Critics of Biden’s Keynesian economics and the wealth tax and distribution plans touted by some Democrats, however, think the new taxes may cripple the rebounding U.S. economy, U.S. competitiveness and the stock market, which could harm job creation and stifle middle class wealth creation, raises and benefits.
“The tax proposals in the American Jobs Plan (Biden infrastructure plan) rely on mistaken assumptions about how corporate taxes work, how corporations respond, and how workers are affected,” Erika York an economist with the nonpartisan Tax Foundation said in a recent blog.
According to York, an increase in the federal corporate tax rate to 28% would raise the U.S. federal-state combined tax rate to 32.34%, higher than every country in the OECD, the G7, and all our major trade partners and competitors including China “This would harm U.S. economic competitiveness and diminish our role in the world,” York said.
When the U.S. last had the highest corporate tax rate in the OECD, prior to tax reform in 2017 with the Tax Cuts and Jobs Act (TCJA), “the U.S. experienced several years of economic malaise, including chronically low levels of investment, productivity, and wage growth, as well as major distortions and avoidance schemes in the corporate sector. This included corporate inversions to lower-tax countries, migration out of the corporate sector and into the noncorporate sector, and a decline in business dynamism. This is why the U.S. lowered the corporate tax rate, to compete with other countries around the world that lowered theirs long ago,” York said.
Whether the Tax Foundation analyzes corporate tax collections as a portion of GDP, average effective tax rates, or marginal tax rates, “each measure shows that the U.S. effective corporate tax burden is close to or above the average compared to its OECD peers,” York added. “Raising corporate income taxes would put the U.S. at a competitive disadvantage, whether one looks at statutory tax rates or effective corporate tax rates,” she added.