Opinion: Biden wants to make the US more competitive. His tax hikes will do the opposite
President Joe Biden recently introduced his "Made in America Tax Plan" as part of his ambitious infrastructure agenda. But the problem is, the plan would reduce the incentive to make most things in America.
At the core of the $2 trillion package is a paradox: infrastructure projects are designed to make the United States more competitive, but they will be paired with corporate tax increases that will do just the opposite. While rebuilding roads, bridges, and other infrastructure is a laudable goal, funding it with taxes that suppress private investment and damage our global competitiveness undermines that goal.
The Biden plan would raise the corporate tax rate to 28% from 21%. Tax Foundation research found that this 7-point jump would erode America's current competitive advantage. Increasing the federal corporate tax rate to 28% would raise the US federal-state combined tax rate to 32.3% — that's higher than every country in the Organization for Economic Co-operation and Development (OECD), the G7 and all our major trade partners and competitors, including China.
Additionally, we found that the proposed corporate tax increase would reduce after-tax incomes for workers across all income levels; for example, by nearly 1.5% for the bottom 20% of earners. Raising the corporate rate would also reduce long-run economic output by 0.8%, eliminate 159,000 jobs and reduce wages by 0.7%.
And this is just one proposal in the plan that would diminish American investment and result in a more onerous and complicated corporate tax system. President Biden is also proposing a new 15% minimum tax on the book income that large corporations report on their financial statements, which follows a different set of accounting rules than taxable income. He would increase taxes on multinational firms by raising the minimum tax on foreign profits to 21%, modifying it to be calculated on a country-by-country basis, and eliminating the 10% exemption on tangible investment abroad. Plus, his plan would repeal the deduction incentivizing firms to move intellectual property into the United States, though it would provide a tax credit for certain onshoring activity and deny expense deductions on jobs that were offshored.
Changing corporate tax law so drastically in the middle of a pandemic and less than four years after the last major tax overhaul is not wise. Fine-tuning policies over time is common, but these changes will cause more uncertainty and headaches for businesses looking to grow as the economy rebounds, creating more jobs for accountants rather than the jobs we need to rebuild. Changing the already-complex international rules and creating a new tax on corporate book income would complicate the tax code and create a headwind for additional corporate investment.
To fund a large-scale infrastructure package with minimal harm to the economy, policymakers should pursue sources of revenue that are focused on the root of the problem: fixing our infrastructure. Policymakers should consider some potential options that, while not politically popular, just make sense.
Opinion: Biden wants to make the US more competitive. His tax hikes will do the opposite (msn.com)
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Originally Posted by Peter1469
