US Capitol east side.JPG by Martin Falbisoner is licensed under CC BY-SA 3.0

President Biden and Congressional Democrats are overseeing a weak economy. Inflation is at a four-decade high, GDP declined by 1.4 percent in the first quarter of 2022, and less than half of business owners expect better business conditions over the next six months. 

In January of 2021, prior to President Biden taking office, inflation was a mere 1.4 percent. Democrats’ massive spending programs, such as the American Rescue Plan, have pushed consumer prices higher and higher and created inflation of over 8 percent. 

Although Democrat policies have failed the economy, they are continuing to double down and push more tax increases and more spending. President Biden’s budget proposal calls for 36 tax hikes totaling $2.5 trillion, including hiking the corporate tax rate and the top individual income tax rate. The budget also includes 11 tax increases on the oil and gas industry at a time that gas prices are at record highs. 

Lawmakers need to push policies that facilitate economic growth and opportunity to save American businesses and consumers from the disastrous policies of the Biden Administration.  

Below are three things lawmakers should do to combat Joe Biden’s disastrous economic agenda. 

1. Make permanent TCJA individual income rate cuts and increased child tax credit 

While President Biden proposes countless new tax increases, lawmakers should push to make the Tax Cuts and Jobs Act (TCJA) individual income tax cuts permanent. 

The Tax Cuts and Jobs Act reduced individual income rates across the board and doubled the standard deduction from $12,400 to $24,800. The TCJA provisions targeting individual income rates had a sizeable impact on tax liability for the middle class. 

Americans with an adjusted gross income (AGI) between $50,000 and $74,999 saw a 15.2 percent reduction in average tax liabilities between 2017 and 2019 and Americans with AGI between $75,000 and $99,999 saw a 15.6 percent reduction in average federal tax liability between 2017 and 2019. 

The Tax Cuts and Jobs Act also doubled the maximum child tax credit (CTC) from $1,000 to $2,000 per child under age 17 and increased the phase out thresholds from $75,000 to $200,000 for single filers and $110,000 to $400,000 for joint filers. This expansion has been shown to have a large impact on American families’ tax bills, with 36 million households earning $200,000 or less receiving an average credit of $2,002. 

Currently, these provisions are set to expire at the beginning of 2026. Most Americans will see a tax hike if these provisions are not made permanent or extended. If we want to strengthen the U.S. economy, we need to focus on preserving these key provisions of the TCJA. 

2. Extend TCJA full expensing for equipment tax provision 

Another part of the TCJA that Republicans should make permanent is the provision that allows for businesses to immediately deduct the cost of new business investments. 

The TCJA allowed businesses to deduct the total cost of new investments in the year those investments are initially made (also referred to as “full expensing”). This provision subsequently decreases by 20 percent each year at the end of this year until it’s eliminated altogether after 2026. 

Full expensing has been noted as one of the most pro-growth aspects of the TCJA as it lowered the cost of capital investments for businesses. In turn, these higher capital investments led to increased productivity and economic output as well as higher wages for American workers. 

It also simplifies the tax code by equalizing the tax treatment of new investments with other business expenses such as wages, rent, and healthcare costs. 

The Tax Foundation found that expanding this provision would increase long-run gross domestic product (GDP) by 5.1 percent, increase wages by 4.3 percent, and lead to an additional 1.02 million jobs. 

3. Reject efforts to increase taxes on businesses 

In addition to passing good tax cuts, it’s important to stop bad tax increases. President Biden and Congressional Democrats have been pushing to drastically increase the corporate tax rate. Specifically, President Biden’s budget calls for an increase in the federal corporate tax rate from 21 to 28 percent, while other key Democrats such as Senator Bernie Sanders (D-Vt.) have pushed for an even greater corporate tax rate. 

Any proposed corporate tax increases will only make the U.S. less globally competitive and hinder economic growth. Currently, the U.S. state average corporate tax rate is 4 percent, meaning if President Biden’s tax hike were implemented, we’d have a combined federal and state tax rate of 32 percent, well beyond China’s rate of 25 percent and the OECD average rate of 23.5 percent. 

Biden’s proposed corporate tax increase will also harm American workers who have seen their purchasing power fall as a result of high inflation. The Joint Committee on Taxation estimates that 25 percent of corporate tax increases fall on workers, while the Tax Foundation estimates that a whopping 70 percent of this tax is borne by workers in the form of lower wages. 

Lower corporate tax rates have been shown to lead to increased investment, productivity, and economic growth. As a result, American workers see higher standards of living while also helping to address the problem of declining U.S. wages. Allowing businesses to keep more of their money means they’ll reinvest into their business and workers, spurring economic growth and opportunity. 

Lawmakers need to reject any efforts to increase taxes on businesses to avoid further harming small businesses and American workers across the country.