President Biden’s ambitious plan to raise corporate taxes does more than reverse much of the overhaul imposed by his predecessor. It also offers a profoundly different take on how to make the United States more competitive and pay the price.
When President Donald J. Trump and a Republican Congress rewrote the tax code in 2017, most of the benefits went to the wealthiest Americans, with lower rates on businesses and on investment profits. According to supporters, the guiding principle was that cutting corporate and investor taxes would encourage businesses to grow, create more jobs and generate more wealth for all.
In contrast, the driving idea behind the tax plan presented on Wednesday by the Biden administration is that the best way to increase America’s competitiveness and foster economic growth is to increase corporate taxes to fund business. huge investments in transport, broadband, utilities, etc.
The Business Roundtable, the United States Chamber of Commerce, and the National Manufacturers Association have all welcomed the idea of putting money into the repair and construction of national infrastructure, but have backed down from the idea. increase corporate taxes to do this.
“We strongly oppose the general tax increases proposed by the administration, which will slow the economic recovery and make the United States less competitive globally – the exact opposite of the goals of the infrastructure plan,” said the policy director. from the chamber, Neil Bradley, a statement.
The biggest and most eye-catching proposal is to reduce the massive reduction in the corporate tax rate enacted under Mr. Trump. In 2017, Republicans reduced the rate from 35% to 21%. Mr. Biden wants to reduce the rate to 28%.
Even economists who favor low rates for business admit that the 2017 tax cuts did not lead to a big increase in investment. Gross domestic product grew at a rate of 2.4% in the two years before the law was passed and 2.4% in the two years after it was passed.
Tax code debates are really debates about who should shoulder the burden of paying for what society deems important – highways and bridges, clean water and high-speed broadband, basic research and development.
By shifting the tax burden, the Biden administration says businesses – among the biggest winners last time around – should take up more space this time around.
Economists have debated who really bears the cost of raising corporate taxes – shareholders and owners or workers. Research by the Congressional Budget Office, the Treasury Department, and the Brookings Institution found that business owners typically pay about three-quarters of a tax increase, with workers taking the rest.