As Americans struggle, Biden’s tax plan helps blue states and foreign nations
If you take President Joe Biden at his word, the multi-trillion-dollar tax and infrastructure plan being pushed by Democrats is about helping American families and workers.
But if this is the case, why are Democrats proposing to finance this new spending with a tax that will reduce job opportunities for workers and the life savings of American families? Why are New York and New Jersey Democrats — many of whom routinely talk about making the wealthy “pay their fair share” — prioritizing a tax cut that will overwhelmingly benefit their wealthy constituents?
Why is Treasury Secretary Janet Yellen pushing for a global pact with the likes of Russia, China and the European Union that will lock in high taxes across the world that will do nothing to directly help American families?
While Biden has repeatedly claimed he will not raise taxes on Americans making less than $400,000 per year, he is proposing $2 trillion in new taxes that will be borne by American workers and families in the form of fewer job opportunities, lower wages, and reduced life savings. This plan calls for raising the corporate tax rate from 21 percent to 28 percent and creating several new taxes on businesses like a 21 percent global minimum tax and a 15 percent book tax.
As noted by Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the burden of corporate tax hikes. There is debate over how much workers bear of this tax, with some economists arguing just 20 percent is borne by labor, while others argue 50 percent or even 100 percent of the tax hits workers. But even if we assume that workers bear just 20 percent of the corporate tax, workers will collectively be hundreds of billions of dollars worse off.
These tax hikes will also harm millions of middle class Americans that are invested in publicly traded corporations through the stock market including the 53 percent of American households’ own stock, the 80 to 100 million Americans that have a 401(k) and the 46.4 million households that have an individual retirement account.
Biden’s tax increases on businesses will undoubtedly harm Americans across the country.
However, dozens of New York and New Jersey Congressional are also demanding that the Biden spending plan includes a giveaway for wealthy blue state constituents through a federal tax break for the high taxes in these states. Several members including Reps. Tom Suozzi (D-NY) and Josh Gottheimer (D-NJ) have even said they will not support Biden’s proposal without full restoration of the deduction for state and local taxes (SALT).
While these Democrats say the SALT deduction will provide a tax cut for the middle class, this is not borne out by the facts. A New York Times opinion piece described this provision as “the tax cut for the rich that Democrats love,” while the left-of-center Tax Policy Center has found that the top 1 percent of households would receive 56 percent of the benefit of the provision. The bottom 80 percent of households would receive just 4 percent.
The Center for American Progress has stated that repeal of the SALT cap “should not be a top priority” as it would “overwhelmingly benefit the wealthy, not the middle class.” What does this provision have to do with Biden’s oft-stated goal of fighting for working class and middle-class families?
The same question should be asked of Yellen’s push to lock in high taxes in the U.S. and across the world by working with G20 member-states — including China, Russia, Saudi Arabia and the European Union. Yellen is working with these foreign powers set a minimum threshold of taxation that she says would “end the pressures of tax competition” and “make all citizens fairly share the burden of financing government.”
However, it is unclear how this helps American workers and businesses. The last administration even expressed concern that efforts to impose global taxes would disproportionately harm American businesses and allow foreign countries to go after the U.S. tax base. Moreover, can the U.S. really trust foreign countries — many of which have a history of undemocratic governance and human rights violations — to play by the rules in a way that ensures American businesses and workers are treated fairly?
Biden and the Democratic party are touting their plan to spend trillions of dollars in taxes as a way to help Americans across the country. However, it is unclear how policies like raising the corporate rate, enacting a SALT tax cut for wealthy blue state residents, or enacting a global pact on high taxes helps American families and workers.
Alex Hendrie is director of Tax Policy at Americans for Tax Reform