BY-SA 2.0
More from Americans for Tax Reform
Massachusetts Companies Will Face Higher Taxes Than China and Europe if Dem Bill Passes
Massachusetts companies will get stuck with higher taxes than communist China if the Democrats' reconciliation bill is enacted.
The Democrats' reconciliation bill will saddle Massachusetts with a combined federal-state corporate tax rate of 32.4% vs. China's 25%.
The bill will also put Massachusetts companies at a competitive disadvantage vs. Europe: The European average corporate tax rate is 19%.
Massachusetts is home to 18 Fortune 500 companies, which provide jobs and livelihoods for tens of thousands of households in the state.
"As the country tries to recover from a once-in-a-century pandemic, Massachusetts' congressional Democrats must explain why they want to stick residents with higher taxes than China and Europe," said Grover Norquist, president of Americans for Tax Reform.
The Democrats' $3.5 trillion bill will impose the largest tax increase since 1968. It will raise individual income taxes, small business taxes, corporate taxes, and capital gains taxes.
If passed, the combined federal-state capital gains tax rate for Massachusetts residents would be 36.8% vs. China's 20%.
The burden of the corporate tax rate hike will be borne by workers in the form of lower wages, and by households in the form of higher prices. Higher corporate tax rates will also raise utility bills.
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."
Economists across the political spectrum agree that workers bear the brunt of corporate tax increases. And 25% is on the very low end.
According to Stephen Entin of the Tax Foundation, labor (or 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."
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:
"We identify this direct shifting through cross-company variation in tax liabilities, conditional on value added per employee. Our central estimate is that $1 of additional tax reduces wages by 92 cents in the long run. The incidence of a $1 fall in value added is smaller, consistent with our wage bargaining model."
A 2015 study by Kevin Hassett and Aparna Mathur found that a 1 percent increase in corporate tax rates leads to a 0.5 percent decrease in wage rates. The study analyses 66 countries over 25 years and concludes that workers could see a greater reduction in wages than the federal government raises in new revenue from a corporate income tax increase:
"We find, controlling for other macroeconomic variables, that wages are significantly responsive to corporate taxation. Higher corporate tax rates depress wages. Using spatial modelling techniques, we also find that tax characteristics of neighbouring countries, whether geographic or economic, have a significant effect on domestic wages."
A 2006 study by William Randolph of the Congressional Budget Office found that 74% of the corporate tax is borne by domestic labor:
"Burdens are measured in a numerical example by substituting factor shares and output shares that are reasonable for the U.S. economy. Given those values, domestic labor bears slightly more than 70 percent of the burden of the corporate income tax."
A 2007 study by Alison Felix estimated that a 1 percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. She concluded that the wage reductions are over four times the amount of collected corporate tax revenue:
"The empirical results presented here suggest that the incidence of corporate taxation is more than fully borne by labor. I estimate that a one percentage point increase in the marginal corporate tax rate decreases annual wages by 0.7 percent. The magnitude of the results predicts that the decrease in wages is more than four times the amount of the corporate tax revenue collected."
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:
"Because capital is mobile, high tax rates divert investment away from the U.S. corporate sector and toward housing, noncorporate business sectors, and foreign countries. American workers need that capital to become more productive. When it’s invested elsewhere, real wages decline, and if product prices are set globally, there is no place for the corporate tax to land but straight on the back of the least-mobile factor in this setting: the American worker."
Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor:
"In calculating distributional effects, the Urban-Brookings Tax Policy Center (TPC) assumes investment returns (dividends, interest, capital gains, etc.) bear 80 percent of the burden, with wages and other labor income carrying the remaining 20 percent."
"Democrats would be wise to oppose any tax increase," said Norquist.
Matt Dolan Makes “No New Taxes” Commitment in OH U.S. Senate Race
Americans for Tax Reform (ATR) commends State Senator Matt Dolan for signing the Taxpayer Protection Pledge in his race for Ohio’s open U.S. Senate seat. The Pledge is a written commitment to Buckeye State taxpayers that he will oppose and vote against all income tax hikes.
I recently signed @taxreformer's #TaxpayerProtectionPledge. I'm the only #OHSEN candidate with a proven conservative record of cutting taxes for #Ohio workers, families & businesses. I'll bring this same anti-tax, pro-growth approach to the U.S. Senate. https://t.co/sq9Achvmaj
— Matt Dolan (@dolan4ohio) October 6, 2021
Candidates running for public office like to say they will not raise taxes, but often turn their backs on the taxpayer once elected. The idea of the Taxpayer Protection Pledge is simple enough: Make them put their no-new-taxes rhetoric in writing, so the promise is much harder to break.
For those candidates who refuse to sign the Pledge, voters should wonder why this politician chooses to leave the door open to tax hikes.
“Ohio voters are looking for solutions that get Americans back to work and grow the economy. I commend State Senator Matt Dolan for signing the Taxpayer Protection Pledge and promising to hold the line on taxes. It’s the first step in jump-starting the economy,” said Grover Norquist, President of Americans for Tax Reform.
There are currently 178 Pledge signers in the U.S. House and 44 Pledge signers in the U.S. Senate. 85% percent of all congressional Republicans have made the written commitment to oppose higher taxes. In contrast, ZERO congressional Democrats have made that promise.
President Biden has been championing a $3.5 trillion reconciliation bill, which includes the largest tax increase since 1968. These tax hikes will disproportionately hurt workers, retirees, consumers, and small businesses.
“Voters have a right to know where candidates stand on taxes before heading to the voting booth. The Taxpayer Protection Pledge is a simple litmus test that tells voters I’ll work to protect your wallet. I encourage all candidates for elected office to make this commitment today,” continued Norquist.
Senator Dolan joins Jane Timken in signing the federal Taxpayer Protection Pledge in the 2022 race for the U.S. Senate seat being vacated by Rob Portman’s retirement. The primary is May 3, 2022, and the filing deadline for candidates is February 2, 2022.
New candidates sign the Taxpayer Protection Pledge regularly. For the most up-to-date information on this race or any other, please visit the ATR Pledge Database.
Photo Credit: Matt Dolan for U.S. Senate
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