10 reasons to oppose the corporate tax hike


To fund their infrastructure and rights spending plans, House Democrats are proposing significant tax increases over the next decade. They want to raise taxes on businesses, investments and high incomes, but the burden of those hikes would ultimately fall on all of us in the form of lower wages, smaller retirement accounts and slower growth.

Let’s take a look at the proposed corporate tax increases, which are projected to raise $ 1 trillion. Such increases would be a lose-lose-lose proposition for businesses, workers and the economy for at least 10 reasons.

Competetion. Companies can now locate their automotive, semiconductor and pharmaceutical factories in dozens of countries. America must compete to attract these investments, but the Democrats’ proposed corporate tax increase from 21% to 26.5% would push them back. With the increase, our combined federal-state corporate tax rate would be 30.9 percent, and therefore much higher than global average by 23.6 percent.

Investment. Businesses invest to earn after-tax profits. Higher taxes would reduce profits and thus undermine investments in factories, machinery and other assets. Ironically, Democrats want to boost investment in infrastructure, but two-thirds of America’s infrastructure is privately owned and would be harmed by tax increases.

Innovation. Democrats want to increase spending on energy research, manufacturing and other activities. Corn more of US research is funded by companies trying to make after-tax profits, and funding would drop if taxes were to rise. President BidenJoe BidenUN meeting with US and France canceled due to timing issue Schumer to lift GOP blockade on Biden state.the infrastructure of plan mentions “innovation” 17 times, but an increase in corporate tax would reduce innovation by slowing the process of replacing old machines with newer, more advanced machines.

Wages. Despite leftist rhetoric, labor and capital are complements and not adversaries. When taxes go up on one factor of production, it hurts the other. If corporate taxes were raised, companies would reduce their investment in factories and machinery, which in turn would reduce worker productivity and slow wage growth.

Foreign operations. Democrats would not only increase the corporate tax rate, but also increase taxes on foreign operations of American companies. But the main purpose of overseas operations is to enter foreign markets, in part with products exported from the United States. When an American company increases its sales overseas, it benefits the head office, research and production facility workers here at home. The Democratic tax hike would make American businesses less competitive abroad, jeopardizing their domestic operations.

Transparency. The corporate tax burden falls on individuals as workers, consumers and shareholders, the latter including anyone with a pension plan. Politicians favor corporate taxes because they hide some of the cost of government from voters, but it is more transparent and democratic to impose simple and equal taxes on individuals so they can see the full cost of government .

Avoidance and evasion. When tax rates rise, companies have more incentive to cut taxes with legal loopholes and illegal dodges. These problems have grown because corporate profits are hard to measure in today’s global economy, but Congress has made matters worse by littering the tax code with tight restrictions and complex structures that businesses mix up. to save money when tax rates go up.

Complexity. The Democratic tax plan would increase tax complexity by adding dozens of special benefits that businesses would likely abuse, especially if tax rates rise. The plan, for example, includes more than two dozen green power cuts totaling 235 billion dollars. The big winners from the added complexity would be the well-paid lawyers and lobbyists who find ways to distort and develop them.

Government revenue. The Democratic plan would increase government revenue in the short term, but could lose revenue in the long term, as companies invest less and avoid and avoid more. secretary of the treasury Janet YellenJanet Louise Yellen McConnell and Shelby propose government funding bill with no debt cap. claims that governments are losing money because of a corporate tax “race to the bottom”, but that is not true. For 22 high-income countries, the average corporate tax rate fell from 47% in 1980 to 25% in 2019, but the average corporate tax revenues Pink from 2.2% of gross domestic product in 1980 to 3.0% in 2019. Over time, businesses and markets react to tax changes, so tax rates and revenues may move in different directions. opposites.

Questionable expenses. Democrats want to raise taxes to fund higher government spending, but the private sector can likely use the funds more productively at the margins. Democrats haven’t done any cost-benefit analysis to show their spending would be higher in value than the private spending it would replace. Furthermore, if new government spending is required, there is nothing to prevent state governments from funding it on their own for their own residents.

Democrats want companies to pay their “”equitable sharing”, As if corporate taxes were ultimately not reaching people. The truth is that corporate investment in pharmaceutical research, power generation, Internet infrastructure, and many other activities benefits us all and would be damaged by corporate tax increases.

Chris Edwards is Director of Tax Policy Studies at the Cato Institute.

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