South Carolina companies will get stuck with higher taxes than China and Europe if the Democrats' reconciliation bill is enacted.

The Democrats' reconciliation bill will saddle South Carolina with a combined federal-state corporate tax rate of 30.2% vs. communist China's 25% and the European average of 19%.

"As the country tries to recover from a once-in-a-century pandemic, President Biden and 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 South Carolina residents would be 35.72% 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."

WATCH:

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.

According to media reports, Democrats are reducing the total cost of their plan from $3.5 trillion to as low as $1.9 to $2.2 trillion. However, they are not actually seeking to reduce total federal spending – instead they are simply utilizing budget loopholes and gimmicks to create the illusion that the bill will cost less.

The bill will contain the same harmful policies including trillions of dollars in job-killing tax hikes, wasteful welfare programs that increase dependency on government Green New Deal climate subsidies. 

Most of the policy changes being floated to lower the cost of the bill involve shortening the length of time a certain policy will last, not eliminating any of these destructive policies. Congress typically measures spending and taxes over a ten year budget window, and Democrats want to manipulate this practice by having some programs expire after several years and have others take effect gradually.

Rep. Pramila Jayapal (D-Wash.), head of the Congressional Progressive Caucus, said, “We would be willing to trim the number a little bit by cutting back the years for some of these programs, but we want to make sure our priorities as we've articulated them are all contained within the bill.” 

The expectation is that once new welfare programs are created, they will never go away and that like other federal programs, they will become permanent, expensive programs. CBS News reported that, “The progressives hope that popular programs would then be renewed down the line, as they're about to expire.” 

Specifically, Democrats are expected to shorten the duration of programs like these even more. For example, instead of creating a fully refundable Child Tax Credit until 2025, they may only include an expanded CTC for 2 years. The Wall Street Editorial Board explains that, under an expanded CTC, a married couple making $150,000 a year with four children would qualify for $13,200 a year. A similar family making $400,000 a year could still receive up to $8,000 a year in taxpayer dollars. 

Democrats may also reduce the duration of the paid family and medical leave provision. Under this provision, a married couple with a newborn making $200,000 a year could collect more than $1,000 a week. 

It is clear that these benefits go far beyond the scope of helping those in need. In fact, this bill increases taxes on working families to deliver thousands of dollars a month to very well-off families. However, because these welfare programs hand out a massive amount of money, provide money to a large base, and would become a regular part of many Americans' month (or week), it would be incredibly difficult to get rid of them.

To be clear, the $3.5 trillion bill released by House Democrats already uses budget gimmicks.

Within the current legislation, the fully refundable Child Tax Credit only lasts until 2025, universal pre-kindergarten funding expires in 2028, free community college expires in 2028, many of the climate tax credits expire in 10 years, several affordable housing provisions expire in 10 years, and more. Democrats reasonably assume these measures will be extended indefinitely, but place an expiration date on them to bring down the cost of the bill. 

If the provisions of this bill are made permanent, the Committee for a Responsible Federal Budget (CRFB) estimates that the true cost could be between $5 trillion and $5.5 trillion over a decade, and much more beyond a decade. 

Rather than pushing through trillions in new spending, lawmakers should look to rein in out of control federal spending. Last year, the U.S. government spent over $6 trillion. The U.S. is on track to spend over $6 trillion this year, or 30 percent of the economy, even before this massive spending plan is signed into law. 

The CBO already projects that the U.S.’s interest costs will triple within the next decade: $331 billion this year to $910 billion in 2031, accounting for 12 percent of the entire federal budget. This budget resolution would launch the United States into even deeper debt, thus requiring a massive chunk of yearly federal spending be dedicated to interest payments.   

While the topline cost of the Democrat’s socialist tax and spend bill may be going down, it appears that any reduction in size will be due to budget gimmicks, not true spending restraint. Americans should not be fooled into thinking this bill is anything but a massive socialist Wishlist packed with destructive tax hikes, wasteful spending, and giveaways to progressive special interests.

Americans for Tax Reform today released a new TV ad blasting the Democrats' tax-and-spend plan to impose higher business taxes than communist China. The ad also calls out the Democrat plan to give special tax subsidies to reporters.

If President Biden and congressional Democrats succeed in passing their socialist wishlist, Americans will see the largest tax increase in more than 50 years. America will be less competitive than China and Europe and small businesses and working families will see higher taxes.

See the ad here and visit HighTaxJoe.com to learn more about the plan.

The ad script is as follows:

First Afghanistan. Now China. 

Biden has a knack for bad decisions. 

Biden’s socialist spending bill means higher business taxes than Communist China.

It’s the biggest tax increase in 50 years.

It’s even loaded with special interest spending like tax subsidies for journalists.

Will Congress stop him?

We can’t afford higher taxes than Communist China, especially now.

Democrats want to raise the corporate rate higher than China and other major economic competitors. 

The House $3.5 trillion socialist spending plan raises the federal corporate tax rate to 26.5 percent, resulting in a combined federal and state rate of 31 percent. President Biden has previously proposed raising the corporate tax to 28 percent, which would be over 32 percent after state taxes. 

By comparison, China’s corporate rate is 25 percent while the developed world average (OECD) is 23.5 percent. The European average corporate tax rate is 19%.

Not only would this make the U.S. globally uncompetitive, but it will also harm working families, increase the cost of goods and services and reduce the life savings of Americans.

Workers Will Bear the Burden of an Increased Corporate Tax Rate. Raising the corporate tax will cause businesses to invest less in the United States and more overseas (or not at all), resulting in fewer job opportunities and lower wages for American workers:

• 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."
   
• A Treasury Department study estimated that “a country with a 1 percentage point lower tax rate than its competitors attracts 3 percent more capital.” This is because raising the corporate rate makes the United States a less attractive place to invest profits.  
   
• According to Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment. 
   
• 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.  
   

A Corporate Income Tax Hike Would Increase the Cost of Goods and Services. Raising the corporate income tax would cause prices to increase for American consumers in a couple ways. A 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers. Additionally, customers directly bear the cost of corporate income taxes imposed on utility companies. In this way, customers would have to pay more for their utility use. 

Already, inflation levels are rising. Consumer prices increased by 5.4 percent on an annualized basis in July, according to the Bureau of Labor Statistics (BLS). In January 2021, before Joe Biden took over the presidency, annual inflation was at a stable 1.4 percent. If Americans are struggling to afford goods and services now, they certainly will be after the corporate income tax is implemented.

A 26.5% Corporate Tax Rate Would Threaten American Life Savings. A corporate tax increase will threaten the life savings of families by reducing the value of publicly traded stocks in brokerage accounts or in 401(k)s. Individual investors opened 10 million new brokerage accounts in 2020 and at least 53% of households own stock. In addition, 80 million to 100 million people have a 401(k), and 46.4 million households have an individual retirement account.  

President Biden and Democrats continually claim their tax hikes will hold middle class families and small businesses harmless. However, the facts do not support this case. If Democrats have their way and raise taxes, millions of main street businesses, low- and middle-income workers, and retirees will be hit. Lawmakers must reject the 26.5% federal corporate income tax rate hike.

Nebraska companies will get stuck with higher taxes than China and Europe if the Democrats' reconciliation bill is enacted.

The Democrats' reconciliation bill will saddle Nebraska with a combined federal-state corporate tax rate of 32% vs. communist China's 25% and the European average of 19%.

"As the country tries to recover from a once-in-a-century pandemic, 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 Nebraska residents would be 38.64% 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."

WATCH:

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.